The introduction of the euro will mean a drop in the value of CAP price supports for the agricultural industry, the chief economist of the Irish Farmers' Association, Mr Con Lucey, has predicted.
In a paper reviewing the year and predicting what might happen next year, Mr Lucey said the link between the punt and the euro would reduce the value of the Common Agricultural Policy supports by about 1.1 per cent.
He said the value of CAP direct payments would be reduced by about 5 per cent, as the "green rate" for this purpose had been frozen since 1995 (green rates are the notional EU currency in which agricultural grants are calculated).
"However, full compensation will apply in 1999 but will be phased out over the following two years. With CAP direct payments and accompanying measures worth £1,200 million, after the next reform of the CAP the longterm annual loss in direct payments is about £60 million."
Mr Lucey said the positive implications of the euro were the prospect of low and stable interest rates and relative low inflation of about 2 per cent.
He said the public finances should continue to be favourable, and this could lead to further tax cuts in the budget in 2000.
He described 1999 as an extremely important year for Irish agriculture because the EU budget proposals for 2000 to 2006 would determine the resources for the CAP and structural funding.
It would also determine the share-out of structural funds between countries and regions, and there would probably be changes in the structural-funding regulations.
He said the IFA was concerned at the Commission proposal to limit the existing budget ceiling of 1.27 per cent of member-states' GDP for the next seven years.
This, he said, would mean the budget would grow in line with the real growth rate in the economy as well as in line with inflation, but there was no specific increase to fund eastern enlargement.
He said it was very difficult for his organisation to determine its strategy and priorities for the CAP Reform Agenda 2000 negotiations because of the budget uncertainty.
Mr Lucey said he saw little cause for optimism that cattle prices would rise in 1999 because of Ireland's current over-dependence on non-EU markets and failure to penetrate the EU market.
In real terms, cattle prices fell by 4 per cent in 1998 over 1997. However, they were down by 22 per cent in the past three years.