The extent to which the European Union will provide agricultural subsidies to new member countries as the EU expands eastward is fast becoming a sticking point in enlarging the 16-member group.

Some of the EU's biggest net contributors - including Germany, Great Britain, the Netherlands and Sweden - are resisting making direct-subsidy payments to farmers in the 10 countries set to begin joining the EU in 2004.

Second-class citizens?

The future EU members aren't happy either. Major farming countries like Poland say that if they aren't given the same subsidies and status as current EU nations, they'll be treated like second-class citizens.

At a meeting of agricultural ministers in Luxembourg earlier this week, Germany and other key EU financial backers signalled they did not want to add the countries to the EU's Common Agricultural Policy, which comprises nearly half of the EU's overall budget, until after 2006.

The current Agenda 2000 policy was agreed to in Berlin in 1999 and will remain on the books through 2006. The opponents say that direct payments to the new members were not foreseen at those meetings in Berlin.

Additionally, a mid-term review is due this July from European Agriculture Commissioner Franz Fischler, and Germany and the Netherlands are calling for structural reforms to the agricultural policy at that time, including cuts in existing direct subsidies.

The German government, which with 10 billion euro ($9.5 billion) a year in support payments is the EU's largest financial backer, has said it is not willing write a blank check for agricultural subsidies as the EU accepts new members in 2004.

An EU compromise

The EU Commission earlier this year proposed giving each of the new members 25 percent of the subsidies allocated from the Union's €40 billion ($36 billion) annual agriculture budget before phasing in full subsidies after 10 years. That proposal is being supported by the eleven other EU members, including France and Spain.

However, the German government fears that overly generous subsidies could discourage Eastern European countries from tackling much-needed agricultural reforms that would make their farmers more efficient.

German politicians also worry that expanded EU agricultural subsidies could further tax the federal budget.

"You can't just send a 'Blue Letter' to the German government," demanding that it reduce its public deficit, "and then turn around and then expect higher contributions from it," German Foreign Ministry Undersecretary Gunter Pleuger said earlier this week, referring to pressure the EU has placed on Germany to bring its federal budget in line.

Conflicting positions

But farmers in Germany, who themselves rely on subsidies from the EU to make ends meet, have mixed feelings about eastward expansion.

"There are two conflicting positions for farmers," Hans-Heinrich Berghorn of the German Farmers' Association in Brussels told DW-WORLD. On the one side, he said, a large portion of the $9.5 billion the German government pays to Brussels each year goes to subsidies for France, Italy and Spain. "Still, we also know that German farmers cannot not survive without direct payments."

With Germany in the midst of an election year, it is unlikely - despite pressure from France and other countries - that the issue will be resolved before er an EU expansion summit in Copenhagen this December.