Market Focus : Europe Strives for Plan to Suit Farmers, Trade Demands : Cuts in subsidies are the only way to curb overproduction, one EC official says. Farmers say that proposal would drive them out of business.

If Paul de Keersmaeker harbored any lingering doubts that European farmers are fed up with their politicians, the eggs surely swept them away.

De Keersmaeker, Belgium’s secretary of state for European affairs and agriculture, traveled to the countryside late last month to do a little politicking at the 57th annual Libramont agricultural fair. Instead, frustrated farmers pelted him with eggs, water and flour, breaking his glasses.

Like farmers everywhere, many of those in Europe regard themselves as perpetually on the brink of economic catastrophe. What particularly galls farmers not only in Belgium but throughout the 12-nation European Community is a proposal to slash their generous government price supports by up to 35%.

“Sooner or later we won’t be able to pay our debts,” a farmer at the Libramont fair said. “If it goes on like this, in two years we will see a series of bankruptcies.”

At stake is much more than the welfare of the EC’s 10 million farmers. Their government benefits have become inextricably bound to the opportunity for American pharmaceutical companies to market their drugs abroad; the ability of American insurance companies to do business in foreign lands, and the prospects for American computers in worldwide competition.

What ties all these disparate elements together is the current round of talks among more than 100 nations, aimed at liberalizing the terms of international trade. The talks collapsed last December over a single issue: the EC’s refusal to dismantle its generous farm subsidies, which, according to the United States and other agricultural exporters, give European farmers an unfair advantage.

The stubborn deadlock means that Americans who stand to benefit from liberalized international trade--and pharmaceutical companies, insurance firms and computer makers are only a fraction of them--are having to bide their time.

They detect a faint light on the horizon--the same light that provoked Belgian farmers to assault De Keersmaeker. Ray MacSharry, the EC agriculture commissioner, last month proposed a thoroughgoing reform that for the first time would provide farmers with incentives to produce less, not more.

MacSharry’s proposal is just that--a proposal. It will become reality only with the approval of the EC’s member nations. Every nation except Greece has expressed vehement objections, and their opposition has sent all previous reform plans into wastebaskets.

Now, however, the climate is gradually changing. The cost of the EC’s agricultural program, climbing at a rate of about 7% a year, has mounted to about $41 billion annually for the EC and another $28 billion for consumers in the form of artificially high prices. The total cost of the U.S. farm support program is about $40 billion.

So generous are the EC’s farm subsidies that they encourage European farmers to produce much more than European consumers can eat. Mounds of uneaten food are growing into mountains: 20 million tons of wheat and other grains, 900,000 tons of butter, 750,000 tons of beef. In 1989, the EC produced 20% more grain than it used.

Even the loudest opponents of change concede that something has to give. “We are concerned about the surpluses and about the cost of the current program,” said Klaus-Martin Lotz, an international specialist with the German Farmers Federation.

“We are in favor of sensible reform,” said David Naish, president of the British National Farmers Union.

Most farmers insist that the MacSharry proposal does not meet Naish’s test. “This is very much the same old stuff,” said Jens Peter Myllerup, an international specialist with the Committee of Agricultural Organizations in the EC.

However, the MacSharry proposal is the only one on the table. France and Britain, in particular, fearing to wade into this minefield, have resisted farmers’ demands that they prepare alternatives.

“I’m afraid the basics of the MacSharry plan will come about,” said Robin Lee, a wheat farmer in southeast England.

MacSharry’s proposal would introduce some radical changes to Western European agriculture:

* For the first time, European farmers, like their American counterparts, would be encouraged to set aside some of their land, leaving it idle.

* Also for the first time, some farm support payments would depend on acreage, not production. For example, wheat farmers who set aside 15% of their land would qualify for per-acre payments designed to offset the blow from the proposed 35% cut in price supports.

* Nearly half of Europe’s farmers are at least 55 years old, and they would become eligible for pensions if they retired early, turning their land over to new occupants who would not farm it.

* The EC would pay farmers for environmental improvements--for converting farmland into forests, maintaining abandoned land, promoting the quality of the scenery and increasing the diversity of animal and plant life on their land.

MacSharry has stressed his environmental proposals, which are designed to protect the countryside at a time when less and less of it is needed to produce food.

“Rural areas are not just where many of our people live, but they are where the rest of us can breathe,” he said. “The countryside is a source of reassurance and stability in an increasingly and in many respects artificial and synthetic society.”

Italian farmer Augusto Bocchini, for one, thinks MacSharry should let farmers stick to farming. “One should not mix social, environmental and economic policies with production policies,” said Bocchini, who grows wheat, corn, sugar beets and a variety of other crops near Perugia.

But it is the pocketbook issue that is foremost on the minds of Europe’s farmers. The great majority do not like what they see in MacSharry’s proposals: reductions in price support levels of 35% for grain, 15% for beef and butter, and 10% for milk.

Even those reductions would leave EC prices relatively high. Although the mandated price of wheat, for example, would plunge from $185 a ton to $120, it would still be nearly double today’s world price.

Farmers say such price cuts would drive them from the farmhouse to the poorhouse. “I haven’t dared work out the final figures,” said Lee, the English wheat farmer. “But I know we’d have to struggle.”

To soften the blow, MacSharry proposed a host of new forms of government payments: not only per-acre payments to farmers who leave some of their land idle but also bonuses for small farmers and premiums for dairy farmers who kill some of their young male calves.

Many farmers fear that new layers of bureaucratic procedures would accompany the new payments. More than that, they do not trust the EC to maintain the payments.

“Now our revenues are based on production,” said Luc Guyau, a dairy farmer near Vendee in western France. “We can’t accept having our revenues based on government aids that might disappear one day.”

French Agriculture Minister Louis Mermaz, a longtime opponent of agricultural reform, said he fears that the individual EC nations might have to pick up the costs of the special payments.

MacSharry also satisfied no one with his effort to direct more aid to small farmers.

In Britain, where the average farm is five times the average for the EC as a whole, farmers complain that MacSharry’s plan unjustly discriminates against large, efficient farms.

And in the southern tier of EC countries, where farms are typically much smaller than average, MacSharry’s proposals do not seem to go far enough.

“Small producers are not well enough protected,” said Sandro Mascia, Brussels representative of the General Confederation of Italian Agriculture.

The vehemence of MacSharry’s opposition suggests that reform in EC agricultural subsidies is not just around the corner. That in turn bodes ill for the international trade talks, at least in the immediate future.

“We have a good way to go yet,” conceded U.S. Trade Representative Carla Anderson Hills after a late July meeting here with MacSharry and Frans Andriessen, the EC’s commissioner for external relations.

European officials are trying to be more upbeat. “There is no doubt that the initiative to start the (agricultural) reform has improved the atmosphere of confidence with the rest of the world,” said Hugo Paemen, chief EC trade negotiator.

Paemen said the talks could be concluded by the end of the year, as the heads of state of the seven biggest industrial democracies urged at their annual summit in London last month. “I think we can do it if the political will is there,” he said.

Whether Paemen is right will depend on whether Europe’s politicians can resist such assaults as the one launched against the Belgian farm minister at Libramont.

What One Farmer Would Reap Peter Wyatt makes $430,000 a year from a herd of 210 dairy cattle on a 370-acre spread in southern England. Here is how he figures the proposal of Ray MacSharry, European Community agriculture commissioner, would affect him: AGRICULTURAL CHANGE

10% price reduction for milk

GAIN OR LOSS: $32,000 7-cent-a-quart compensation for milk for next 10 years

GAIN OR LOSS: +$2,900 Annual government payment of $110 a cow for first 40 cows

GAIN OR LOSS: +$4,400 Government payment of $145 for each cow slaughtered early

GAIN OR LOSS: +$5,000 Increased sales price for dairy cattle because fewer cattle would be on the market

GAIN OR LOSS: +$5,000 Reduction in government-set price of corn feed

GAIN OR LOSS: +$6,300 TOTAL AGRICULTURAL CHANGES

GAIN OR LOSS: -$8,400 Bonuses for environmental protection that Wyatt does anyway

GAIN OR LOSS: +12,400 GRAND TOTAL: +$4,000 Times researcher Isabelle Maelcamp contributed to this story.