Archive Article: 1997/11/08
ITS goodbye to green money on 31 December 1998 and hello to the green £ on 1 January 1999.
European monetary union (EMU) will sweep away the green money system for agricultural payments – but only for those countries which sign up for EMU. They will have equal prices set for their farm products in euros – the new European currency unit which becomes obligatory for EMU members in 2002.
Outside the EMU, countries failing to join the first group of single currency adopters will have their national currencies floating.
Farm prices will rise if the national unit, such as the £ if Britain stays out, depreciates against the euro and will fall if they appreciate while the euro falls, farm policy consultant Brian Gardner told the RASE/FAF conference in Stoneleigh, Warks.
"Non-participating countries will be in a similar situation in the post single currency era as they are at present; their green rates will be adjusted to the value of their national currency as it fluctuates in relation to the euro," he pointed out.
In theory, countries, including Britain, which aspire to joining the second wave of entrants into EMU, will be moving their national currencies close to the level at which they want to enter the system. This should reduce fluctuation and the need for green money changes.
However, he warned that other theories predicted a recession ahead for those countries expected to be first into EMU, producing a weak euro. This could lead to speculation in currencies such as sterling, which were not in EMU.
"There would have to be revaluations of agricultural reference rates against the euro and continuation of the erosion in returns to British farming due to the rising value of sterling against euros."
Velcourt Group chairman Robin Malim called for a clear statement of intent from the Government on when the UK would join the EMU. But he insisted the pound must be at a lower level in the international money exchanges than it currently stands.
And he regretted that Britain would not be in at the outset influencing the way EMU will operate. Currency fluctuations over the last year have hit British farmers hard economically, said Mr Malim, and the NFU forecast for this financial year showed a huge drop in the farming industrys profits by £2.5bn to a little over a total of £750m.
Fixed costs and wages have been forced up and will haunt the industry for several years, although the strength of the pound may bring down some inputs and variable costs, he added.
"I believe the violent movements in currency markets benefit no one but the speculator. But the stability from entering EMU will be an important factor in our businesses," Mr Malim said.
Instead of being inward looking as in the past, an effect of the monetary union could be to make the UK look more at global markets where it could compete thanks to the demand for quality products and its efficient farming structure.
The combinable crops assurance scheme will help the UK keep the initiative in exporting.
Professor David Hughes, of Wye College, said the big multinational agricultural companies and major food buyers, such as the food chains, would move quickly towards adjusting their accounting systems to deal in euros.
However, Lord Kingsdown – former Bank of England governor and farmer Robin Leigh Pemberton – said there would be no compulsion even for the first EMU members to use euros for the first three years of the system.
He hoped the UK banks would allow accounts into which payments could be made in euros but credited in sterling if the customer wished.
Early EMU membership looks slim. David Millar hears about the implications of staying outside the Euro currency club for the next few years.