E. coli and the European Commission

Spanish cucumbers or German beansprouts aside, the origin of Europe’s E.coli outbreak is without importance. The ensuing spiral of misinformation and its arbitrary blacklisting of a nation’s commerce is, however, reopening old wounds between the European Commission (EC) and the continent’s agricultural industry.

The discovery of the O104.H4 strain of the bacterium, _Escherichia coli_ in Germany at the end of May, has so far claimed 37 lives in its 3,228 cases. Spread by ingestion of contaminated fresh produce, the present strain is said to cause the potentially fatal hemolytic-uremic syndrome (HUS), hospitalising its victims at best. Erroneously identified at first by German health officials as arriving in exported Spanish cucumbers, a German farm and its beansprouts in Lower Saxony were later confirmed to be the source of the epidemic.

The following international consumer desertion of tainted vegetables, stoked by alarmist media coverage, has hampered Spain and the Euro Zone’s agricultural industry in the short term. Incandescent with Germany’s finger pointing, the Spanish government has vowed to take legal action to recuperate its losses – reported at €200 million a week. European-wide losses were estimated to be in the region of €1bn a week, imperilled by Russia’s blanket ban on EU fruit and vegetables as ripe produce rots in fields and warehouses.

The swiftness of countries’ stampeded to quasi-protectionism and the destruction this has had on European trade highlights a number of fundamental issues. The EC’s initially rejected offer of €150m compensation to Spain – later raised to €210m (yet to be accepted) – reflects its willingness to step into the breach and relieve blighted producers of unexpected hardship, in turn a product of the benevolence of the Common Agricultural Policy (CAP). It furthermore constitutes tacit moral hazard, something much more unlikely to occur under the same circumstances in the durable goods market. Of course, whilst decisions taken on medical grounds shouldn’t be flouted in place of arguments of the economic benefits – the health of the nation being vital – Germany’s actions, tantamount to slander, will present difficulties for the EC, needed to be clarified for future disputes.

The damage to the European economy does not just lie at the misfortune of agricultural producers however. Indeed the real cost of medical care expenditure and lost productivity arising from associated premature deaths are sure to have serious ramifications down the line. The budget of German state-sponsored insurance firms for hospitals treating patients in particular, is soon to exhaust its €180m figure, demanding extra financial support. Bill Marler, an American food safety attorney, estimates average compensation figures for wrongful deaths to be at $1.5m, based on past settlements and jury verdicts in the US. Coupled with claims for HUS injuries at $3.5m, he places the total cost of the outbreak moreover at a weighty $3.5bn.

Despite that concrete estimations of the economic fallout of an outbreak the scale of Europe are hard to predict, the EC needs to undergo necessary adjustment. As the crisis appears to subside, the shift in its past concessionary stance with Europe’s producers will be essential in the industry’s future.