Currency changes good for Continent

17 April 1997

Currency changes good for Continent

AS UK farmers brace themselves for another green £ revaluation in May, Continental producers are reaping rich rewards from a series of green currency devaluations.

The situation arises because of the strength of sterling, which moved into revaluation territory in mid-March.

Under the EUs complex agri-monetary rules, when one green currency is up for revaluation, any other member state with a negative gap between its green and market rates must devalue the green rate to eliminate that gap.

This occurred first on Mar 24, when Denmark, the Netherlands, Portugal, Spain and Greece all had their green currencies devalued. As a result, support prices and direct income payments, which are set in ecus, are now worth more when converted into national currencies in those countries.

The situation was repeated on Apr 3, with Germany and Austria added to the list of beneficiaries.

But it is not all good news across the waters. Irish farmers are set to lose some of the compensation awarded to them for last years green currency revaluations, because of this years devaluations.

In total, about Ir£92m compensation was granted in 1997. A further Ir£46m of EU money was due to be paid this year, but Ir£15m has been cancelled due to the 5% devaluation of the green punt since January.

"But we are not too disappointed," says Irish Farmers Association senior economist Con Lucey. "We are aware of the rules and, given a choice between devaluations and compensation, we would rather have the devaluations."

lMeanwhile, UK farmers are set for about a 3.4% support price cut on May 3. Despite some recent slippage in the value of sterling, the market rate was still 6.8% above the green rate at the end of the latest reference period (Apr 12) – well above the 5% allowed before a revaluation is triggered. &#42

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