The CAP in the Face of the Economic and Financial Crisis

16-03-2009

Introduction When the US real estate bubble burst between 2007 and 2008, it signalled the start of a major international financial crisis leading to economic recession worldwide. It is now clear that the deterioration of the macroeconomic fabric all over the world is of a size and a duration not seen since 1929. It is against this backdrop that the current economic and financial crisis is disrupting a number of the parameters of the common agricultural policy (CAP): - Consideration must firstly be taken of the impact of the recession on the trend of agricultural commodity markets, and most particularly on world food demand. Within this context it may now be perceived that the crisis has put an end to the commodities bubble prevailing between 2006 and 2008, and world prices for agricultural products and food have already dropped to pre-2006 levels. - The crisis is likewise affecting various sectors and trends in agricultural production costs and revenue, which reassert the stabilising role of CAP aid. - Lastly, some account must be taken of the (asymmetric but global) impact on public finances, on the Community budget (in terms of own resources and expenditure) or on national budgets; an impact that may even force a review of the multiannual financial perspective in force (2007/2013) and seriously affect negotiation of the EU’s future financial framework. The sway held by the CAP over the Community budget could well have a major impact on the future expenditure allocated to agriculture. Moreover, increases in public debt and spending commitments already in place at national level to tackle the economic and banking crisis weaken the Member States’ cofinancing capacity.

Introduction When the US real estate bubble burst between 2007 and 2008, it signalled the start of a major international financial crisis leading to economic recession worldwide. It is now clear that the deterioration of the macroeconomic fabric all over the world is of a size and a duration not seen since 1929. It is against this backdrop that the current economic and financial crisis is disrupting a number of the parameters of the common agricultural policy (CAP): - Consideration must firstly be taken of the impact of the recession on the trend of agricultural commodity markets, and most particularly on world food demand. Within this context it may now be perceived that the crisis has put an end to the commodities bubble prevailing between 2006 and 2008, and world prices for agricultural products and food have already dropped to pre-2006 levels. - The crisis is likewise affecting various sectors and trends in agricultural production costs and revenue, which reassert the stabilising role of CAP aid. - Lastly, some account must be taken of the (asymmetric but global) impact on public finances, on the Community budget (in terms of own resources and expenditure) or on national budgets; an impact that may even force a review of the multiannual financial perspective in force (2007/2013) and seriously affect negotiation of the EU’s future financial framework. The sway held by the CAP over the Community budget could well have a major impact on the future expenditure allocated to agriculture. Moreover, increases in public debt and spending commitments already in place at national level to tackle the economic and banking crisis weaken the Member States’ cofinancing capacity.