In a letter sent to Berlin on Thursday, the Commission said it was forced to take legal action against Germany because the southern German state of Bavaria had failed to comply with EU rules on agricultural subsidies.

"Under these circumstances the Commission has no alternative but open legal proceedings against Germany," the EU Commission said in a statement.

Following a 2006 EU decision – also carried by Germany – all data on the recipients of agricultural subsidies must be published on the Internet since the beginning of May.

Germany, which receives about 5.4 billion euros ($7.5 billion) in agricultural subisidies from Brussels each year, was the last country in the 27-nation EU to publish the names of beneficiaries of farm aid with a six-week delay in June.

However, Bavaria – a German state that has a powerful farmers lobby and a long history of antagonizing Berlin and Brussels - has been withholding data on the grounds that Brussels' demands were in breach of data protection laws, sparking a legal battle with the EU judiciary.

The Bavarian agricultural ministry said it would withhold data on Bavarian farmers until the European Court has ruled on the legality of the move.

Germany now has a month to respond before Brussels takes further steps, which could result in a court case at the European Court of Justice and heavy fines.

Milking the EU cash cow

The issue of agricultural subsidies has been a touchy business for decades, but recently things came to a head when it emerged that some recipients in Germany are not farmers in the traditional sense, but millionaires, big corporations, or even organizations that have no links to agriculture.

Reinhild Benning, an activist with the German environmental group BUND, has taken a closer look at how the EU farm aid has been spent in Germany.

She found out that the German airline, Lufthansa, has been receiving subsidies for dairy products it serves its passengers on transcontinental flights.

"Under EU rules this constitutes an export for which the airline absurdly receives export subsidies to the tune of two-and-a-half-million euros," she said.

Another example of questionable EU subsidies, she said, were 500,000 euros in annual subsidies received by the German energy giant RWE for measures aimed at re-cultivating coalmining areas in eastern Germany.

The German dairy company Muellermilch, she added, was able to milk the EU cash cow for a new creamery it built in the eastern German state of Saxony.

"While building the new plant, Muellermilch closed two of its older ones in western Germany - on balance, the EU spent 70 million euros to enable the company to scrap 17 jobs," Benning said.

Privacy v. transparency

The obligation to make the payments transparent dates from a bitterly contested reform of the EU’s Common Agricultural Policy (CAP) in 2006.

At the time, notably Britain demanded greater accountability with regard to farm subsidies which eat up some 40 percent of the EU’s annual budget.

However, critics say the publication of names and amounts is a violation of privacy rules.

"I would have preferred a solution in which the names of major recipients only are disclosed", Peter Schaar, the German commissioner for data protection, said.

Schaar said it would have been better to determine a limit for subsidies above which recipients would be obliged to disclose full details.

Author: nk/ Uwe Hessler

Editor: Sonia Phalnikar