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It's always fascinating to see how others tackle similar problems to the ones on our farm... great to get that little 'light-bulb moment' when you find something which will work. We've made quite a few useful things from your magazine

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Could PIGs (Portugal, Ireland, Greece) upset the farming apple-cart?

Down on the farm the troubles of euroland seem very far away, especially when the spring work is keeping us extra busy. But are farmers right to think that the ‘bail-out’ of the Greek, then Irish, and now Portuguese economies will have little impact on farming in Britain?

Of course we’re aware that Britain’s contribution to the bail-out funds will have an impact on the national treasury - the latest £6bn for Portugal is going to have to be found somewhere, even though it’s a loan which will be recovered in time.

Part of a commentator or journalists job is to sometimes ‘think the unthinkable’, applying the what-ifs to situations which others, particularly politicians, would rather not consider. So everyone goes along with mainstream thinking until such time as the wheels do fall off, at which point all can say that it was ‘totally unexpected’. Only it actually wasn’t. And those people who had just an inkling of what might happen were just a little prepared, or not so surprised, or slightly better able to cope.

Something like this may well be happening over the euro at the moment. Commentators tell us that these countries have ‘been maxxing out on their credit cards’, and the implication is that if they take a break from shopping their account, like yours or mine, will return to normal. As if it were so simple.

There’s a fundamental problem with the euro which politics has ignored. The nations are close politically, but less so when it comes to finance. There’s a lack of balance in the Euro zone which can be explained by another simplistic analogy: ‘it’s a car fitted with different sized wheels’.

Each member state has very different tax regimes, social security systems, commercial laws - in fact the shape of the Euro coins in their pockets is the thing they have most in common. The Eurozone has fundamental weaknesses which are patched up by pumping up the tyres on the smaller wheels until bursting point, and slacking off the pressure on the big wheels which makes them roll less well.

Supporting national budgets is a fundamental necessity if the system is to survive. Countries which default on their borrowings are no longer credible in an organisation such as the European Community. Yet this support, as we have seen over the past year and more, involves huge sums, which must be found from budgets, found from tax payers.

These same taxpayers are funding the traditional activities of the EU, and of these the agricultural budget, at around E45 billion each year, is the biggest. Farming gets more support than any other European industry. It’s the same order of magnitude as the total European Financial Stability Mechanism (E60bn).

Agricultural and fisheries support is written into the DNA of the EU, and it seems accepted that a proportion of it goes in unintended directions. We have regular revelations of malpractice, misjudgement and downright thievery, yet the sector is often rewarded with an increased budget.

As farmers we know that a good deal of EU agricultural support spending ends up in the bank accounts of affluent, profitable, successful agri businesses across European agriculture. We also know that the basis of this support goes back in history, and that it is maintained through the intransigence of a few European member states, led by France, and there are some countries which would shed few tears if the whole system were to be abandoned. Farm support in the EU is hanging on by its fingernails and is seen as increasing irrelevant and anachronistic by the European population and taxpayer.

The current stresses in the Euro currency could be the catalyst to fundamental changes in European spending, for their common currency, the Euro, is more important than their support of a sector which has grown increasingly wealthy over the years. Can the EU afford to support this major industry in the indiscriminate way it has been doing, and at the same time provide support for member states whose national budgets and borrowing have fallen way out of line?

Thinking the unthinkable involves an economy such as the Spanish finding it needs structural help from the EU. The country is bigger than any of the PIG economies, so the bail-out would be larger, and coming on the heels of the other three there would be significant strain on the euro. This is the time when a major re-shaping may be forced on the Community, and when France and other agri supporters will find themselves backing a winded horse that has no running left.

The crisis in Euroland has so far had very likely impact on farming. Support countries are delving into their national budgets to raise additional funds, and continue to provide funds for farming and, of course other industries. At present there seems no talk of emergency budget reviews in the EU, even though this would be the advice provided to any family that had ‘maxxed out on its credit cards’.

The difficulty which could present to UK farming is that the Single Payment and associated funding last year accounted for half of UK farming profits. For every £ made growing cereals, producing milk and beef, growing vegetables and also running farm-based diversification businesses in tourism, farm shops and so on, another £ came from the EU.

Of course farming profits are dictated by tax, and farmers are notorious at reducing their tax bills by re-equipping, and expanding their holdings. With a high proportion of farm businesses being in the form of family partnerships, with few shareholders, there is little point in declaring larger than necessary profits.

So for some, the reduction of the Single Payment would require some reassessment of capital spending, but no great financial terror. For others however, the situation could be more serious. Younger farmers with substantial borrowings will be dependent on the Single Payment for servicing their banks and finance companies. Tenant farmers, who always have the problem of poor equity and in recent times since the banking crisis have had difficulty in accessing funds, can be looking at the EU payment as a means of finding their escalating rents.
Prudent farmers will consider their own reliance on the European budget and support, and see ways they can adopt to reduce their dependence.