Agrimonetary questions and the euro
As will become clear below, one of the cornerstones of the common agricultural market is the possibility for all producers in the sectors under a common market organisation to be able to sell their products to an intervention body, at a guaranteed price, which is set each year by the Council and is the same for all the Member States. For this to be possible, the common agricultural policy requires a denominator common to the different currencies in which guaranteed prices are expressed. This requirement provided the impetus for the creation in 1962 of the Unit of Account (UA) a fictive currency or rather measuring standard whose value corresponded to the gold parity of the US Dollar registered with the International Monetary Fund (IMF). After the creation of the European Monetary System in 1979, the UA was replaced by the ecu [see sections 7.2.1 and 7.2.2].
Since the ecu consisted of the weighted value of the Member States' currencies, the revaluation or devaluation of an individual currency used to lead to a change in the value of the ecu and in the relative position of each currency towards it. "Green rates", lying somewhere between the value of the ecu and the official exchange rate for a given national currency, were introduced in 1969 as a compromise between the interests of strong-currency countries, which rejected cuts in their farmers' earnings after revaluations of their currencies, and those of weak-currency countries, which refused to support the revenues of the farmers of the most prosperous countries of the Union. As a consequence, every time there was a change in the central rate of a national currency, the green rates were changed in turn and all the monetary gaps were closed by "Monetary Compensatory Amounts" (MCAs). The application of the MCA regime naturally engendered technical and administrative difficulties complicating the normal process of marketing agricultural produce within and outside the EU and distorting competition.
The introduction of the euro, on 1 January 1999, ended the previously existing problems concerning the fixing of common prices and intervention measures [Regulation 2799/98]. It led to a major reform and simplification of the agrimonetary system. Agricultural conversion rates have been discontinued. Agricultural prices and aid in the participating Member States is paid in euros. EU aid too is paid and collected in euros [Regulation 2800/98 and Regulation 2813/98]. In the case of the Member States outside the eurozone, the euro exchange rate is used for the necessary conversions into their national currencies, unless they decide to make payments in euro. For those Member States the value of a payment is determined by the exchange rate on the date of the operative event (a price or an aid) and not on the date of actual payment.
The use of the euro benefits the CAP, not only by simplifying its procedures and reducing its budget costs through the abolition of the green rates, but also through the simplification and transparency of aid schemes for farmers, price stability and increased competitiveness in European agriculture. Like their American counterparts, who can use their national currency (the dollar) for export transactions, European enterprises now have the euro and are able to invoice their products in the currency in which their costs are also denominated, thereby avoiding an exchange risk.