On the brink of ruin?

US and Canadian import restrictions will cost EU farmers four hundred million dollars a year in lost trade

By Europe business correspondent Patrick Bartlett

The financial cost of Europe's farm crisis is almost impossible to calculate but it is certain it has already run into many billions of dollars.

The European Commission has already set aside almost one billion dollars in aid for farmers hit by the BSE crisis.

All freight vehicles are disinfected before entering Europe

The impact of the foot-and-mouth outbreak has so far been mainly felt in Britain but the response of America and other countries in banning EU meat imports will be felt by farmers across the Union.

Britain's National Farmers Union says foot-and-mouth is costing the country's farmers $90m dollars a week.

But experts say the total economic cost for the country will be several billion dollars as earnings from tourism, sport and other sectors are also hit.

If the French outbreak spreads to the rest of the continent, the results will be far worse.

In fact, the whole of Europe is already suffering. The import restrictions imposed by the US and Canada alone will cost EU farmers $400m a year in lost trade.

Significant slowdown

Denmark's pork exports will be particularly badly affected. Because farming represents less than three percent of the European Union's economic output, its direct impact on economic growth will be limited.

But some countries are more vulnerable than others. Ireland, which exports 90% of its food production, could suffer a significant slowdown.

Another less obvious impact will be on inflation. Since the BSE scare, beef prices have collapsed, threatening many farmers with ruin.

But the prices of other meats, which consumers have turned to instead, have been rising - a situation made worse by restrictions on livestock transport to control foot-and-mouth, which make it harder to get food into shops.

With inflation in the Euro zone already above target, that is a worry for Europe's central bankers.

Higher inflation will make it harder to cut interest rates, reducing Europe's resilience to America's economic downturn.

Above all, the farming crisis is adding to a perception that the European economy may not be as robust as national leaders and the European central bank have claimed.