EU Proposes Special Financing Facility Worth 1 Billion Euros To Help Farmers In Developing Countries

WASHINGTON--(BUSINESS WIRE)--The European Commission today proposed to establish a special finance facility to respond to soaring food prices in developing countries. The fund would be worth 1 billion euros (1.6 billion dollars) and would operate for two years, 2008 and 2009. This money would be in addition to existing development funds and would be taken from unused money from the European Union's agricultural budget. The facility would give priority to measures such as improving access to farm inputs like fertilizers and seed, and to safety net measures aimed at improving productive capacity in agriculture. The support would be paid via international organizations, including regional organizations.

José Manuel Barroso, President of the European Commission, said: "The impact of high food prices is particularly severe for the world's poorest populations. It may put at risk our progress towards the Millennium Development Goals and exacerbate tensions in poor countries, namely in Africa. This 1 billion euro facility aims to generate a strong and rapid agricultural supply response. It is an act of solidarity with the world's poorest but also a responsible measure to promote stability. It is aimed at increasing agricultural production in developing countries to combat the effects of soaring food prices. Such an increase in supply is necessary to fight rising food prices world-wide."

Louis Michel, Commissioner for Development and Humanitarian Aid, commented: "The food price rise has hit farmers and populations in developing countries the hardest. This major cash injection will help raise agricultural production in these countries by providing farmers there with the means…to make a difference across the medium and long term. This is Europe responding in real-time with effective actions. This is Europe responding with effective solutions to help farmers in Africa and in other developing regions."

Rising food prices in 2007 and 2008 have created major problems for developing countries and their populations. Poverty has deepened for millions, whilst the soaring cost of basic foodstuffs have resulted in riots, unrest and instability in several countries, risking the gains of years of political, developmental and peacekeeping investments.

It is hoped that this finance facility from the EU will help stimulate a supply response to this situation from farmers in developing countries. It offers new income-generating opportunities to bring rural communities out of poverty by providing incentives for investments and productivity improvements. The Commission expects the positive results of this assistance to include an increase in agricultural production and food security in assisted countries, reduced malnutrition rates and reduced food price inflation.

Eligible countries and the share they should receive will be selected on the basis of transparent criteria. Information provided by the UN Task Force and international organizations - mainly UN agencies like the FAO, WFP, World Bank and IMF - will be used, and this may be supplemented by country-specific information obtained from the European Commission's Delegations.

While all developing countries are potentially eligible for support, assistance will be provided to those that are most severely affected by the food price crisis in socio-economic and political terms, and which do not have the means or capacity to respond unassisted.

The criteria to be used in selecting countries to benefit from the facility will include the extent of their reliance on food imports, food price inflation, and social and fiscal vulnerability. Other financing available to the country from the donor community will be taken into account, as well as the country's potential to increase agricultural production. The Facility also allows for regional-level programs, covering all developing countries of that region.

Global initiatives could also be financed when implemented through a regional or international organization. For example, the facility could assist with the programs of the FAO (emergency input delivery program), IFAD (e.g. rural finance), UNICEF (child nutrition, nutritional safety nets), WFP (humanitarian food assistance, transitional safety nets), the ICRC (food assistance) and the World Bank (market-based risk management, safety nets).

Delegation of the European Commission to the
United States
Kasper Zeuthen, 202-862-9530