EU ENLARGEMENT is likely to have a more immediate effect on currency markets than on commodity markets, with significant implications for British farmers, according to a new report from the NFU.
“This is important. Changes in the value of the Euro are the single most important factor behind fluctuations in British farm incomes,” it says.
“A 1% decline in the value of the Euro against the Pound can cause UK farm income to fall by about £100m.”
Even though the new member states will not be able to join the Euro immediately, they have all said they want to do so.
And, even though they will continue to trade in the Crown, the Forint or the Zloty, the mere fact they have joined the EU is likely to affect the value of the Euro.
“While there are arguments on both sides, on balance some short-term weakening of the Euro can be expected,” says the NFU.
It believes financial markets will be reluctant to invest in the Euro until it becomes clear what effect enlargement will have on EU budgets and policies.