Dairy crisis proves EC’s strategy for a soft landing after quotas did not work

Wherever the Greek crisis eventually ends up, one thing is certain. The referendum vote against the EU financial plan was proof that Brussels cannot continue ignoring the views of people or politicians in Member States. That said, when it comes to the crisis in the dairy industry – and no matter what the European Commission may say that is what farmers are facing – Brussels is still insisting that it understands markets better than everyone else.

The agriculture committee of the European parliament has been looking at the impact of the removal of quotas, and it raised concerns about the decline in milk prices over the past year. This is obvious to most people, but the farm commissioner, Phil Hogan, is sticking to his ‘crisis, what crisis’ line. The problem for the Commission is that if it admits there is a crisis it will have to do something about it. That would be costly, but more significantly, it would be an admission that its strategy for a soft landing after quotas did not work.

MEPs rejected calls from a minority for a back-door reintroduction of supply management when prices fall. This was the correct decision, since by the time controls had an impact the market would have corrected itself.

What MEPs really wanted was a review of the price at which intervention is triggered. This was set in 2003, as part of the Franz Fischler CAP reforms, and was reviewed but not altered in 2008. Since then the cost of production has soared, making intervention all but irrelevant at 23 cents or around 16 pence a litre. This is probably the way the Commission wants it to be, since no matter how bad the market gets, intervention is an unlikely prospect.

In response to the committee, Mr Hogan again ruled out a review of intervention. He said Member States had instruments they could use, citing as an example coupled supports, but that is a long-term answer to a short-term problem that would have little impact.

Given a world market where over production is still a major problem, and the fact that the Russian market will remain closed until next year, Mr Hogan seems to be the only person who doesn’t believe there is a crisis in the European dairy industry. Politicians, farm lobby groups and farmers struggling to make ends meet know there is a crisis. If the Commission chooses to ignore all these views, it can’t be surprised that when the opportunity comes, as happened in Greece, people choose to give it a bloody nose.

The dairy issue is not the only agricultural issue the Commission has got wrong recently because it chose to ignore public opinion. It has had to back away from an ill-conceived plan to allow Member States to unilaterally ban the import of approved genetically modified (GM) livestock rations.

It has also now asked them to help search for scientists to advise the Commission, after it decided to end the post of chief scientific adviser. It is hard to believe yet another Brussels committee will be as effective as having a robust single adviser – but it was the Commission president, Jean Claude Juncker’s choice to dispense with Professor Anne Glover, because she wanted science to guide the GM debate.

The challenge to the Commission’s power by the Greek government and people has made world headlines. It is evidence that the big financial fudges of a few years ago to get countries into the euro was a massive political mistake. Whatever happens in Greece next, the euro will remain an unstable currency because of those fudges, and the present Commission would do well to show some humility and admit the errors of past Brussels administrations.

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