14 February 1997

Sterling peak – more fears

ANOTHER price-sapping green £ revaluation is on the cards, followings sterlings climb to a four-year high early this week.

The hike has opened the gap over the existing green rate (used to convert Brussels support into national currencies) beyond the 5% trigger point.

The situation now has to be monitored for 50 days. If the 5%+ gap still exists by Mar 29, as seems likely, green rates will be revalued, bringing support values down.

The last revaluation occurred on Jan 21, and led to a 5.4% drop in intervention prices and export subsidies. Barley, beef and butter were all affected, as were compensation payments for the various BSE-related slaughter programs.

But rates for area aid and headage payments were supposed to be frozen at current levels, and MAFF has made a request to Brussels to put this into effect. This would protect area aids from an 8% fall due to the adverse green £ changes since last July.

But the commission is now attempting to shift the goal-posts and limit the extent of any benefits derived from freezing green rates.

Some cut in area aids is therefore still possible for 1997/98, though the UK is expected to strongly oppose any such move at next weeks council meeting in Brussels.