Out of all the different EU policies, there are few that have been more discussed than the Common Agricultural Policy (CAP). It has been 57 years since its introduction, and while Europe has changed enormously compared to half a century ago, the CAP hasn’t. It can therefore be stated that the CAP is outdated and inefficient. This opinion piece will explain why.

The CAP was introduced in 1963, in order to enhance agricultural productivity and to offer guaranteed prices to farmers for certain products. The fact that the CAP was designed in the post war area is one of the main reasons why it is outdated and incoherent with EU goals.

In the early years of the CAP, its aim was to ensure that food was available to all. In order to produce this food, farmers received subsidiaries from the EU. At one point there was enough food, but the CAP was not changed. Farmers produced much more than necessary, which eventually led to overproduction.

The EU population’s demand for quality food is not being answered by the CAP, as the policy still focuses on quantity. This is very alarming since the CAP is the EU’s biggest item absorbing 40% of the EU budget is.

The CAP consists of two pillars. The budget of the first pillar is in the form of direct payments to farmers located the EU. These payments are calculated based on the size of the operation of a farmer. These direct annual payments create an unfair farm support system. It is quite unfair that 32% of the subsidies go to 1.5% of the farmers industry. We can therefore simply conclude that smaller farmers are being put out of business because of the CAP.

The CAP is also negatively affecting European households. The policy is totally dominated by only European farms. For this reason, we as European consumers, have to pay 17% more than the average world price for products. Households that earn less, and therefore have a lower amount of money to spend, are spending a larger percentage of their income on food than richer households. Resulting in the fact that poorer households in the EU feel the consequences of the CAP the most.

In addition, there is no coherence at all between the COP and Europe’s environment policy and goals. The majority of species in Europe are under serious threat and one of the main causes is the agriculture sector. The ecosystems and species that are dependent on agriculture are in a poor, declining state. In France alone, the amount of farmland birds has fallen by a third in 15 years. 

The subsidies received by farmers are calculated on the basis of the size of the land owned by farmers, which results in large farms being treated more favourably than small ones. This forces small farms into harsh agricultural practices, such as the use of nitrogen-rich manure. When released into the environment, it is transformed into Harmonia, a substance that is extremely harmful to the environment.

It is needless to say that the CAP also has several positive aspects. Because of the CAP, we have strict rules regarding the quality and security of food in Europe. However, these strict rules on food make it difficult for third world countries to participate in trading their products. Countries that are not part of the European Union have to deal with tariff barriers. Developing countries that are already unable to compete with their own market, now also have no chance to sell their products on the European market. The CAP thus contributes to blocking economic in Third World countries. Undermining the bloc’s development goals as well. 

It can be concluded that the CAP is an insufficient and outdated system and completely incompatible with the EU in present time. 
The CAP ignores global warming, lacks sustainability and has a negative impact on the low-class in Europe and the development of Third World economies.
The CAP is only beneficial for big land-owning farms, since it is calculated based on land size. Especially in recent times, with environmental problems rising, isn’t it time for more nature-friendly policies? If the EU doesn’t change the CAP quickly, it will damage more than its intended purpose.

References

Barkham, P. (2018, March 23). EU in ‘state of denial’ over destructive impact of farming on wildlife. Opgehaald van The Guardian: https://www.theguardian.com/environment/2018/mar/23/eu-in-state-of-denial-over-destructive-impact-of-farming-on-wildlife

Commission, E. (sd). The common agricultural policy at a glance. Opgehaald van European Commission: https://ec.europa.eu/info/food-farming-fisheries/key-policies/common-agricultural-policy/cap-glance_en

Land, L. (2017, March 1). UNCAP THE TRUTH ABOUT EU FARM POLICY. Opgehaald van Living Land: https://www.living-land.org/blog/2017/2/13/uncap-the-truth-why-the-common-agricultural-policy-doesnt-fit-anymore

Reuter, D. (2018, December 27). THE COMMON AGRICULTURAL POLICY: PROMOTING THE ‘POLLUTER GETS PAID’ PRINCIPLE. Opgehaald van Green European Journal: https://www.greeneuropeanjournal.eu/the-common-agricultural-policy-promoting-the-polluter-gets-paid-principle/

White, S. (2017, December 4). EU agricultural policy incoherent and outdated – report. Opgehaald van Euractiv: https://www.euractiv.com/section/agriculture-food/news/eu-agricultural-policy-incoherent-and-outdated-report/

A job in a sunny Mediterranean place like Portugal, would be the ultimate dream for many people working in cold wet Member States. However, they are often unaware that working in another Member State could lead to different salaries for the same job. 

Economic inequality in Europe is high and rising, resulting in the fact that Europe’s distribution of wealth is unfair. This opinion piece will explain the current unfair situation in Europe.

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Inequality in Europe is increasing due to the fact that 20% of Europeans make five times more than the bottom 20%. This unfair redistribution of wealth is the result of faster income growth in western European countries and slower than average in the east. The slow growth in wages is the most significant problem facing Europe since the financial crisis. These effects are most noticeable in low-income countries such as Romania and Portugal, but also felt in Italy and even in Germany.

Minimum wages vary throughout Europe. In order to earn more, people are moving to other Member States that offer higher salaries. Most people in Europe work in the services sector making high-end wages.For the same job in the services sector, an Estonian person makes €500 per month, while in Belgium this person could earn €1500 per month. (Seetharaman, 2018)

The hourly rate for students is yet another black page in the story of the unfair division in Europe. In Lithuania, the average hourly salary lays at 4 euros per hour, which is three times lower than the average rate across the EU. The biggest difference is the one between Luxembourg and Romania, ranging from €1.57 in Bulgaria to €11.55 per hour in Luxemburg. (Wixforth, 2018)

An emergence of economic disparities can also be seen between regions. The capital of Latvia, Riga, holds the same GDP per capita as the UK. However, four hours away from Riga, the GDP is the same as that of South Africa. 
Therefore, especially young people feel the need to leave their country. They are looking for job opportunities, including higher wages, elsewhere. When young people start to leave their country of origin, Europe will very soon become a fragmented continent.

When we compare Europe with other countries and their statistics, we tend to conclude that things are not too bad. Eurostat figures for the EU as a whole are calculated on the basis of the average of the national tariff rates, weighted by population size. This method of calculation is inaccurate and greatly undervalues the real scale of poverty and inequality, since it ignores the large differences in income between the Member States. (Dauderstädt, 2019)

Inequality, whether social or economic, is and will affect growth in countries. The unequal distribution of wealth in Europe is the result of the current political situation in Europe. In France, feelings of anxiety and insecurity sparked the yellow jackets movement and the rise of populism.

It reduces productivity and the level of competitiveness and, moreover, it does not make the labour market more efficient. Those who are unable to support their families due to low wages require public support. This withdraws available resources from the EU budget that could have been devoted to economic investments. Ultimately, it is a continuous spiral that destroys economic progress and increases the gap between rich and poor.

We can conclude that wealth in Europe is highly fragmented. The difference between wages in different Member States makes the freedom of workers a living paradox.  

Economic inequality has led to the political rise of populism in Europe. It is a serious problem, that is often underestimated in official figures. In my opinion, the European Union’s motto “Unity in diversity”, is rather contradictory. It is true that the difference in wages create diversity, but is this really the kind of diversity we want to reach? 

References

Commission, E. (2018). Income and living conditions. Opgehaald van Eurostat: https://ec.europa.eu/eurostat/web/income-and-living-conditions/overview

Dauderstädt, M. (2019, January 15). Addressing poverty and inequality in Europe. Opgehaald van Social Europe: https://www.socialeurope.eu/poverty-and-inequality-in-europe

Seetharaman, M. (2018, September 24). Europe’s Ticking Time Bomb: Wage Inequality. Opgehaald van Euronews: https://www.euronews.com/2018/06/12/europe-s-ticking-time-bomb-wage-inequality

Wixforth, S. (2018, November 20). The European Hydra: Wages And Social Dumping – Competition Law As A Way Out. Opgehaald van Social Europe: https://www.socialeurope.eu/the-european-hydra-wages-and-social-dumping-competition-law-as-a-way-out

“Fasten your seatbelts, Europe!”
The world’s most prosperous continent is on the verge of deteriorating. Europe must prepare itself for an economic setback. There are several events coming up that could eventually lead to a new financial crisis in Europe, which will be discussed in this opinion piece. 

According to recent data, the euro area is currently growing at the lowest annual rate it has been in the last four years. Since the European Union got out of the Eurozone crisis, Europe’s real gross domestic product annual growth rate saw an upward trend. The bloc grew 1.6% in 2014, 2.1% in 2015 and 2.7% in 2017. In 2018, however, it dropped to an annual rate of just 1.2%. (Klein, 2018)
From this it can be concluded that Europe is in trouble. The following events will be the last push that will lead Europe towards a financial crisis.

The first event is the approaching end of the Asset Purchase Programme (APP). A few months ago, on 13 December, 2018, the European Central Bank decided to end the APP. (Mauldin, 2019)
Through this programme, private and public assets were purchased in order to reduce the risks of a long period full of low inflation. (ECB, 2019)
Since 2015, the ECB bought 2.6 trillion euros of debt, mainly government debt, across the euro zone, in order to avoid periods of recession.
The APP has been described as the backbone of the economies of the euro countries. The programme helped many Eurozone countries recover from the financial crisis which began in 2008. With the money the banks received for selling their government bonds to the ECB they could give out more loans to businesses which stimulated business activity. This eventually led to economic growth.

Mario Draghi, president of the ECB, has been carrying out his plan of cancelling the APP for a while now. At the start of 2018, the purchasing programme was cut in half, called quantitative easing, and then again in October. The current situation is that in 2019, the purchasing rate will arrive at zero. 

Timing couldn’t be worse, since Europe will now lose an institution on which it has become very dependent in the past years. The abolition of the APP is dangerous, since economic growth in Europe is clearly not stable. One of the main causes is the collapse of the industrial production throughout the Eurozone. This is very alarming as this industry has been the driving force behind many major European economies. With the abolition of the APP, the ECB will not be there anymore with a programme to financially stimulate the Eurozone economies. Europe is left to manage it economy on its own, something it clearly is not ready for yet, which could easily lead to an economic disaster.

Then there is Italy, where the economic situation, including the countries debt, is getting worse day by day. In 2018, Italy was startled by the populist government’s heavy spending plans, which triggered the European Union and boosted bond yields, due to concerns about the Italian budget.

Italian banks own government bonds of their country’s debt. When bond yields go up, bond prices go down and thus their value decreases as well. This results in a deterioration of their capital. The government bonds of Unicredit, Italy’s biggest national bank, have dropped in value to 12 euros, while a few months ago they were worth 18 euros. In an effort to safeguard their money, banks become more reluctant to grant loans. This results in companies having to pay higher interests or not obtaining credit in the first place, suffocating the economy. Economic growth will be slowed down, people will spend less money and unemployment will rise.
As a result, fewer people will pay taxes and the financial situation of the government will become even worse.

Since banks in Frankfurt, Paris and Madrid are currently holding more than 425 billion euros of sovereign and private debt, Italy’s debt is in hand of banks spread throughout Europe. (Giovanni Salzano, 2019)
This is a very risky situation, since Italy is Europe’s third largest economy and their economy accounts for 11% of Europe’s GDP, which is 10 times that of Greece. From this we can  conclude that, when Italy’s economy will collapse, so will all banks in the Eurozone. (Ewing, 2018)

Ten years after the financial crisis in 2008, Europe is still trying to get back on phase. However, it looks like another crisis is on its way. The crisis might set off in Italy, since their debt could eventually lead to the breakdown of whole Europe. 
Due to the abolition of the ECB’s Asset Purchase Programme, there is no longer a programme that can be used to stimulate Europe’s economy. How the Eurozone will perform in 2019 remains a question but one thing is for sure, there is a big possibility it could eventually result in a financial crisis. It looks like Europe is in for a period full of turbulence!

References

ECB. (2019). ECB. Retrieved from Asset purchase programmes: https://www.ecb.europa.eu/mopo/implement/omt/html/index.en.html

Ewing, J. (2018, October 12). Why Italy Could Be the Epicenter of the Next Financial Crisis. Retrieved from NY Times: https://www.nytimes.com/2018/10/12/business/italy-debt-crisis-eu-brussels.html

Furness, V. (2018, November 20). Reuters. Retrieved from Italy’s bond yields rise as budget tensions weigh: https://www.reuters.com/article/us-eurozone-bonds/italys-bond-yields-rise-as-budget-tensions-weigh-idUSKCN1NP1QH

Giovanni Salzano, D. P. (2019, January 4).Why Italy’s Debts Are Europe’s Big Problem. Retrieved from Bloomberg: https://www.bloomberg.com/graphics/2019-italian-banks/

Klein, M. C. (2018, December 28). Get Ready for Europe’s Next Crisis. Retrieved from Barron’s: https://www.barrons.com/articles/europe-economic-crisis-is-coming-51545951011

Martin, W. (2019, January 15). Business Insider. Retrieved from We now have conclusive proof that Europe is in an economic slump, and that two of its biggest economies are careering towards recession: https://www.businessinsider.nl/germany-and-italy-recessions-as-european-economy-slumps-2019-1/

Mauldin, J. (2019, January 4). These 3 Events Will Create A Perfect Storm For Europe In Early 2019. Retrieved from Forbes: https://www.forbes.com/sites/johnmauldin/2019/01/04/these-3-events-will-create-a-perfect-storm-for-europe-in-early-2019/#6224f8fc4069

Long Live Brexit!

Brexit has often been called a fatal mistake, and rightfully so. Especially economically, the UK has put itself in the most difficult situation it has ever been. The following question arises: does the European Union benefit from a potential Brexit deal? I personally suppose it does. There are various positive aspects to this decision, which I will discuss in this opinion piece.

“Britain isn’t just losing Brexit. Europe is wining it.”- Stephen Paduano, journalist for Foreign Policy

A popular opinion by the pro-leavers is that it will be Europe that will suffer on an economic level from the fact that the UK is leaving the European Union. This opinion, however, couldn’t be further from the truth. Of course it is a well-known fact that Member states could suffer economically from the consequences of the UK leaving. For the Netherlands, for example, it could eventually lead to a reduction of their economy by 1.2%. (Partington, 2018)

However there are far more benefits for Europe when it comes to the UK leaving. According to the Financial Times, the Brexit deal will result in a higher growth in export and saving rates. This year, the EU’s export rate will increase by 4,5% which is 1,4% higher than the UK’s. The saving rates will grow due to the fact that EU households spend less as a proportion of what they earn compared to the UK, which eventually results in higher saving rates for the EU.
In addition, the EU’s economic growth is currently faster than the UK. (Romei, 2019) The EU commission expects that this will remain the case for the next year. From this it can clearly be concluded that the EU is not economically dependent on the UK.

It will be the UK, that will suffer the most economically from its decision. The reality is that businesses that are currently based in the UK are looking for opportunities elsewhere in Europe. Frankfurt for example, is considered as a popular city full of upcoming business opportunities. (Ringg, 2018)
Another phenomenon is that numerous UK investment banks are moving. This will lead to thousands of job opportunities overseas which will contribute to a significant economic growth on Europe’s mainland. (Paduano, 2018)

Neighbour Ireland has turned into the best substitute by controversially offering lower taxes, less regulation and access to the single market. Ireland’s present tax rate lies at 12,5% which is currently one of the lowest tax rates in the whole of Europe. This makes Ireland a very interesting place for companies to start new businesses

It will be very hard for UK employers to undertake any business in one of the thirty countries that make up the European Union and the European Economic Area. Many factories in the UK are letting go their staff at the moment. One of today’s most important industries, the technology sector, is also shrinking in the UK. Technological businesses are leaving since they feel the UK no longer has access to foreign talent and financial assets.

The industry in the UK that will suffer the most from Brexit is the food processing industry. Farms and processing businesses depend on a workforce of 40%, consisting of EU born citizens, that will have to leave due to Brexit.  

The single market had various of advantages for the UK, which the country will of course try to preserve. However as Merkel has often stated, “there is no room for cherry picking”. The UK shall have to face the consequences of not having any negation power. This all paints a very uncertain picture for the future of their economy. Especially since a recent article admitted that the UK government will fail to roll over trade deals with the EU and other third countries (Fox, 2019)

Looking at the relationship between the UK and the EU, it is clear to say that the UK has always had a hesitant position towards the EU. Throughout history, the UK has consistently opposed the ideas of the EU, while the EU has always tried to take the UK’s wishes into account. Since the country’s admission, it opted out on several key parts of the EU legislation and of course the Monetary Union. In the end, it has been a one sided relation that has to stop. Europe should focus on what it has and the many opportunities the Brexit deal can bring, such as job opportunities and higher saving rates.  Brexit should thus rather be seen as a celebration; the further integration of Europe can finally begin.

References

Fox, B. (2019, February 12). UK admits it will fail to roll over EU trade deals. Opgehaald van Euractiv: https://www.euractiv.com/section/uk-europe/news/uk-admits-it-will-fail-to-roll-over-eu-trade-deals/

Paduano, S. (2018, October 17). Britain isn’t just losing Brexit, Europe is winning it. Opgehaald van Foreign Policy: : https://foreignpolicy.com/2018/10/17/britain-isnt-just-losing-brexit-europe-is-winning-it/

Partington, R. (2018, July 19). No-deal Brexit would harm EU countries as well as UK, warns MK. Opgehaald van The Guardian: https://www.theguardian.com/business/2018/jul/19/no-deal-brexit-would-harm-all-european-countries-warns-imf

Ringg, S. (2018, October 3). Japan waves goodbye to UK as “gateway to Europe” post Brexit. Opgehaald van Bloomberg: https://www.bloomberg.com/news/articles/2018-10-03/japan-waves-goodbye-to-u-k-as-gateway-to-europe-post-brexit

Romei, V. (2019, January). What will the EU look like after Brexit? Opgehaald van Financial times: https://www.ft.com/content/dec6968c-f6ca-11e7-8715-e94187b3017e