Agriculture ministers from the 15 EU countries meeting in Luxembourg on Thursday failed to agree on a sweeping reform of the CAP, which currently eats up roughly half of the Union’s €100 billion ($117 billion) budget.

France, which has resisted decoupling farm aid from production subsidies, wants to buy time before making a radical and today received Germany's official support.

"Germany has decided to help politically, but at the same time France has also moved," Chancellor Gerhard Schröder told France's Europe 1 radio in an interview. "We understand that France needs time to explain the changes to its farmers."

Earlier this week, Schröder and French President Jacques Chirac said they would back a "partial decoupling" of aid for farmers linked to production from 2006 onwards. The European Commission wants to end production subsidies from 2004, before the agriculturally dependent economies of Eastern Europe join the EU. Critics fear that extending subsidies to the new EU countries will only exacerbate the already big problem of over-production in Europe.

The Common Agricultural Policy has been attacked for years for creating unfair trade conditions and hurting agriculture in developing countries, as European farmers have been paid to produce food no one wants to buy. But wary of the penchant of French farmers to stage massive protests, Chirac defended the status quo on Friday.

"We will not agree to just any deal. The CAP is a good policy. It is the trunk around which Europe has grown and equally it is still an essential element of its identity," Chirac told a gathering of farmers, according to the Reuters news agency. "I will continue to defend the CAP."

Ministers to meet next Tuesday

On Thursday, EU agriculture ministers were unable to agree upon CAP reform proposals suggested by EU Farm Commissioner Franz Fischler. But some ministers were confident a compromise could be found next week during new talks starting on Tuesday.

"All have realized that the time to make a decision has come," said Greek Agricultural Minister Georgios Drys at a press conference in Luxembourg on Friday, according to the German news agency DPA.

Germany’s farm minister Renate Künast was also optimistic: "We are on the way to a huge reform."

Since France is the largest beneficiary of EU farm aid and Germany the EU’s largest paymaster, any Franco-German deal will likely form the basis for CAP reform next week.

Only last October, Chirac managed to convince Schröder to keep the EU agriculture budget steady from 2007 to 2013, instead of sharply trimming farm aid as some European countries wished.

CAP reform is also seen as critical in getting the next round of World Trade Organization negotiations off the ground. Liberalizing the agriculture sector has been a key aim for the Doha round of trade talks, and failure to revamp the CAP could scupper the whole process.