The European Commission, 23-25.3.22, proposed a number of measures-state aid in the agribusiness sector and activation of the FEAMA (European Maritime, Fisheries and Aquaculture Fund)-to address the war economy.
The European Parliament, in turn, adopted a resolution on the Urgent Action Plan in hopes of ensuring food security, on 3/24/22 (1,2). But the situation precipitates and food price lists fly, according to the latest FAO data.
1) State aid, temporary crisis framework
On 3/23/22, the Commission adopted a Communication establishing a Temporary Crisis Framework for State Aid Measures to Support the Economy in the Aftermath of the Conflict in Ukraine. (3) Indeed, the Treaty on the Functioning of the European Union allows for state aid to enterprises, within certain limits, where it is necessary to remedy ‘a serious disturbance in the economy of a member state‘ (TFEU, Art. 107.3.b).
The precedent (still in place) is the Temporary Framework of state aid given to cope with the pandemic. Before that, the one established at the time in response to the 2008 economic crisis. On this premise, the Commission defines the two types of state aid that member countries will be able to adopt, subject to notification to Brussels for verification of compatibility with established criteria and the EU Treaties. (4)
1.1) Limited amount of aid
Eligible state aid is subject to an overall limit of €400,000. Aid can come in any form, including repayable advances, guarantees, loans and other similar financing instruments.
In contrast, businesses active in agriculture, fisheries and aquaculture are subject to a €35,000 threshold. Aid given to processors and distributors cannot be transferred to primary producers.
1.2) Liquidity supports
Supports can also come in the form of guarantees and low-interest loans. To this end, the Commission has defined a set of requirements and conditions. The total amount of loans and liquidity support, among other things, may not exceed:
– 15% of the beneficiary’s average annual turnover in the last three fiscal years, or
– 50% of energy costs in the 12 months prior to application submission.
1.3) Aid for exceptional increases in gas and energy costs.
Eligible costs for ‘exceptionally marked increases‘ in natural gas and electricity prices related to the conflict in Ukraine are calculated according to appropriate criteria outlined in Notice 24.3.22. (5)
However, the total aid per enterprise may not exceed 30 percent of eligible costs, subject to a ceiling of 2 million euros. Therefore, the announced crisis remains uncovered for at least 70 percent of the costs. (6)
1.4) Application period
The Temporary Framework applies retroactively from 1.2.22, with the possibility of signing aid agreements by 31.12.22. Without excluding hypotheses of adaptation of state aid, with extension of its scope and period of application, in relation to developments in the ongoing conflict.
2) War economy, other economic damage control measures
The Commission also adopted an implementing decision on 25.3.22 through which it defined ‘Russia’s military aggression against Ukraine‘ as an ‘exceptional event causing significant market disruption.’ (7)
2.1) Possible activation of FEAMPA.
The above decision is the premise for activating the support mechanism to promote the marketing, quality and added value of fishery and aquaculture products, as well as the processing of their products.
This makes it possible to draw exceptionally on the resources of the European Maritime, Fisheries and Aquaculture Fund (EMFF), established in 2021. (8) To compensate fishery and aquaculture operators, at least in part, for lost earnings and additional costs caused by the conflict.
2.2) FEAMPA, the expenses covered.
FEAMPA may indemnify expenses (for lost earnings or additional costs) arising from the exceptional event in question, where they have actually been incurred by the beneficiaries from 24.2.22 (date of the start of the conflict) until 31.12.22. Subject to possible extensions, which may be decided by the European Commission should the conflict continue (i.e. the resulting ‘significant market disruption‘).
3) FAO, record high food prices
Food prices hit a new global record following a near 13 percent increase in March, the U.N.Food and Agriculture Organization (FAO) said today. Indeed, the war in Ukraine, sanctions on Russia and export restrictions have caused unprecedented turbulence in the markets for basic grains (up 17 percent) and edible oils (up 23 percent).
The food price index recorded by the FAO based on global food commodity trade averaged 159.3 points as of March 2022. The February 2022 index, originally set at 140.7, already represented a record. And it was later revised upward to 141.4 points. (9)
Dario Dongo and Maria Rosaria Raspanti
Cover design from Mobile Cuisine
Notes
(1) Dario Dongo. Food security, thesis and antithesis of the European Parliament. GIFT(Great Italian Food Trade). 3/27/22, https://www.greatitalianfoodtrade.it/idee/food-security-tesi-e-antitesi-del-parlamento-europeo
(2) European Parliament. Resolution 24.3.22 on the need for an urgent EU action plan to ensure food security inside and outside the European Union in light of the Russian invasion of Ukraine (2022/ 2593 RSP). https://www.europarl.europa.eu/doceo/document/TA-9-2022-0099_IT.html
(3) European Commission. Temporary crisis framework for state aid measures to support the economy following Russia’s aggression against Ukraine (C/2022/1890), https://bit.ly/3DQqzQE
(4) It is in any case specified, for the avoidance of doubt, that aid may not be granted to persons and entities subject to Community sanctions
(5) ‘The eligible cost is represented by the product of the number of units of natural gas and electricity purchased by the enterprise from external suppliers as an end-consumer during the period from 1.2.22 to 31.12.22 (“eligible period”) and the determined increase in the price the enterprise pays per unit consumed (expressed, for example, in EUR/MWh). This price increase is calculated as the difference between the unit price paid by the firm in a given month and twice (200%) the unit price paid by the firm on average for the reference period from 1.1.21 to 31.12.21′ (Temporary Framework, paragraph 52.e)
(6) Dario Dongo. Gas and electricity, a crisis foretold. GIFT(Great Italian Food Trade). 20.3.22, https://www.greatitalianfoodtrade.it/mercati/gas-ed-energia-elettrica-una-crisi-annunciata
(7) European Commission. Implementing Decision (EU) 2022/500, 25.3.22, defining Russia’s military aggression against Ukraine as an exceptional event causing significant market disruption (C/2022/1961). https://eur-lex.europa.eu/legal-content/IT/TXT/?uri=CELEX:32022D0500
(8) Reg. EU 2021/1139, establishing the European Maritime, Fisheries and Aquaculture Fund (PE/53/2021/INIT). https://eur-lex.europa.eu/legal-content/IT/TXT/?uri=CELEX:32021R1139#ntr13-L_2021247IT.01000101-E0013
(9) Gus Trompiz. Food prices hit record high in March, U.N. agency says. Reuters, 8.4.22, https://www.reuters.com/world/food-prices-surge-new-record-high-march-un-agency-says-2022-04-08/
Dario Dongo, lawyer and journalist, PhD in international food law, founder of WIISE (FARE - GIFT - Food Times) and Égalité.
