EU agriculture reform proposals could result in a net loss of £125 million a year in prices and premiums, according to the Minister of State for Agriculture, Mr Noel Davern.

Stressing that his estimate was "tentative," the Minister said it was based on what was known so far of the proposals on market supports.

During a debate on the EU Commission's CAP reform package, known as the Agenda 2000 (Santer) Proposals, Mr Davern said he was setting up four consultative groups which will operate for the duration of the EU negotiations on the reform of the Common Agricultural Policy.

The groups - one each for beef, milk, cereals and rural development - were being established so that Ireland's input into the negotiations could be based on the "widest and best expertise available".

Mr Davern said the proposals looked at the implications of the enlargement of the EU to include 10 central and east European countries and Cyprus.

He pointed out that enlargement would increase the number of EU consumers by 100 million to about half a billion. Agriculture, he said, played a much greater role in those economies.

"More than 20 per cent of their work-forces, on average, are employed in agriculture, compared to an average of 6 per cent in the Union."

Mr Davern said the Commission proposed to cut beef support prices by 30 per cent.

"These proposals are obviously of crucial signifance to us given the central importance of beef production in our economy. The sector accounts for over one third of agricultural output in Ireland.

"As the largest net beef exporter in the Northern Hemisphere, we export some 90 per cent of our annual beef output."

Ireland accepted the need for reform but was concerned as to whether the proposals would "restore market balance and sustain producers' incomes".

He stressed that he would be "seeking to ensure that any cut in price is fully compensated." In addition, any final package which is agreed must ensure that extensive grass-based systems are not disadvantaged as against the more intensive bull-producing systems in the EU."

As they stood the proposals favoured intensive beef production and "to maintain that bias in the final package would be a mistake."

Ms Mary Coughlan (FF, Donegal South-West) said that the majority of her farming constituents were small, part-time hill farmers and the "headage payments and compensation payments are the only lifeline" they had.

She said that when the EU got beyond the Santer proposals and into other agreements they should copper-fasten compensation payments.

Ms Coughlan said the proposals to extend exports to third-country markets were not worked out. The Far East could be a massive market for the EU and Ireland.

However, there was nothing to say that in 10 years time the market could be sustained or that Ireland could get into the market against New Zealand.