EU Agricultural Policy and Economic Cohesion
EU Agricultural Policy
The objectives of the Common Agricultural Policy (CAP) were to ensure a standard of living similar to the European average, fair prices for consumers, and quality food. The Community has provided substantial aid to farmers in the form of grants and tariffs.
Stages of the CAP
Since 1957, the CAP was characterized by guaranteed prices for milk, cereals, sugar, and beef. This led to negative effects by encouraging increased production of these products, creating large surpluses.
In 1984, a new phase of the CAP began with limited production. The aim was to avoid the overproduction of the previous stage. A policy of quotas was introduced, limiting subsidies to maximum amounts, but these remained high: over 50% of the budget of the EU. The United Kingdom and Denmark denounced the excessive importance of agricultural subsidies. Countries exporting food and raw materials also voiced opposition because the CAP was considered unfair competition.
In 1992, subsidies were decreased, and support prices were reduced. Since 2000, environmental protection factors have been taken into account.
Cohesion Policies
Cohesion policies promote solidarity, with member countries with higher incomes contributing to the development of the poorest, favoring a better distribution of wealth.
EU Budget and Funding
The EU has its own resources for its budget. The EU budget has several sources of income:
- Agricultural Levy: Taxes on imports.
- Customs Duties: Common tariff for goods imported from third countries.
- VAT Fee: Member States make contributions based on value added.
- Share in relation to GDP: State contributions in terms of its Gross Domestic Product.
Member states contribute according to their degree of wealth and receive funds according to their needs. These funds are based on the financing of investments in countries with income below 90% of the mean.
European Funds, known as the Structural Funds and the Cohesion Fund, are dedicated to this objective.
Structural Funds
The Structural Funds are dedicated to employment, rural development, fisheries, and infrastructure, and are divided into four types:
- European Regional Development Fund (ERDF): Finances infrastructure and employment.
- European Social Fund (ESF): Finances the training of the unemployed.
- European Agricultural Guidance and Guarantee Fund (EAGGF): Development of rural areas.
- Financial Instrument for Fisheries Guidance (FIFG).
The Cohesion Fund finances environmental projects and transport networks. Currently, and until 2013, the main beneficiaries are the economies of Eastern Europe.
The Creation of a Common Currency
In 1971, the EEC decided to limit the band of fluctuation of the value of different currencies by creating the European monetary snake. In 1979, the European Monetary System (EMS) created a unit of account, the ECU, consisting of the value of the currencies of member countries.
The Maastricht Treaty created a single currency, the euro, which should ensure the free movement of capital. The new currency went into circulation on January 1, 2002, in fifteen European countries.
Participating countries demanded the fulfillment of strict economic stability criteria: a deficit below 3% of GDP, a debt level below 60% of GDP, low inflation, and interest rates close to the average. The UK and Denmark achieved a status of non-adherence, and Sweden did not join the euro zone. The euro circulates in 17 European Union countries.