French farmers set fire to tyres in Lille yesterday during a nationwide protest at the common agricultural policy on the eve of the Berlin summit Picture: PASCAL ROSSIGNOL/Reuters

THE Government is preparing to fight all the way to retain Objective One status for the Highlands and Islands at the European Council of Ministers, but last night the outline of a deal was emerging that would see the region being formally excluded from the subsidy system

The region, which no longer qualifies for Objective One funds, would instead receive transitional relief to soften the blow and continuing to qualify for other aid.

If Objective One status were to be retained, the key could be found in the sea lochs off the west coast of Scotland and whether our European partners can be persuaded to view them the same as the inland lakes of Sweden and particularly Finland. Success would mean #220m of European support for the Highlands and Islands over the years 2000 to 2006.

The Herald has obtained a copy of the Government's final briefing paper for Berlin. It rehearses the European Commission's recognition of both low GDP and sparse population as indicators of severe structural problems.

The EC demands that Objective One areas must have 75% or less of the European average GDP, but the Highlands and Islands is just over at 76.4%. The Commission is also to extend Objective One status to northern Finland and Sweden, currently in Objective Six, on grounds of sparsity of population. The qualifying figure for sparsity is eight people per sq km, but the Highland figure is nine and a half.

The UK Government argues that given the Highlands and Islands is the region which most narrowly misses out on both grounds, that creates a special case in itself as the area will suffer ''double exclusion''.

''The Highlands and Islands would be the first NUTS II (statistical) region entirely excluded by the 75% GDP cut-off and the eight persons per sq km cut-off for current Objective Six.

''If any area is to qualify for special treatment then Highlands and Islands has a strong claim to head the list. It suffers the acute problems of low GDP and sparsity of population. Its GDP fell during the first three years of the current Objective One programme.

''The UK believes it is essential that the Highlands and Islands are offered the same support as the current Objective Six regions in the future.

''This is a principled case, not an expensive exception. It is based on fair treatment for similar areas, and would only affect 374,000 people, 0.1% of the EU population.

''The area's current Structural Funds programme amounts to only 0.2% of the EU budget. The UK will continue to press the case for the Highlands to be designated as an Objective One area.'' The paper argues that 10 people per sq km would be a more natural cut-off point for Objective One qualification on grounds of sparsity.

On that basis it ranks six different communities in northern Finland and Sweden against which the Highlands and Islands are competing. Only one area in Finland has a lower GDP.

''The Highlands and Islands is the second poorest of these regions. Its GDP is only very slightly above that of the poorest, it has the same problems of peripherality and sparse population, but it would be excluded from Objective One under the current proposals.''

The Government also argues that the EC has not taken into account the peculiar physical features of the West Coast of Scotland, and that if the many inland lakes of Finland and Sweden are taken as a land for the purposes of sparsity of population, so should the sea lochs of the Highlands and Islands.

''The Highlands and Islands highly indented coastline increases distances and makes the problems worse. The western seaboard of Scotland, for example, is 416km from end to end, but has a coastline of 3680km. Population density calculated on the area's land and the 'enclosed' sea areas is only seven persons per sq km.''

Leader Comment Page 16

REBEL Labour MP Dennis Canavan yesterday announced he will hand in his nomination papers to stand as an independent in the Holyrood elections and will submit the official forms today at Falkirk's Municipal Buildings.

The Falkirk West MP, who was rejected from Labour's approved list of candidates, said: ''I would still prefer to stand as a Labour candidate and over 95% of the members of Falkirk West constituency party voted for me to be on the list of Labour candidates.''

Mr Canavan will now challenge Labour's official candidate Ross Martin for the seat. He has said he will resign his Westminster seat if elected to the Scottish Parliament, forcing a by-election.