Eurozone: The Real Eurozone Scandal - by Simon Wren-Lewis

Imagine that it was revealed that 10% of the European Union budget (the money that goes to the EU centre to fund the common agricultural policy and other EU wide projects) had been found to be completely wasted as a result of actions by EU policymakers. 

By wasted I do not mean spent on things that maybe it should not have been spent on (rich farmers, inefficient farmers, infrastructure projects whose costs exceed benefits etc), but literally money that went up in smoke. Imagine the scandal. Heads would roll, and some might find themselves in jail.

10% of the EU budget is about 0.1% of EU GDP. Yet sums at least ten times that figure are currently being wasted in the Eurozone, as a result of actions by Eurozone policymakers. Here is the latest OECD assessment of output gaps across eleven Eurozone countries, for both 2013 (blue) and 2014.

A negative output gap means that output could be the amount of the gap higher without raising inflation above target. Of course Greece is a nightmare, and things in the other PIIGS are really bad, but the output gap in the Netherlands is around 3%, in France over 2% in 2014, and even in Germany the output gap exceeds 1%. Estimating output gaps is an imprecise science, but gaps of at least this size are consistent with inflation well below target (currently 0.3%). So output could be at least 1% higher across the Eurozone with no ill effects. This is the equivalent of the entire EU budget going up in smoke.

Read more: The Real Eurozone Scandal

Agriculture: EU Reaches Deal Reshaping Bloc’s Farm Policy in Next 7 Years - by Rudy Ruitenberg

European Union negotiators agreed on the bloc’s future common agricultural policy, after two years of discussions on how to spend what may total 373.2 billion euros ($485 billion) over seven years. 

The new policy will cut some subsidies in the 27-nation bloc and tie others to environmental measures, the European Commission, the EU’s executive arm, wrote in an e-mailed statement today. A plan by farm ministers to trim payments above 150,000 euros for a single farm was left out of final talks as there was no consensus, Paolo De Castro, chairman of the European Parliament’s agriculture committee, said at a news conference in Brussels yesterday.

The EU’s common agricultural policy sets the direction from 2014 to 2020 for farmers who produce 20 percent of the world’s wheat, milk and pork, 11 percent of its sugar and beef and account for 30 percent of global cheese exports. Agriculture would make up 39 percent of the EU’s total budget of 960 billion euros proposed for 2014-2020.

Read more: EU Reaches Deal Reshaping Bloc’s Farm Policy in Next 7 Years (1) - Businessweek