European Union farm ministers have opened two days of talks in Luxembourg to reform the EU Common Agricultural Policy. The European Union is under pressure to overhaul the $50 billion annual program which critics say leads to unwanted surpluses that hurt farmers in poor countries.

Farm payments make up close to half of the annual $90 billion EU budget. France and Germany, the biggest recipients and biggest funders of the farm subsidies, proposed key changes to the program late Tuesday, including cuts in subsidies and a decoupling of the link between how much farmers produce and how much they earn.

They say the system pressures farmers to produce surpluses, which are later dumped on world markets with the help of export subsidies. This process undercuts the exports of poor nations.

Under the new plan, farmers will receive direct income support and production subsidies will be capped and linked to farmers' compliance with environmental and food safety laws.

EU Farm Commissioner Franz Fischler has warned against a weak compromise. In a statement he said, "It is decision time. The negotiations will be toughm, but an agreement can be reached." He argued that failure to reach an agreement will bring dire consequences for both farmers and consumers.

The issue has a worldwide impact. The commission argues that changes are needed so that the European Union can meet its commitment under the Doha round of world trade negotiations to cut subsides that hurt poor nations by distorting trade conditions. The commission also seeks reforms before 10 new members join the European Union in 2004. Many of the new members are heavily dependent on farming.

Supporters of of the proposal say it would move the European Union closer to competing in the world market, benefiting consumers and taxpayers.

Critics say farm subsidies contribute to the image of the European Union as a corrupt and fat bureaucracy. But farmers fight hard against reforms, saying they need such support.