French farmers took the law into their own hands in early August when they began attacking trucks carrying fresh fruit from Spain. This internecine bickering – almost a time-honoured tradition in Europe – is nothing if not symbolic. Even the eurozone’s leaders have been fighting it out of late as the future of the European single currency has been thrown into fresh doubt.
In theory, they agree that the euro’s survival – in its present form, at least – depends on propping up the ailing economies of Greece, Ireland and Spain. In late July they reached a deal to bail out Greece for a second time and broaden the scope of the European Financial Stability Facility to prevent the problem spreading. But then they went on holiday, leaving investors to guess where the money would come from, where it would go and whether it would achieve the desired effect.
As a result, the European Central Bank has had to step in to buy Italian and Spanish government bonds with the aim of restoring confidence. To an extent it has worked – the Italian and Spanish governments can now borrow money at rates closer to normal – but investors remain suspicious that EU leaders do not have sufficient collective political will to see the project through. The euro is under pressure and will remain so until investors are confident once more that they will get all their money back if they lend it to peripheral states.
While the EU mulls a 30 per cent cut to its School Fruit Scheme funding, over in the US growers have found support from an unlikely quarter. Starting in September, the McDonalds burger chain will include a small pack of apple slices in all of its Happy Meals. Although apple slices have been available with Happy Meals for a while, only a tenth of customers have taken up the offer. From this autumn it will be included automatically in nearly 20m meals a month sold in 14,000 shops across the country. Jim Allen, president of the New York Apple Association, said: “If we can get them to serve as many apples as they do hamburgers, we’ll be all set.”
Mr Allen and his members are likely to be less enthused about the US federal budget agreement sealed at the beginning of August. The two major parties – Democrats and Republicans – were polarised on the issue, with the left refusing to cut welfare spending and the right refusing to increase taxes. The eventual compromise came just in time to prevent the government defaulting on its financial obligations but not in time to avoid a downgrade of America’s credit rating.
Growth plans
Investors too took a dim view of what they saw as a disgraceful quarrel between blinkered politicians, and their opinion has not improved since. The market’s disaffection with US politics has done nothing to improve its appetite for the dollar and the latest pronouncement from the Federal Reserve hasn’t helped either. Faced with a glacial pace of economic recovery and the continued failure of the employment market to make good the job losses seen in 2008/09, the Fed made a strong commitment to helping the economy. Instead of repeating its prediction that US interest rates would remain very low “for an extended period”, the Fed put a date on it – mid-2013. All things being equal, the federal funds rate will now remain close to zero for two years. This is likely to depress the dollar, which should please the White House and the Fed.
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