To regulate or not to regulate? The crisis in the dairy industry, which has now reached fever pitch with a producers' strike, is symptomatic of a wider dilemma faced by Europe. At a time when "regulation" has become a buzzword in the field of finance, a significant number of member states are advocating a return to a policy of "regulation" in agriculture. The argument in favour of such a policy has always been the same: food cannot be treated like other commodities, and on this basis, agriculture should not be subject to the same conditions as other industrial sectors.

Now that milk prices are in free fall and Europe's producers are facing increasing financial difficulties, should the deregulation of the milk market be allowed to continue? French, Belgian and German dairy farmers, who are campaigning for government intervention, insist that the food markets should not be regulated solely by supply and demand — but need to be governed by policies that take into account the issues of employment, land settlement, sustainable development, food safety, and public health.

Quotas to disappear by 2015

However, this view is not shared by all of Europe's member states. The crux of the matter is a wrangle over two different agricultural models: on the one hand there are the proponents of production sourced from family owned farms spread over a wide geographical area, which is the current model in France. On the other, there is the lobby for Danish style "milk factories," which are naturally more cost efficient. Today, members of the former group believe that deregulation of the sector — which over the last few years has reduced the availability of subsidies for storage and exports — has resulted in the price volatility that has triggered the present crisis. The liberals ranged against them argue that the recession and a reduction in demand is responsible for the difficulties in the sector.

The strikers are mainly protesting against the gradual elimination of quotas, which are a key feature of the regulatory system that has been in operation since 1984. Deemed to be inefficient, quotas are being progressively phased out in compliance with a European Commission proposal that has been approved by member states, and will completely disappear by 2015. Many older farmers see this as a setback, while their younger colleagues who have always worked in a regulated market wonder how the abandonment of the system designed to eliminate over production will affect their future livelihoods.

Death knell for milk producers

Militant producers are campaigning for the continuation of the quota system, which guarantees them a stable income, while others are proposing a compromise solution, with "new regulations" to offset the phase-out of quotas. This is the position adopted by French Agriculture Minister Bruno Le Maire and his German counterpart Ilse Aigner, a native of Bavaria who also sets great store by agricultural traditions. On Friday 18 September, Le Maire announced that "several member states were in favour of total deregulation, but I believe that we are now reversing that trend." France and Germany have secured the support of 16 member states on the issue, and on Monday 21 September, Mr Le Maire will travel to Poland in an attempt to further boost this alliance. However, the front for renewed regulation will have its work cut out to overcome opposition from the UK, the Scandinavian countries and Italy, which at this stage would prefer to pay superlevies that may be imposed as a result of overproduction. This group of "free-market" states can also count on the support of the Commissioner for Agriculture, Denmark's Mariann Fischer Boel.

Announced on 17 September, Fischer Boel's latest proposal for a solution to the crisis, involves the introduction of a sort of "scrappage scheme" to restructure the industry: the goal is to sustain producers who have invested, and to offer assistance to those who wish to leave the sector. However, this will be a severe blow for those hoping for more regulation, or a decision to lower production quotas which would increase prices. They argue that measures of this kind will drive out less competitive producers and increase the market share of bigger suppliers — and contribute to the development of corporate agriculture that the EU has sought to promote over the last 25 years.

Not surprisingly, the dairy farmers' branch of France's main agricultural union, the FNPL, declared that the proposal amounted to a "death knell for milk producers." In France alone, the number of dairy farms has fallen from 427,000 in 1984 to 90,000 today — and 334,000 European farmers left the business between 2006 and 2008. Mrs Fischer Boel is set to leave the post of Commissioner for Agriculture in November, but her departure is unlikely to put an end to the controversy. The battle to replace her will likely be fought between another Dane, and a candidate from Romania, which is closely allied to France in the pro-regulation camp. The newly re-elected Commission President José Manuel Barroso, who will be called on to referee this contest, has promised a second mandate more focused on regulation— at least in finance. It remains to be seen if in his view "regulation" should be solely confined to this field.