The profound financial crisis at the heart of the EU provides an ideal opportunity to address the issue of the Common Agricultural Policy (CAP) which was set up in the 1950s mainly at the instigation of Germany and France. Currently, it accounts for annual expenditure of over €50 billion and represents a colossal percentage – some 40% - of total EU costs. Central to its operation are many concepts – subsidies, quotas, levies and intervention prices – that are anathema to most free market economists.
Not surprisingly, the CAP has also given rise to such Pythonesque features as butter mountains and wine lakes. Whilst some progress has been made in reforming the CAP in recent years, the reality is that it remains a highly expensive anachronism of post-war recovery – and very unsuited to today’s competitive economy.
Inevitably, in the short term, the EU’s focus will be on saving the euro as the markets continue to home in on the dreadful public finances of both Italy and Spain – whilst accepting that Greece’s case is virtually beyond recall. Amongst the more sensible proposals for resolving the euro crisis is a currency split between two EU blocs – the northern and southern countries, with France’s membership underpinning the latter.
In any event, the euro crisis is giving rise to fundamental thinking about the future of the EU. Indeed, within the UK, eurosceptics are becoming far more vocal, with continuing calls for a referendum on the UK’s future EU participation. Furthermore, at some juncture, the UK may need to make further financial contributions to saving the euro – whether directly, through the IMF or bilaterally as with the Ireland.
In return, the UK should demand concessions of its own, including major cuts in CAP payments and, in the long term, its abolition. Its replacement should be based on individual national agricultural policies. Remember, the PR executive mantra - every crisis provides an opportunity.