Eastern Europe turns back on single market

Politico | 16 May 2017

Eastern Europe turns back on single market

 

EU’s newest members say big Western European landowners and multinational supermarkets are wiping out their farmers and shopkeepers.

 

By Simon Marks

 

The EU’s newest members are the fiercest opponents of its single market.

 

As with so many of the toughest fights in Brussels, it all boils down to farmers and food.

 

Central Europeans say big Western European landowners and multinational supermarkets are wiping out their farmers and shopkeepers. Protecting smallholders from powerful investors like banks has leapt to the top of the political agenda. Eastern European governments have rolled out a complex web of new laws to stop foreigners buying out swaths of ultra-cheap farmland.

 

The European Commission regards this new legislation in the former communist countries as an existential threat to the EU’s free flow of goods, people and capital — the single market, in short — and struck back with infringement cases intended to preserve its sanctity.

 

In Bulgaria, for example, the European Commission launched an infringement proceeding last year over a law that investors should be resident for more than five years before they can buy farmland. In Romania, Brussels objected this year to rules that supermarkets should source 51 percent of fresh produce from local suppliers. There has been no decision on either case.

 

It is in Poland, the regional heavyweight, that the battle over respect for the single market is fought the hardest. Brussels has already ordered the authorities to halt a tax on the retail sector on the grounds it grants a selective advantage to small, local shops with a low turnover over big foreign-owned supermarkets. All eyes are now focusing on how the European Commission will react to a growing chorus of complaints in Poland over the rights of foreigners to buy farmland.

Bye-bye Babinek?

 

For French farmer Stéphane Gerard, Poland’s restrictions on land ownership are now threatening a 16-year love affair with the small village of Babinek in the country’s northwest.

 

In 2001, when he was 23 years old, Gerard took out a lease on 1,000 hectares to grow sugar beet, potatoes, oilseed rape, maize and wheat on a picturesque estate in West Pomerania. He hired 12 Polish families, supported the conservation of partridges and invested large sums in heavy machinery.

 

His ambition was to buy the land and settle there with his family. He said he understood the local authorities’ desire to protect local smallholders but argued the new restrictions on foreign ownership that were imposed by the Polish government last year failed to consider the contribution he was making.

 

“For several months, I have alerted numerous people. But far from making progress, the case seems to have ground to a halt or even gone backward in a way that clearly goes against European rights,” Gerard said from his Polish estate. He has since taken Poland’s Agricultural Property Agency to court and says he has become a “bête noire” for the ruling right-wing Law and Justice party.

 

Poland’s ambassador to France, Andrzej Byrt, wrote to Warsaw’s agriculture minister, Krzysztof Jurgiel, asking him to find a “friendly solution” so that “intensive Franco-Polish cooperation in the agricultural sector can continue.”

 

Gerard’s case is not unusual.

 

The fight over land has kicked off after the expiry of a series of transitional agreements across Central Europe that ended between 2014 and 2016. Before then, countries were allowed to impose restrictions on land acquisition but had been expected to bring their national rules in line with the EU single market.

 

The European Commission, however, is still worried about investor access and has opened infringement procedures against Bulgaria, Hungary, Latvia, Lithuania and Slovakia. Brussels has not issued a final decision in any of the cases.
 

Keep it Polish

 

Last May, Warsaw introduced legislation preventing people from buying land if the country’s Agricultural Property Agency deemed the acquisition would lead to an “excessive concentration” of farms.

 

Most critically, there are long residence requirements that effectively mean a land buyer must have been resident in Poland for a decade. Other conditions include holding an agriculture degree and agreeing to reside on the farm for at least five years. Individual Polish farmers also have a right of refusal on land being prospected in their neighborhood. Investors argue these rules give generous leeway to the local authorities to exclude non-Poles.

 

“The current regulations in a host of eastern members are clearly targeted toward preferring national buyers of agricultural land over those of other EU citizens,” said Emmanuelle Mikosz, European affairs adviser for the European Landowners Organization, which represents private landowners.

 

A spokesperson for the Permanent Representation of Poland to the EU insisted that the country was trying to prevent speculation that had pushed land prices up as much as seven times since 2004, but was generally open for business. She said that between April 30 and December 31, 2016, Polish authorities issued 4,087 decisions (to both foreigners and Poles) on the acquisition of agricultural land, 91.3 percent of which were positive.

 

The spokesperson added that new laws in Poland had been introduced on the basic assumption that “land is not an ordinary commodity.”

 

“It was often the case that the land was sold and resold many times, while no activity or investments were seen on the land itself.”
 

Cheap. Not so cheerful.

 

It’s easy to see why the former Soviet bloc is so attractive. The average price of agricultural land in Poland — by no means the cheapest destination in Eastern Europe — was €9,481 per hectare in 2016, while prices in the Netherlands averaged €59,115 per hectare in March this year, according to official government figures.

 

But the land rush can lead to bad press. Large land acquisitions in Romania by Rabobank from the Netherlands sparked major media attention in late 2015 and helped fuel the anti-investor backlash.

 

“There is definitely a push [to undermine the single market], but I don’t consider it unjustified,” said Attila Szocs, a campaigner at Eco Ruralis, a rural campaign group in Romania. “Europe is facing a land rush, where multinational companies and hedge funds are heavily investing in land either for purely industrial or speculative purposes, making this resource less and less accessible for young farmers.”

 

Eastern Europeans have many reasons to fear that they are not getting a fair deal — one of their most common complaints is that their subsidies from the EU’s €58-billion-a-year Common Agricultural Policy have been calculated at lower levels than Western countries.

 

The European Commission has also laid itself open to accusations of double standards by not challenging France and Italy over behavior also traditionally seen as a threat to the single market — such as mandatory origin labels on food that are viewed as a way to boosting local French and Italian producers.

 

Still, Szocs pointed out that there were sometimes ambiguous motives to restrictions on foreign investors.  He said Hungary’s crackdown on selling land to foreigners — partly fueled by Austrian agribusiness buying up large amounts of rural property — resulted in agricultural land being scooped up by local officials.

 

“There is a great political push to keep the status quo and not permit new investors,” Szocs said. “The government is using strong nationalistic rhetoric banning land sales toward foreigners.”

 

In a sign of the direction of the political current, MEPs have also recently noted “the positive measures taken by some member states in regulating their land markets in order to avoid speculative land transactions.”

 

Such political messages appear to have been heard by officials in Brussels, which suggested there could be a diplomatic solution to the battles over farms and food.

 

“The Commission’s services are considering the next steps to take,” a Commission spokesperson said referring to the infringement procedures. “At the same time, we are supporting member states to exchange best practices and to find solutions that comply with EU law.”