Economic and monetary union has a particularly far-reaching impact on farmers and agricultural policy in general. The farming sector has traditionally played a lead role in integration. Nevertheless, the Common Agricultural Policy (CAP) soon reached its limits in the current European monetary system. Common farm prices, subsidies, etc. are almost impossible to implement without a common currency. The CAP has been regularly upset by currency turmoil and rocked by frequent crisis situations. The agricultural monetary regime developed as a make-shift solution is flawed and unable to forestall disadvantages for farmers in hard-currency countries. In the present system, the appreciation of a national currency translates into price and income pressures for farmers and (at least temporary) competitive disadvantages for their commercial standing. Benefits and disadvantages of EMU The single currency will provide the CAP with the stable foundation that it has so far been lacking. It eliminates the current practice of translating farm prices, subsidies, etc. from their fixed ECU rates to national currencies, which in turn means that the agricultural monetary regime will become superfluous. Exchange rate fluctuations and exchange rate-caused distortions will no longer occur, so that EMU will, for the first time since the CAP was introduced, secure a common agricultural market that offers fair competitive terms to all participants. This is a crucial advantage and probably the greatest gain for farmers in the hard-currency countries such as Austria. The change to the euro nevertheless will entail both problems and costs for farmers. Position of Austrian farmers For Austrian farmers, the benefits of the single currency will prevail: their currently disadvantaged position in a hard-currency country will disappear and they will be able to compete at fair terms. The Austrian agricultural sector would prefer the first wave of EMU members to be large, to ensure that its benefits will be maximized. The participation of Italy in the single currency is especially important, as it is Austria's second largest market for farm products. A "small EMU" would not be desirable for the farming and food industry. The schilling-euro conversion rate will play a key role in the transition to EMU for the agricultural sector, as it affects the purchasing power of farm prices and producer subsidies fixed in euro, which in turn bears upon agricultural incomes. Should the schilling be appreciated vis-à-vis the currently valid "green rates", this would have a negative impact on farmers' incomes.