The EU has a budget deal. The new eastern members of the EU get more money, Western Europe puts its hands in its pockets and the British rebate is slashed. And the Common Agricultural Policy is safe, a ‘review’ in a few years but nothing concrete until 2013. It remains nearly half of the entire EU budget.
Why subsidise farming and not other industries? Well, there is a point. Food is a strategic resource. If a country does not maintain a viable agricultural sector then it must rely on imports. That is fine unless foreign trade is disrupted; then people go hungry. Thousands died of starvation in Europe and millions across the world during World War two and in its immediate aftermath. Zimbabwe today is a case study in what happens when a country can no longer feed itself. That’s why farming is different from making fridges.
The CAP has been pernicious though. Its effect has been to dump cheap, surplus agricultural products onto the world market, crushing developing country producers and causing poverty. The rules have changed from 2005 to unlink subsidy to farmers and raw production, but countries can implement them on an individual basis. That probably means that the French won’t and the export of poverty will continue.
Was it a good deal? The new EU countries certainly deserve support, both for their own sake and as potential trading partners for the prosperity of all. This is especially true as they tend to take a more Anglo-American than Franco-German view of economics. Britain will shell out, but the rebate was cut for too little. The CAP needed deeper reform, so do the EU finances as a whole. While the leaders debated the big numbers they glossed over the fact that the EU’s 2004 accounts were rejected by the auditors. This is the 11th year in a row that the accounts haven’t been signed off.
There is some good news though. In 2004 they could actually verify 35% of the spending. That’s on a £67 billion budget.
Critics condemn EU deal 'failure'