The Downing Street Years, 1979-1990

by Margaret Thatcher

  After Spain the European Community presidency passed to France. Partly in order to ensure that eastern Europe did not dominate the European Council scheduled for December at Strasbourg, President Mitterrand called a special Council in November in Paris specifically to discuss the consequences of events in the East and the fall of the Berlin Wall. He was also pressing hard for the creation of a European Bank of Reconstruction and Development (EBRD) in order to channel investment and assistance to the emerging democracies. I was sceptical about whether such an institution was really necessary. The case had not been made that aid of this dimension had to go through a European institution, as opposed to national or wider international ones. I conceded the point in Strasbourg; but my wishes were eventually met because the EBRD now sensibly involves the Americans and Japanese, not just the Europeans. President Mitterrand and I finally put together a deal in 1990: I agreed that his protégé Jacques Attali would be EBRD President and he agreed that the bank would be situated in London.

  To some extent the French strategy of holding an ‘unofficial’ Paris Council on East-West relations worked because the Strasbourg Council concentrated — at least in its official sessions — heavily on the more narrowly European matters of EMU and the Social Charter. I was as strongly opposed to the holding of an IGC on economic and monetary union as ever. Equally, I had little hope of blocking it altogether. The French aim was to set a date for the IGC and this I still hoped to stave off. Until a few days before the start of the Council we were optimistic that the Germans would support us in calling for ‘further preparation’ before the IGC met. But in a classic demonstration of the way in which the Franco-German axis always seemed to re-form in time to dominate the proceedings, Chancellor Kohl went along with President Mitterrand’s wishes. By the time I arrived in Strasbourg I knew that I would be more or less on my own. I decided to be sweetly reasonable throughout, since there was no point in causing gratuitous offence when I could not secure what I really wanted. It was agreed that the IGC would meet under the Italian presidency before the end of 1990, but after the German elections. As for the Social Charter at which I had directed my fire at Madrid, I reaffirmed that I was not prepared to endorse the text, my determination having been if anything strengthened by the fact that the Commission was now proposing to bring forward no fewer than forty-three separate proposals, including seventeen legally binding directives, in the areas which the charter covered. That effectively ended the discussion of the charter from our point of view. On EMU I would return to the fray in Rome.

  In the first half of 1990, however, there was the Irish presidency to contend with. The unwelcome habit of calling extra ‘informal’ Councils proved catching. Charles Haughey decided that another one was needed in order to consider events in eastern Europe and the implications for the Community of German unification. Perhaps that is what Mr Haughey really envisaged, but for others this was just an opportunity to keep up the federalist momentum.

  ‘Political union’ was now envisaged alongside ‘monetary union’. In a sense, of course, this was only logical. A single currency and a single economic policy ultimately imply a single government. But behind the concept of ‘political union’ there lay a special Franco-German agenda. The French wanted to curb German power. To this end, they envisaged a stronger European Council with more majority voting: but they did not want to see the powers of the Commission or the European Parliament increased. The French were federalists on grounds of tactics rather than conviction. The Germans wanted ‘political union’ for different reasons and by different means. For them it was partly the price of achieving quick reunification with East Germany on their own terms and with all the benefits which would come from Community membership, partly a demonstration that the new Germany would not behave like the old Germany from Bismarck to Hitler. In this cause, the Germans were prepared to see more powers for the Commission and they gave special importance to increasing the power and authority of the European Parliament. So the Germans were federalists by conviction. The French pushed harder for political union: but it was the agenda of the Germans, who were increasingly the senior partner of the Franco-German axis, which was dominant.

  For my part I was opposed to political union of either kind. But the only way that I could hope to stop it was by getting away from the standard Community approach whereby a combination of high-flown statements of principle and various procedural devices prevented substantive discussion of what was at stake until it was too late. Within the Community I must aim to open up the divisions between the French and the Germans. At home I must point out in striking language just what ‘political union’ would and would not mean if it was taken at all seriously. Far too much of the Community’s history had consisted of including nebulous phrases in treaties and communiqués, then later clothing them with federal meaning which we had been assured they never possessed. Consequently, I decided that I would go to Dublin with a speech which would set out what political union was not and should never be. This seemed the best way of having all concerned define — and disagree about — what it was.

  There was no doubt about how determined the French and Germans were in their federalist intentions. Shortly before the Council met in Dublin at the end of April President Mitterrand and Chancellor Kohl issued a joint public statement calling for the Dublin Council to ‘initiate preparations for an Inter-Governmental Conference on political union’. They also called on the Community to ‘define and implement a common foreign and security policy’. President Mitterrand and Chancellor Kohl chose at about the same time to send a joint letter to the President of Lithuania urging temporary suspension of that country’s declaration of independence in order to ease the way for talks with Moscow. As I took some pleasure in pointing out in my subsequent speech at the Council, this was done without any consultation with the rest of the Community, let alone NATO — it demonstrated that the likelihood of a common ‘foreign and security policy’ was somewhat remote.

  I made my speech early on in the proceedings over a working lunch. I said that the way to dispel fears was to make clear what we did not mean when we were talking about political union. We did not mean that there would be a loss of national identity. Nor did we mean giving up separate heads of state, either the monarchies to which six of us were devoted or the presidencies which the other six member states favoured. We did not intend to suppress national parliaments; the European Parliament must have no role at the expense of national parliaments. We did not intend to change countries’ electoral systems. We would not be altering the role of the Council of Ministers. Political union must not mean any greater centralization of powers in Europe at the expense of national governments and parliaments. There must be no weakening of the role of NATO and no attempt to turn foreign policy co-operation into a restriction on the rights of states to conduct their own foreign policy.

  To deliver a ten-minute speech with one’s tongue in one’s cheek is as much a physical as a rhetorical achievement. For of course this was precisely the route which political union, if taken seriously, would go. Perhaps only my remarks about heads of state — which were widely reported — added a new element to the barely hidden agenda of the European Commission and those who thought like it. My speech did also have some immediate effect, for it rapidly became clear in the discussion that heads of government were either unable — or perhaps at this stage unwilling — to spell out precisely what political union meant for them. Top marks for calculated ambiguity, however, must surely have gone to Sig. Andreotti, who suggested that although we must set up an IGC on political union, it would be dangerous to try to reach a clear-cut definition of what political union was. Mr Haughey wound up the discussion by announcing blandly that almost all the points I had mentioned in my remarks would be excluded from political union. And perhaps that was said with tongue in cheek as well.

  At the end of June we were back in Dublin again. The Community Foreign ministers had been told to go away and produce a paper on political union for
the European Council’s consideration. I hoped that I had at least put down a marker against the sort of proposals which were likely to come before us at some future stage. But I was in no position to stop an IGC being called. I spent more time elaborating on our latest thinking on the hard ecu proposal. Anything that I could do to influence the discussions in the IGC on EMU which would run in parallel with that on political union was of value. I took most satisfaction, however, at this Council from stopping the Franco-German juggernaut in its tracks on the question of financial credits to the Soviet Union. I was not generally convinced that allowing former communist countries in eastern Europe — let alone the communist USSR — to build up more debt would do them any favours. Above all, any assistance must be properly targeted and must be intended to reward and promote practical reform rather than — as I was to put it in discussion at the G7 in Houston the following month — ‘providing an oxygen tent for the survival of much of the old system’.

  President Mitterrand and Chancellor Kohl, however, were more interested in power politics and grand gestures. Shortly before the Dublin Council opened they had agreed to propose a multi-billion dollar loan to the Soviets and over dinner on the second day they tried to bounce the rest of us into endorsing this. I said that this was quite unacceptable. No board of directors of a company would ever behave in such an unbusiness-like way. We should not do so either. There must be a proper study done before any such decision was made. After much argument, which continued the following morning, my approach prevailed.

  EMU AND THE GATT

  Of the two, it was EMU rather than political union which posed the more immediate threat. What was so frustrating was that others who shared my views had a variety of reasons for not expressing them and preferring to let me receive the criticism for doing so. The weaker economies would have been devastated by a single currency, but they hoped to receive sufficient subsidies to make their acquiescence worthwhile. The classic case was that of Greece. I became all too used to a Greek chorus of support for whatever ambitious proposals Germany made.

  Nor were the Germans at one on the move towards European economic and monetary union. From time to time Karl Otto Pöhl had been outspokenly critical of the concept. As I understood it, the pressure for EMU was coming from France which found it unacceptable to have monetary policy dominated by the deutschmark and the Bundesbank. The Bundesbank would not have had any problem sticking with the ERM rather than going further, but the political pressure for EMU was now very strong. I always had the highest respect for the Bundesbank and its record of keeping down inflation in Germany and I found it significant that those who contributed most to this achievement often had least time for a single European currency which would, of course, have meant the end of the deutschmark.

  To get away from the often parochial atmosphere of the over-frequent European Councils to a meeting of the G7 was always a relief. That at Houston in July was the first chaired by President Bush, who was by now imposing very much his own style on the US Administration. These economic summits were by no means just ‘economic’ any longer: nor could they be when the economic and political world order was changing so radically and rapidly. In the forefront of all our minds was what needed to happen to ensure order, stability and tolerable prosperity in the lands of the crumbling USSR. But no less important was that at the G7 I could argue much more effectively for free trade and recruit allies for my cause than I could within the narrower framework of the Community.

  It was scorching hot in Houston — so hot indeed that as heads of government stood watching the opening ceremonies the ever thoughtful and technology conscious Americans arranged for us to have special air conditioning around our feet, blowing up from the ground. President Bush asked me to open the discussion on the economy and, after noting the implications of the collapse of communism, I concentrated on the imminent danger of the collapse of free trade unless the GATT round was successfully completed. I said that it was vital that the world did not relapse into blocs, particularly in trade and monetary matters. That would be a step backwards with damaging economic and political consequences, particularly for the countries which were excluded. We should, in fact, be looking beyond the present GATT round to see how the process of freeing up world trade in goods and services could be continued.

  The discussion returned to trade the following day. I now strongly supported Brian Mulroney who argued that the biggest losers if the GATT failed would be the less developed countries (LDCs). I also reminded those present of the huge amounts still being spent by the European Community, the United States and Japan on agricultural support. In fact, the section of the Houston communiqué which dealt with trade constituted the best and toughest statement ever made by the major economies on the subject. The tragedy was that the European Community’s commitment to trade liberalization was only skin deep, as subsequent events were to show.

  THE ROME EUROPEAN COUNCIL

  I flew into Rome at midday on Saturday 27 October knowing full well that this would be a difficult occasion. But I still did not realize how difficult. This time the excuse for holding an ‘informal’ Council before the formal Council in December was even more transparent than in Paris or Dublin. The idea was allegedly to take stock of preparations for the forthcoming CSCE summit and to discuss relations with the Soviet Union.[109] In fact, the Italians wanted to pre-empt the outcome of the two IGCs on EMU and political union. Nobody bothered to explain why a special Council was necessary before the IGCs reported.

  As always with the Italians, it was difficult throughout to distinguish confusion from guile: but plenty of both was evident. In his ‘bidding letter’ to the Council Sig. Andreotti made no mention of the need to discuss the GATT Uruguay round. I wrote back insisting that if the Community Trade and Agriculture ministers had not reached agreement on the Community offer on agriculture beforehand we must discuss the matter at Rome because time was running out.

  More of a clue to the Italians’ intentions was perhaps given by the Italian Foreign minister’s letter which went so far as to suggest a provision for future transfer of powers from member states to the Community without treaty amendment. The Italians gave out — and it was well reported in the press — that they would be taking a moderate line, not pressing for a specific date for the start of Stage 2 of EMU and noting that Britain’s hard ecu proposal must be taken seriously. A long and often contradictory list of proposals on political union had been drawn up by the presidency, including plans for a common foreign policy, extended Community competence, more majority voting, greater powers for the European Parliament and other matters. The precise purpose of this paper remained unclear. What I did not know was that behind the scenes the Italians had agreed with a proposal emanating from Germany and endorsed by Christian Democrat leaders from several European countries at an earlier caucus meeting that the GATT should not be discussed at the Council. Had there been such a discussion, of course, they would have found it more difficult to portray me as the odd one out and themselves as sea-green internationalists.

  Chancellor Kohl had spoken publicly of the need to set deadlines for the work of the IGCs and for Stage 2 of EMU. But on the eve of the Rome Council he took a surprisingly soft line with Douglas Hurd, now Foreign Secretary, about his intentions. Herr Kohl suggested that perhaps the conclusions of the special Council could say something about a ‘consensus building around the idea’ of a specified starting date for Stage 2. But Douglas recorded his impression that the German Chancellor was not set on seeking even this much, and that he might be open to persuasion to drop references to any date. Moreover, Chancellor Kohl said that he did not oppose discussion of GATT in Rome. What he would not get into was negotiation of the Community position. He said that he recognized the importance of the Community’s offer on agriculture in the GATT and accepted that December was a real deadline for the Uruguay round. He also recognized that Germany would have to compromise. He would be prepared to say tough things to the German farmers in due cours
e — but not yet. Apparently he implied to Douglas that there could be a trade-off. If I was prepared to help him during the discussion of the GATT, he might be able to help me during the discussion on the EMU IGC. This, of course, turned out to be far from his real position.

  I myself lunched with President Mitterrand at our embassy residence in Rome on the Saturday. He could not have been more friendly or amenable. I said that I was very disturbed at the Community’s failure to agree a negotiating position on agriculture for the GATT negotiations. I understood that agreement had very nearly been reached after some sixteen hours of negotiations at the meeting of Agriculture and Trade ministers the previous day but had been blocked by the French. President Mitterrand said that this was all very difficult, that agriculture must not be looked at in isolation and that Europe — or more exactly France — should not be expected to make all the concessions at the GATT talks. He asked me when I proposed to raise the issue at the Council. I said that I would bring it up right at the beginning. I would demand that the Council make clear that the Community would table proposals within the next few days. Failure to do so would be a signal to the world that Europe was protectionist. President Mitterrand interjected that of course the Community was protectionist: that was the point of it. Clearly, there was not much to be gained by continuing this particular argument.

  The French President did, however, agree with me — or so he claimed — about the political union proposals. Indeed, he was highly critical of some of M. Delors’s remarks and had no time at all for the European Parliament. Somewhat more surprisingly, President Mitterrand claimed that France, like Britain, wanted a common currency, not a single currency. This was not true. But let me be charitable — there may have been some confusion in translation. In any case, I detected no hostility or wish to force me into a corner.