26 February 1998
By Boyd Champness
UK agriculture has nothing to gain but everything to lose by not joining the first wave of Economic Monetary Union (EMU) participants in 1999, according to a leading consultant.
Robert Gooch, of European consultancy group Eurinco, said that if EMU was not a success, then nervous investors would pour money into strong and appreciating currencies such as Sterling, which would have a devastating effect on UK agriculture.
However, if the Euro was a success, then the rules and regulations would have already been set in concrete by Germany and France, leaving very little scope for the UK to play a key role when it eventually joins.
The European council of finance ministers will decide in May which countries have met the Maastricht criteria, with only four countries not expected to join the first wave in 1999. These include the UK, Sweden and Denmark – on their own undertaking – and Greece, because its Drachma will not qualify.
Speaking at the Farmers Weekly Economic and Monetary Union conference in London this week, Mr Gooch said he believed the UK will join EMU in 2003 after Labour wins the next election. But he was concerned about the interim period and how the Green Pound revaluation system will work once the Euro is introduced.
He said a currency revaluation system would have to be maintained for the four EU member states not using the Euro, however, he fears payments will be made very much on political grounds and the “ins will not look too favourably towards the outs”.
If this was the case, then British farmers would have to rely on the generosity of the UK Government to allocate funds to the farming industry suffering due to the strength of sterling – something the Government has already proven reluctant to do.
Mr Gooch said the benefits of a “successful” single currency would be the potential for a better macroeconomic climate which includes lower inflation and interest rates, and better budget discipline. Also, the Euro would replace the Dollar as the dominant currency.
Under the Euro, the single market would be a true single market with greater transparency and increased competition, which bodes well for UK farmers. Also, there would be stability in commodity prices and incomes because there are “no Green rates” within a single agrimonetary system and no need for national Governments to consider compensation for revaluations.
If the Euro was not a success, then there is the potential for worse macroeconomic conditions with higher unemployment and interest rates and more turbulent national economic cycles because of the loss of national flexibility.
Being forced to accept Europes “social” markets, such as the rigid labour markets of many EU member states, would be to the detriment of UK prosperity. In addition to this, EMU would result in greater federalism which points to a loss of monetary and political sovereignty.