Stephen Cadogan: EU budget means the new Government will need to find its feet quickly

Stephen Cadogan: EU budget means the new Government will need to find its feet quickly

Farmers are more bleary-eyed than most this week, as the arrival of the year’s 2.5m calves gathered pace, and the results of a history-making general election emerged.

There were late nights in the cowsheds, and with the TV and other media.

The calves are the foundation for the next few years on each farm, but so are the election results.

“The economy, stupid” advice of Bill Clinton’s strategist, James Carville, was set aside by voters who had been squeezed too hard by the austere years of recovery since the 2008 recession. So they voted for change, not for the economy.

Since the 2008 bust, Ireland has become the fastest growing European economy, thanks to steady economic growth since the end of the EU-IMF bailout in 2013, supported by strong domestic demand, and by multinational companies operating here which have helped to reduce the unemployment rate to a historic low of 4.8% in November 2019.

However, not enough people have sufficiently benefited from the recovery to go along with current government policies.

Instead they opted for a historic swing towards the left-wing nationalist Sinn Féin party.

Citizens voted for a change of government due to unhappiness with health services, housing services, the high cost of living (although inflation has been well controlled), and other failures of the government to distribute the economic recovery dividend fairly.

In 2008, in addition to the Irish property market collapse, there was the global credit crunch, higher commodity prices, global financial market problems, weaker demand in countries Ireland trades with, and adverse exchange rate movements.

There is no shortage of such threats to the economy, the more recent ones being a potential no-deal Brexit at the end of the year, or loss of some of the multinational employers on which the economy depends heavily.

Global financial instability could increase, or the outbreak of coronavirus in China which is disrupting the entire supply chain of all industries could trigger global recession, or greatly reduce demand in a country Ireland trades with. Trade wars could spread.

Governing a country so dependent on trends outside its control is difficult.

The incoming team will have to find their feet quickly, fiscal responsibility will be important, and we must all hope they succeed.

Meanwhile, there are difficult tasks for the caretaker government.

One of the first challenges will be negotiations in the EU institutions on the multi-annual budget, after which progress can be made on Common Agricultural Policy reform.

The president of the European Council, Charles Michel, has called a special European Council meeting which will start on February 20, and is likely to go on as long as it takes to get some progress on the so far very slow negotiations on the multi-annual budget.

On the table will be matters such as the overall size of the budget; the proposed reductions in agricultural and cohesion spending; and finance for new EU priorities such as security, migration and climate action.

European Council President, Charles Michel
European Council President, Charles Michel

Michel is pressing ahead for budget agreement at the February 20 meeting or shortly thereafter, and huge decisions may be needed by our caretaker government.

Next up after those decisions will be talks on whether there will be a two-year or one-year transition period until the new CAP is in place, and how mu ch funding should be allocated for these transition arrangements.

The outcome of these negotiations will be especially crucial for farmers over the next seven years.

During the last recession, farmers were acknowledged to have played a valuable role in in the food sector’s success, which stood out as one of the few industries reporting progress while others felt the worst effects of the bust. One of the main reasons for that success is that farming is bankrolled externally by the CAP, which insulates it somewhat from national boom and bust.

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