“Policy interventions that aim at encouraging greater levels of smallholder production for sale in markets need to take better account of the heterogeneity of smallholder households,” said David Hallam, Director of the UN Food and Agriculture Organization’s (FAO) Trade and Markets Division.

In the foreword to the report, Smallholder Integration in Changing Food Markets, Hallam added that just as smallholders are a heterogeneous group, the markets in which they participate are also diverse in terms of their size, geographic location, connectivity to other markets, power relations between market players, and institutional setting.

The report notes that with greater market integration and more inclusive value chains, small farmers are more likely to adopt new technologies required to achieve productivity growth.

Stressing that there is no one-size-fits-all solution, the two main ways to link farmers with markets is to provide them with better access to credit and insurance, and to strengthen the links between farmers and buyers.

Farmers will not expend more time, money and energy in producing more, if any surplus will likely go to waste because there is no storage, no transport or, possibly, no market within a reasonable distance, Hallam said.

“The risk that any money spent to produce more will be lost is too great a risk for poor farmers to run,” he added.

The report also notes a paradox of high food prices. Seen by some policymakers as an opportunity for farmers to produce more and earn more, the response by many farmers has been muted.

“High levels of price, production risks and uncertainty, and limited access to tools to manage them deter investment in more productive new technologies that would enable smallholders to produce surpluses for sale in markets,” according to the report.

It also highlights the negative consequence of inadequate infrastructure, high costs of storage and transportation, and non-competitive markets.

In addition to more tailored policies, the report also highlights the role of the public sectors and international development partners to promote better policies for small farmers.

Italy’s FTSE MIB index fell 4.7%, while London’s FTSE 100 shed 1.5% and share markets in Frankfurt and Paris also fell more than 2%. In New York, the Dow Jones Industrial Average fell 1.55% and Asian markets lost between 0.7% and 2.2%. The yield on Italian government bonds rose sharply, implying markets are more wary of lending to Italy.

What happened in Italy?

Pier Luigi Bersani’s centre-left bloc won the lower house vote but has failed to secure a majority in the Senate, and control of both houses is needed to govern. A protest movement led by comedian Beppe Grillo won 25%, and a bloc led by current Prime Minister Mario Monti came fourth, with only a 10%.

The outcome of the election, which finds Italy in deep recession and tough austerity measures, was so close that the margin of victory was less than 1% in both houses of parliament. Centre-left leader Pier Luigi Bersani commented to BBC correspondent Katya Adler :”It is clear to everyone that a very delicate situation is emerging for the country,”

Mr Berlusconi ‘conceded’ to his opponents the lower house; however,  he stated that he would not associate with Mr Monti’s centrist bloc because the prime minister’s poor showing was down to popular discontent with his austerity measures.

The final equilibrium is very fragile: Bersani has the majority, as the winning bloc is guaranteed 340 seats, but the margin is extremely small. Therefore, on a final exam, Italy is walking on a fine line, and stability is not what the country seems to go for.

The results produced a mixed reaction in Europe.

From Bruxelles the president of the European Parliament, Martin Schulz, stated RAI radio that the result is very difficult for Italy, e for Europe: “There is a need for a stable government” because Italy is a member of G8 and therefore a strong player in Europe.

In Germany, the Minister for Foreign Affairs, Guido Westerwelle, hopes for the creation of a functional government in the interest of the whole Europe; he also urged Italy to continue its reforms, and called for a government to be formed “as quickly as possible”.

Garcia-Margallo, his Spanish counterpart, expressed “extreme concern” about the financial consequences of the Italian elections.

It is a mystery where Italy is going. The only man that might make sense of it is Grillo; the Genoese comic, who toured around the country throughout the election campaign and based his speeches on insults against a discredited political class.

“We’ve started a war of generations,” Mr Grillo said in an audio statement on his website,(www.beppegrillo.it) : “They are all losers, they’ve been there for 25 to 30 years and they’ve led this country to catastrophe.”

The current level of commitment to the rescue funds is not enough to restore market confidence, he said. A credible financial firewall will provide governments with the breathing space they need to focus crucially on revitalising Europe’s economic growth and competitiveness.

“Weak financial conditions, fiscal consolidation and economic adjustment are restricting demand in the short-term before the long-term benefits on stability and growth are felt,” Gurría said. “Decisive action to restore confidence and support demand is needed now.”

Presenting the OECD’s Economic Surveys of the Euro Area and the European Union in Brussels, Mr. Gurría said: “The recent measures already taken to strengthen fiscal discipline, provide liquidity and implement growth-enhancing reforms – particularly in Greece, Italy, Portugal  and Spain -  are  important advances towards a brighter economic outlook, but the challenges remain daunting.”

The economic, fiscal and financial imbalances of the area have led to weak bank balance sheets, high unemployment and low growth.

The survey calls for an ambitious programme of reforms in product and labour markets, tax systems and education to rebalance the economies, restore competitiveness, boost growth and bring down stubbornly high levels of unemployment – particularly among the young. It argues many reforms would stimulate growth even in the short-term.

“Europe is stalling. It needs to get out of first gear and make growth the number one priority,” said Mr. Gurría.

To boost economic activity at the EU level, a step change in the political commitment to the Single Market is needed. The OECD says national regulations, rigidities and poor implementation of existing EU rules are frequently holding back cross-border economic activity, growth and job creation, and are undermining the EU economy’s efficiency and competitiveness. Greater progress is needed in opening services markets.  The report calls for an annual review for each country of the obstacles to benefitting fully from a market of 500 million consumers.

Despite some 24 million unemployed people across Europe, most EU countries expect growing skill shortages in certain sectors. Labour mobility within Europe is low. The EU should encourage migration in order to help workers and firms to achieve the most productive job matches.

The two surveys highlight the need for Europe to make fundamental changes to financial supervision and regulation.  Europe needs an effective system of crisis resolution and excessively close ties between domestic banks and governments need to be undone.