The EC ruled that GM contamination could cause economic losses to conventional foods if they have to then be labelled as containing GM material, thus attracting a lower price. Such a scenario could be especially damaging to the fast-growing organic food sector.
This is the first case where the European Commission has authorised such state aid, and underlines again the anti-GM sentiment of many Member State populations.
GM ingredients are regarded with some suspicion by consumers in Europe and as such are used infrequently in food formulations by food manufacturers who do not want to see sales fall. Some major food producers operating in Europe, such as Heinz, and nearly all major UK supermarkets, have begun to use non-GM status as a marketing tool in itself.
Earlier this year, a survey polled by the UK's consumer magazine Which? found that Britons feel even more strongly about GM foods than they did two years ago. More than six out of 10 people (61 per cent) were concerned about the use of GM material in food production - up from 56 per cent in 2002.
Such opposition from consumers has strengthened arguments that non-GM food must be protected. However, the EC says that under the current Danish proposals, compensation will be granted only if the presence of GM material exceeds 0.9 per cent and is limited to the price difference between the market price of a crop that has to be labelled as containing GM material and a crop for which no such labelling is required.
In addition, the payment of compensation does not free the GM farmer from any civil or criminal liability under Danish law. The Danish authorities will in all cases take action to recover the compensation paid from the farmer from whose fields the GM material has spread.
The EC says that the compensation fund will be replaced by private insurance as soon as such is available. The duration of the compensation scheme is limited to five years.
The Commission believes that such aid will contribute to a successful co-existence of GM crops with conventional and organic crops, not least because it is wholly financed by the Danish farmers with GM crops and ends when insurance products covering the risk of admixture become available on the Community market.
Such aid, said the Commission, appears to improve the structures of agricultural production in a way that is compatible with Community policy concerning such co-existence.
But not everyone is singing from the same hymn sheet. To date, the Commission has asked EU members over ten times to vote on authorising a GMO food or feed product. But in the large majority of cases, there was no agreement or simple deadlock.
Luxembourg, Greece and Austria consistently vote against GMO approvals, while the UK, Finland and the Netherlands almost always vote in favour.