Simon Coveney (Cork South Central, Fine Gael)
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Some members may wish to leave after that. I thank the committee for inviting me to address it on the issue of CAP reform. My comments will focus on where the negotiations currently stand and on how progress is likely to be made as we try to reach agreement on a reform package before the end of the Irish Presidency in June. I will be happy to answer members' questions at the conclusion of my statement.

Recent months have seen a number of positive developments in the negotiations on CAP reform. The agreement by the European Council on the multi-annual financial framework on 8 February provided the necessary clarity to enable negotiations to move forward. This was followed by the by the European Parliament's adoption of an overall position on the reform proposals in its plenary session of 12 March and agreement by the Council of Agriculture Ministers on 19 March on its so-called general approach to the reform package, that is, all four regulations, following the tabling of compromise proposals by the Irish Presidency. The latter achievement in particular represented a major step forward given the complexity involved in reaching a compromise among 27 member states on such a wide range of issues. It proved possible to complete this task thanks to the determined commitment of my colleagues to reach agreement and their readiness to compromise on extremely sensitive issues. More important, the negotiation process is now able to move to the final so-called trialogue stage, whereby the Irish Presidency represents the Council of Ministers in discussions with the European Parliament and Commission on finding an overall compromise.

We have, therefore, moved from a narrower focus on finalising a Council position to the point where the Council's position is one of three different perspectives being brought to the table. Given that the European Parliament and the Commission have their own views on the wide range of issues arising under the CAP reform package and we do not yet know the likely shape of the final compromise package, it is too early to draw firm conclusions about the precise implications for farmers and we will have to await the end of the process, which I hope will be in June. In the meantime, however, I wish to update the committee on some of the details of the Council agreement and to highlight key issues that will have to be addressed with the Parliament and the Commission as we push for an inter-institutional political agreement by the end of June.

Direct payments are the area that has received most coverage in Ireland. Perhaps the most contentious issue from a political perspective is the question of how direct payments should be distributed within member states. The Commission's proposal to move to a system of flat rate national or regional payments by 2019 would result in a significant payment transfer between farmers in a number of member states, including Ireland. As an alternative, the Council added the partial convergence model originally proposed by Ireland, which would instead give member states the option to move only part of the way towards a full convergence payment system. Based on the Commission's methodology for distribution of payments between member states, we believe this can work. This option acknowledges the fact that it is no longer tenable to base payments on historical references while at the same time allows member states to move towards convergence in a more measured way than would be possible under the Commission's proposal. Optional minimum and maximum payments per hectare are also provided for.

In addition, the Council has proposed, as an add-on to either the flat-rate or partial convergence models, that member states may use up to 30% of their national ceilings for top-up payments to farmers on their first hectares up to the national average farm size or up to 30 ha.

The European Parliament has its own views on internal convergence. In some ways these are broadly similar to those of the Council, in that the Parliament's position provides for flat-rate payments and for the Irish partial convergence alternative. However, the Parliament representatives, at trilogues and along with the Commission, has supported a mandatory minimum payment per hectare as an addition to the Irish model. The Parliament also provides for the so-called "first hectares" payment, although it feels that this should be made on the first 50 ha, rather than up to the national average farm size. In a departure from the other institutions, the Parliament has also tabled the so-called "tunnel" option whereby payments would converge to within 20% of the national average payment per hectare by 2019, with a maximum loss of 30% that could be incurred by any individual farmer.

On the domestic front, we are facing two sets of demands on this issue. On one hand, there are farmers on low payments per hectare who are arguing for a larger share of the available funding on the grounds of equity and fairness while, on the other, there are those on high payments per hectare who have invested single payment funds in improving the productive capacity of their farms and who do not want these efforts to be undermined. Both sets of demands are understandable and reasonable but are difficult to reconcile for obvious reasons. We need a solution that is fair to everyone and which represents a real move away from historic payments but which avoids unreasonably large cuts to those on higher payment rates. As in all negotiations, the key will be to reach a fair compromise that will help to level the playing field without putting productive farmers out of business. The reality is that the final outcome will be somewhere between the Commission proposal and the Irish one. The important point from our perspective is that the Irish model is at the centre of the negotiations and I will be working to ensure that the final outcome is as close as possible to this model because I believe it provides fairness and a balanced solution.

I was pleased with the Council's agreement to the compromise proposals on greening I brought forward in March. These proposals bring the necessary flexibility to the Commission's original proposals so that farmers can be involved in sustainable agriculture without overly bureaucratic impediments. If we consider the three greening criteria, we can see that the Council and European Parliament positions are quite similar in relation to crop diversification and permanent grassland. On ecological focus areas, the internal debates within the Council and the Parliament were more complex and difficult. However, the broad elements of the Council's general approach largely concur with the framework ultimately adopted by the Parliament, although there are differences on details such as thresholds and phasing. Similar positions have also been adopted on the structure of the greening payment, which addresses Ireland's requirement that this payment be applied as a percentage of each farmer's individual payment rather than as a flat rate.

The positions of the Council and Parliament are further apart when it comes to the concept of equivalence and, more specifically, the related issues of the Pillar 2 baseline and double funding. The Council has taken the view that greening should not be included in the baseline for rural development activities. It has also extended the provision on organic production in Article 29 of the horizontal regulation to agri-environment measures supported under Pillar 2. The European Parliament, on the other hand, has taken the view that all greening measures should be included in the baseline for Pillar 2 schemes and has ruled out the possibility of double funding in all circumstances. Its position is that support under the rural development programme should only apply to measures that go beyond the mandatory standards and greening obligations under Pillar 1.

On the question of penalties, the Council has decided that, in addition to forfeiting the greening payment, a farmer could be liable for an additional administrative penalty of up to 25% of the greening payment. In contrast, the European Parliament approach is to penalise defaults on greening obligations with loss of the greening payment only. The reason the Council has adopted its position is because, in the aftermath of the agreement reached by the Heads of State on the MFF which states that greening must be mandatory, it was necessary to go beyond people simply losing greening payments if they do not implement the greening criteria. That is from where the additional fine of 25% comes.

Other issues in the negotiations include the capping of direct payments and the proposed young farmers and small farmers schemes. On capping, the Commission and Parliament are generally agreed on the mandatory capping of payments at €300,000, with phased reductions applied to payments between €150,000 and €300,000. The Council prefers that payments above €150,000 be capped or reduced by member states on a voluntary basis. Colleagues are aware of my views on that matter.

The Commission and Parliament are again broadly similar in their approaches to young farmers, particularly in their favouring of a mandatory scheme. They have, however, different emphases as regards the maximum area attracting payments and the question of whether selection criteria should be used. The Council favours the use of selection criteria and lump-sum payments, although the main difference in its approach is that the scheme should be optional for member states. Similarly, there are differences in the approaches of the three institutions in respect of small farmers. The Commission favours a mandatory scheme at member state level but participation would be optional for farmers. The Parliament, on the other hand, favours an optional scheme at member state level which would then be mandatory at farmer level. In between, the Council - which I represent - prefers an optional scheme at member state level for farmers with total payments of less than €1,000.

Of course, the big question is whether the three institutions can come to an agreement on these and other issues by the end of June. My strong belief is that they can do so. The vehicle for this will be the so-called "trilogue" process. Typically, this represents the final phase of negotiations in areas where the European Parliament has a co-decision role with the Council. Indeed, this is the first occasion on which that the Parliament has had such a role in respect of CAP reform. As President of the Council, Ireland is representing member states in these negotiations with the Parliament and the Commission. The trilogue phase commenced on 11 April, with discussions on the direct payments and single CMO dossiers. These were followed by the first trilogues on the rural development and financing and monitoring dossiers on 17 April. As of this morning, a total of nine trilogues have taken place across all four dossiers and a tenth is in progress as we speak. Although the process is normally protracted, our intention is to complete a total of 34 trilogues across the four dossiers by 20 June.

I am happy to report that progress has been very good so far. The trilogues have been held in a very positive, constructive atmosphere. All of the institutions have responded to the Presidency's call for a collaborative endeavour and for a spirit of compromise to inform the process. I do not intend to go into excessive detail at this point but it is clear that early progress has been achieved on a number of technical issues. This has been facilitated by technical discussions which are running in parallel to the trilogue meetings. Our team, which represents both the Department and Ireland, has done nothing short of a phenomenal job in light of the level of resources available. Many of the staff involved are working 12 or 14-hour days in order to try to get this over the line.

The more politically sensitive points that have been encountered to date have been discussed in a preliminary or exploratory way in the trilogues but have essentially been parked for further consideration by Ministers and MEPs at a later date. This process is very helpful in allowing the three institutions to engage with each other on these more difficult points so that they can more fully understand each other's positions and will be invaluable when it comes to finalising the agreement. In this regard, I have also agreed with the Chairman of the European Parliament's Agriculture Committee, Mr. Paolo de Castro, on a further parallel process aimed at making progress on the big political issues that are likely to form the basis of the final agreement. In other words, we are engaging in informal political dialogue on an ongoing basis in order to try to find compromises with which everyone can live.

As I have said from the start of the Irish EU Council Presidency, the final target for that political agreement is the end of June. It is clear that the European Parliament and the Commission are committed to achieving this objective along with the Council. Member states have demonstrated their commitment and as the President of the Council of Ministers I intend to do all I can to ensure these deadlines are met. I am clear, however, that the timeline for political agreement by the end of June is remarkably tight and ambitious. In fact, at the start of our Presidency many people said it could not be done. It can only be achieved with significant compromise coming from all sides and an exceptional effort from all three institutions. Therefore, following next week's Council discussion on the current state of play, I intend to use the informal Council meeting in Dublin on 27-28 May to hold informal discussions with the European Parliament on how we can ensure that the end of June objective can be met. We are likely to focus our attention on a limited number of key political issues. I will then take stock of where we stand before taking the necessary steps with a view to reaching final political agreement at the council meeting in Luxembourg towards the end of June. That is currently planned for two days but if it takes three or four days then so be it. We will push hard to try to get political understanding and agreement on all four CAP reforms and regulations. If we do that - I believe we will - then the Irish Presidency will have played a significant role in setting a course of certainty and modernisation for farming for the coming seven years. If the committee has any questions, queries or points of clarification I will gladly to try to answer them.