By Lucien Libert and Charles Platiau
LIZINES, France (Reuters) - French dairy and crop farmer Jean-Claude Pette relies on European Union subsidies to keep his 200-hectare farm afloat. But he worries support could be cut as governments seek ways to plug a budget hole left by Britain's departure from the bloc.
Pette receives 58,000 euros in subsidies annually, more than the 45,000 euro income he earns from his 100 dairy cows and fields of cereals and sugar beet.
He said President Emmanuel Macron must insist on those payouts being left untouched when EU leaders meet this week to thrash out the bloc's next seven-year budget.
"Unfortunately, if you look at the prices we sell our produce for today, we need those subsidies to survive," Pette told Reuters on his farm 80km (50 miles) outside Paris.
Pette is far from alone in France, the EU's biggest agriculture producer.
Agriculture contributed just 1.1% to EU gross domestic product while the bloc's Common Agricultural Policy (CAP) is the single largest component of EU spending, accounting for 38% of the 1.1 trillion euro 2014-20 budget.
EU leaders are divided ahead of the Feb. 20 summit over the size of the overall budget and spending priorities as climate change, defense and immigration jostle with more traditional needs such as farmers and infrastructure projects.
France says there can be no reduction to the CAP budget. Sweden's EU Minister Hans Dahlgren told Reuters a European Commission proposal for a 5% cut did not go far enough.
TOUGH TALKS
French Farmers are already unhappy with Macron, a former investment banker, over issues like pesticide restrictions and a landmark free trade deal brokered with South American countries.
Meanwhile, legislation aimed at sharing profits more fairly along the food chain has yet to be felt at the farmgate.
Macron's government says it has heard the farmers' demands.
"For us, a drop in the agricultural budget is not an option," a French diplomat said, adding that France had the support of other farming nations.
Macron's need to appease the powerful farming lobby at home sets him on a collision course with others like Sweden who want more spending emphasis on climate change, security and migration.
Dahlgren said that meant cuts were needed to spending on agriculture and structural cohesion (infrastructure) and that his government's stance was closely aligned to Austria, Denmark and the Netherlands.
"Some people call us the 'frugal four'. I'd prefer to call us the tax payers' best friend," the minister said.
Beyond the size of the CAP budget, EU countries have options to reshuffle spending, including capping payments to larger farms, harmonizing subsidies between newer and older EU states, and giving more leeway to each country to allocate CAP funds.
Making the CAP more environment-focused might be the reform path that wins most consensus, but this could be tough for Macron to sell to farmers already exasperated at being cast as polluters.
Pette, who joined hundreds of French farmers in November blocking highways leading into Paris, said a further greening of the CAP would devalue subsidies.
"If we're faced with environmental and society demands that are unattainable economically, the fact we receive aid payments won't be enough to offset our losses," he said.