Call for compensation as ‘green’ currencies revalue

Date: 23/01/1997

WHEN is an ecu not an ecu? When it is converted into pounds or marks or francs under the EU's 'green money' system.

This question will be exercising the minds of Irish and British farmers this month as they come to terms with sharp reductions in various market payments following the revaluations of their 'green' currencies.

It also raises the possibility that London and Dublin will have to compensate their farmers for any drop in income.

Of all the Common Agricultural Policy's complex regulations, the 'agrimonetary' rules are the most arcane.

The system for converting subsidies paid centrally in ecu into national currencies has been amended on numerous occasions, seemingly every time currency shifts have threatened to reduce the income of one or other group of farmers.

Arrangements are now weighted so that revaluations are highly unlikely. But recent currency turbulence has meant deep cuts in the number of pounds and punts received by British and Irish farmers for selling surpluses into intervention and reductions in the level of subsidies paid to traders for exporting agricultural products.

The 5.1&percent; revaluation of the pound has come at a particularly bad time for the British, reducing compensation paid from EU coffers for BSE eradication measures. But UK farmers cannot complain too much, having been the main beneficiaries of the system in recent years following sterling's slide since the early 1990s.

Irish Agriculture Minister Ivan Yates has already requested proposals from the Commission for more than 30 million ecu in compensation for losses resulting from the changes.

In a reversal of the situation 18 months ago, a group of five countries (Germany, Austria, the Netherlands, Belgium and Luxembourg) have seen their green rates undergo a series of devaluations, as the pound and punt have continued to firm up. This means that farmers in Germany, for example, receive more deutschemarks for each ecu in subsidy paid out by Brussels.

Compensation payments for price cuts introduced by the 1992 CAP reforms are also converted into national currencies, according to the green rates applicable on 1 January (for livestock) and 1 July (for arable).

But following the last major agrimonetary crisis in 1995, the Commission agreed to an arrangement under which the German-led states froze their green rates for direct aid payments at June 1995 levels. At the time, this protected their farmers from income losses associated with revaluations.

In recent months, the tide has turned, with a number of devaluations pushing up the value of payments in these currencies, making it a real possibility that farmers in the countries concerned will lose out as a result of the June 1995 deal. They are also in danger of forfeiting their right to compensation for loss of income.

Despite the costs and complexity of the system, the Commission said in a report late last year that “no change should be made to the general way the present agrimonetary arrangements function pending their revision with a view to the third stage of economic and monetary union”.