Budget Chief:

BRUSSELS--Farm aid should be reduced to about one third of the European Union's budget and spending could be shifted towards research and innovation, the EU's budget chief said on Monday.
Budget Commissioner Janusz Lewandowski said talks that are about to start on the EU budget, now worth about 130 billion euros ($167.5 bln) annually, could be the most difficult in the bloc's history following the global economic crisis.
Agriculture subsidies account for more than 40 percent of the EU's budget. A fierce battle is expected over their future as the Union tries to overhaul its budget, and an annual rebate cherished by Britain could be under threat.
The EU executive, the European Commission, will publish proposals on the future of the farm subsidies next month. "A hot budget season will start from October. These may be the most difficult negotiations in (the EU's) history," Lewandowski, a liberal economist and Poland's former privatisation minister, told Reuters in an interview. "We are living in special times, when national budgets are subject to painful cuts which creates a lot of frustration."
The talks will coincide with efforts to cut budget deficits across the EU to below a cap of 3 percent of economic output after governments boosted spending to fight the crisis. The overhaul could cut the EU's Common Agricultural Policy (CAP), which critics say unfairly protects European farmers against foreign competition and wastes funds that could be used more productively elsewhere.
"Farm spending should constitute about a third of EU spending and not its main part," Lewandowski said. "To defend the credibility of the budget, we must support the trend of falling farm spending. But it is defended by a strong lobby and will remain an important part of the European budget."
The negotiations, which start in earnest early next year after the Commission makes proposals on the overall reform of EU expenditure, will determine the shape of the EU's long-term budget for seven years from 2014.
France, a major farm aid beneficiary, is expected to lead efforts to defend agricultural subsidies. Net payers to the budget, such as Austria and Germany, are likely to call for austerity while poorer, eastern European countries seek aid.