`In Wake of Crisis, EU Aid to Olive Oil Producers Has Strings - Olive Oil Times

In Wake of Crisis, EU Aid to Olive Oil Producers Has Strings

Jul. 5, 2010
Daniel Williams

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By Daniel Williams
Olive Oil Times Contributor | Reporting from Barcelona

The European Commission, the exec­u­tive body of the European Union, pro­posed June 30th to sus­pend agri­cul­tural aid and farm sub­si­dies to coun­tries with exces­sive deficits in an effort to pre­vent another debt cri­sis like the one that exists cur­rently. In this pro­posal, the Commission has the right to halt EU agri­cul­tural aid to those states that vio­late bud­get­ing rules, like those that expressly for­bid deficits of more than 3%.

As it stands, most EU states have deficits that far exceed this 3% limit and the most seri­ous offend­ers are some of the world’s olive oil pro­duc­ing lead­ers: Greece, Spain, and Portugal. Under these new sanc­tions, if these coun­tries fail to tighten their bud­gets they could lose farm sub­si­dies and other forms of EU agri­cul­tural aid. This could prove dev­as­tat­ing for olive oil farm­ers and pro­duc­ers who court EU aid to revamp out­dated pro­duc­tion meth­ods and could cause pric­ing woes for coun­tries that rely on EU sub­si­dies to store olive oil to limit out­put and res­cue falling prices in the sec­tor.

Europe’s Stability and Growth Pact requires states to keep pub­lic deficits under three per­cent of national out­put and debt at less than 60 per­cent of GDP. Until now how­ever, none of the pro­posed sanc­tions have ever been imple­mented due to a lengthy and com­pli­cated pun­ish­ment pro­ce­dure. Under this new plan, how­ever, the EU promises swifter and harsher action, promis­ing to first sus­pend aid pay­ments to states and then, if no efforts are made to improve deficits, vow­ing the can­cel­la­tion of the bud­getary com­mit­ments and the defin­i­tive loss of pay­ments for the coun­try concerned.”[1]

The European Union is, by far, the largest olive oil pro­duc­ing and con­sum­ing region on the planet with olive oil mak­ing up a whop­ping per­cent­age of GDP for the Mediterranean coun­tries hit worst by the cur­rent eco­nomic cri­sis. Olive cul­ti­va­tion is sig­nif­i­cant to the rural economies of many of the EU’s 27 coun­tries as well as to the envi­ron­men­tal equi­lib­rium of the olive oil pro­duc­ing regions.

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[1] Enhancing eco­nomic pol­icy coor­di­na­tion for sta­bil­ity, growth and jobs – Tools for stronger EU eco­nomic gov­er­nance http://ec.europa.eu/economy_finance/articles/euro/documents/com_2010_367_en.pdf
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