I was in despair. I told the heads of government I was not prepared to go back to talking about a temporary sum: if this was the best they had to offer the Fontainebleau Council would be a disaster.
Geoffrey, civil servants and I then met to discuss what should be done. Our officials set to work with their opposite numbers all through the night and into the early morning. As a result of their efforts, the next day began a great deal better than the previous one had ended.
President Mitterrand’s and Chancellor Kohl’s breakfast the following morning probably cleared the way for a settlement. President Mitterrand opened the formal session by saying that we must try for an agreement on the budget, but if we had not succeeded by lunchtime we should go on to other things. I made it clear that I was now ready to negotiate on the basis of a percentage agreement, but I held my ground for a figure of over 70 per cent. Quite soon, and sensibly, President Mitterrand adjourned the main session so that bilateral meetings could take place.
How hard should I hold out on the figure? I saw President Mitterrand and Chancellor Kohl separately. At this stage the French President would not move above 60 per cent. Chancellor Kohl would go as far as 65 per cent. I came to the conclusion that I could obtain a deal on the basis of a two-thirds refund. But I was determined to get the full 66 per cent. It was only when the full session resumed that I managed to do so. I said that it would be absurd to deny me my 1 percentage point. The French President smiled and said: ‘Of course, Madame Prime Minister, you must have it.’ And so the agreement was reached. Or almost. When the agreement was being drafted an attempt was made to exclude the costs of enlargement from this refund arrangement. I resisted this fiercely and won. The heads of government also agreed to release our 1983 refund.
At my press conference and at the time of my later statement to the House of Commons on the outcome of Fontainebleau there was some criticism that I had not got more. But the crucial achievement was to have gained a settlement which would last as long as the increased ‘own resources’ from the new 1.4 per cent VAT ceiling itself lasted. Of course, in a sense that was not ‘permanent’: but it meant that I would not have to go back every year to renegotiate the rebate until the new VAT limit ran out, and that when it did so I would be in just as strong a position as I had been at Fontainebleau to veto any extra ‘own resources’ unless I had a satisfactory deal on Britain’s budget contribution. More generally, the resolution of this dispute meant that the Community could now press ahead both with the enlargement and with the Single Market measures which I wanted to see. In every negotiation there comes the best possible time to settle: this was it.
It had generally been expected that once we and the Germans had agreed to increase the Community’s ‘own resources’ the admission of Spain and Portugal would run fairly smoothly. In fact it took two European Councils at Dublin and at Brussels to sort it out. The Irish having assumed the Community presidency, the Dublin Council was set for Monday 3 and Tuesday 4 December. I was always the odd ‘man’ out on such occasions simply because as the IRA’s prime political target I had to be surrounded by especially tight security. I could barely venture out of Dublin Castle, where I would stay, helicoptering back and forth only as strictly necessary.
At least on this occasion it was not Britain but Greece which was marked out as the villain of the piece. The two outstanding issues as regards the terms for Spain’s and Portugal’s entry had turned out to be wine and fish, on both of which the Iberian countries were heavily dependent. The negotiations seemed to be nearing a mutually satisfactory conclusion. It was at this point that Mr Papandreou, the left-wing Greek Prime Minister, now intervened, effectively vetoing enlargement unless he received an undertaking that Greece should be given huge sums over the next six years. The occasion for this arose as a result of discussions which had been going on for some time about an ‘Integrated Mediterranean Programme’ of assistance, from which Greece would be the main beneficiary. It seems that the Greeks’ appetite had been further whetted by unauthorized discussion of large sums within the Commission. Mr Papandreou’s statement threw the Council into disarray. Everyone resented not just the fact that Greece was holding us to ransom, but still more the fact that, though Greece had been accepted into the Community precisely to entrench its restored democracy, the Greeks would not now allow the Community to do exactly the same for the former dictatorships of Spain and Portugal.
As it happened I talked to Sr Felipe González, the Spanish Prime Minister, when we were both in Moscow for Mr Chernenko’s funeral the following March. Sr González, whom I liked personally however much I disagreed with his socialism, was indignant about the terms being offered Spain for entry into the Community. I had a good deal of sympathy with him but I cautioned Sr González against holding out for better terms, which I doubted he would get. I said it was better to argue the case from within. For whatever reason, he accepted the advice and at the otherwise fairly uneventful Brussels Council the following month, chaired by Italy, negotiations for the entry of Spain and Portugal were effectively completed. There would be a special bonus to Britain in having Spain in because she would over time have to dismantle discriminatory tariffs against our car imports, which had long been a source of irritation in the motor industry.
But the Greek Danegeld had to be paid. I was alone in Brussels in arguing vigorously against the size of the bill we were presented for the ‘Integrated Mediterranean Programmes’.
At Brussels I also launched an initiative on deregulation designed to provide impetus to the Community’s development as a free trade and free enterprise area. It was intended to fit in with our own economic policy: I have never understood why some Conservatives seem to accept that free markets are right for Britain but are prepared to accept dirigisme when it comes wrapped in the European flag. I noted that the Treaty of Rome was a charter for economic liberty and we must not allow ourselves to change it into a charter for thousands of minor regulations. We should seek to cut the bureaucracy on business and see that labour markets worked properly so as to create jobs. Some Community legislation had been amended up to forty times: we should think what this meant for the small trader. I pointed to a large pile of directives in front of me on VAT and company law. There had been fifty-nine new regulations in 1984. Of these my three favourites were: a draft directive on sludge in agriculture; a draft directive on trade in mincemeat; and a draft directive amending the main regulation on the common organization of the market in goat meat.
I received a good deal of support for the initiative; but of course it was for the Commission – the source of the problem – to follow it through.
It was at Brussels that the new Commission was approved with M. Delors as its President. At the time, all that I knew was that M. Delors was extremely intelligent and energetic and had, as French Finance minister, been credited with reining back the initial left-wing socialist policies of President Mitterrand’s Government and with putting French finances on a sounder footing.
I nominated Lord Cockfield as the new British European Commissioner. I was no longer able to find a place for him in the Cabinet and I thought that he would be effective in Brussels. He was. Arthur Cockfield was a natural technocrat of great ability and problem-solving outlook. Unfortunately, he tended to disregard the larger questions of politics – constitutional sovereignty, national sentiment and the promptings of liberty. He was the prisoner as well as the master of his subject. It was all too easy for him, therefore, to go native and to move from deregulating the market to re-regulating it under the rubric of harmonization. Alas, it was not long before my old friend and I were at odds.
In retrospect, the Dublin and Brussels summits had been an interlude between the two great issues which dominated Community politics in these years – the budget and the Single Market. The Single Market – which Britain pioneered – was intended to give real substance to the Treaty of Rome and to revive its liberal, free trade, deregulatory purpose. I realized how important it was to lay t
he groundwork in advance for this new stage in the Community’s development. I hoped that a significant first step would be the paper which Geoffrey Howe and I worked up for the Milan Council, hosted and chaired by Italy, on Friday 28 and Saturday 29 June 1985. It covered four areas: the completion of the Common Market, strengthened political co-operation, improvements in decision-making and better exploitation of high technology. The most significant element was that dealing with ‘political co-operation’, which in normal English means foreign policy. The aim was closer co-operation between Community member states, which would nonetheless reserve the right of states to go their own way.
I was keen to secure agreement for our approach well before the Milan Council. So when Chancellor Kohl came to see me for an afternoon’s talks at Chequers on Saturday 18 May I showed him the paper on political cooperation and said that we were thinking of tabling it for Milan. I said that what I wanted was something quite separate from the Treaty of Rome, basing co-operation on an intergovernmental agreement. Chancellor Kohl seemed pleased with our approach and in due course I also sent a copy to France. Imagine my surprise, then, when just before I was to go to Milan I learned that Germany and France had tabled their own paper, almost identical to ours. Such were the consequences of prior consultation.
The ill-feeling this created was an extraordinary achievement, given the fact that nearly all of us had come there with a view to proceeding in roughly the same direction. Matters were not helped by the chairmanship of the Italian Prime Minister, Bettino Craxi. Sig. Craxi, a socialist, and his Foreign minister, the Christian Democrat Sig. Andreotti, were political rivals but they shared a joint determination to call an Inter-Governmental Conference (IGC). Such a conference, which could be called by a simple majority vote, would be necessary if there were to be changes in the Treaty of Rome, which themselves, however, would have to be agreed by unanimity. An IGC seemed to me unnecessary (as I said) and dangerous (as I thought). Quite what the French and Germans wanted was unclear – beyond their desire for a separate treaty on political co-operation. They certainly wanted more moves towards European ‘integration’ in general and it had to be likely that they would want an IGC if one were attainable as – for reasons I shall explain shortly – it was. It is also possible that some kind of secret agreement had been reached on this before the Council began. Certainly when I had a bilateral meeting with Sig. Craxi early on Friday morning he could not have been more sweetly reasonable; an IGC was indeed mentioned as a possibility, but I made it very clear that I thought that the relevant decisions could largely be taken at the present Council without the postponement inevitable if a full IGC were to be called. I came away thinking how easy it had been to get my points across.
It was, in fact, Sig. Craxi himself as President who suggested at the Council that we should have an IGC. I argued that the Community had demonstrated that it did have the capacity to take decisions under the present arrangements and that we should now at the Milan Council agree upon the measures needed to make progress on the completion of the Common Market internally and political co-operation externally. There would, I granted, be a need for improved methods of decision-taking if these ends were to be met. I proposed that we agree now to greater use of the existing majority voting articles of the Rome Treaty, while requiring any member state which asked for a vote to be deferred to justify its decision publicly. I called for a reduction in the size of the Commission to twelve members. I also circulated a paper suggesting some modest ways in which the European Assembly might be made more effective. I suggested that the Luxemburg European Council, due to meet in December, should as necessary constitute itself as an IGC. There agreements could be signed and conclusions endorsed. But I did not see any case for a special IGC working away at treaty changes in the meantime.
But it was to no avail. I found myself being bulldozed by a majority which included a highly partisan chairman. I was not alone: Greece and Denmark joined me in opposing an IGC. Geoffrey Howe would have agreed to it. His willingness to compromise reflected partly his temperament, partly the Foreign Office’s déformation professionelle. But it may also have reflected the fact that Britain’s membership of the European Community gave the Foreign Office a voice in every aspect of policy that came under the Community. And the more the Community moved in a centralized direction the more influential the Foreign Office became in Whitehall. Inevitably, perhaps, Geoffrey had a slightly more accommodating view of federalism than I did.
To my astonishment and anger Sig. Craxi suddenly now called a vote and by a majority the Council resolved to establish an IGC. My time had been wasted. I would have to return to the House of Commons and explain why all of the high hopes which had been held of Milan had been dashed. And I had not even had an opportunity while there to go to the opera. Annoyed as I was with what had happened, I realized that we must make the best of it. I made it clear that we would take part in the IGC: I saw no merit in the alternative policy – practised for a time in earlier years by France – of the so-called ‘empty chair’.
I had one overriding positive goal. This was to create a single Common Market. The price which we would have to pay to achieve a Single Market, with all its economic benefits, though, was more majority voting in the Community. There was no escape from that, because otherwise particular countries would succumb to domestic pressures and prevent the opening up of their markets. It also required more power for the European Commission: but that power must be used in order to create and maintain a Single Market, rather than to advance other objectives.
I knew that I would have to fight a strong rear-guard action against attempts to weaken Britain’s own control over areas of vital national interest to us. I was not going to have majority voting applying, for example, to taxation which the Commission would have liked us to ‘harmonize’. Competition between tax regimes is far healthier than the imposition of a single system. It forces governments to hold down government spending and taxation, and to limit the burden of regulations; and when they fail to do these things, it allows companies and taxpayers to move elsewhere. In any event, the ability to set one’s own levels of taxation is a crucial element of national sovereignty. I was not prepared to give up our powers to control immigration (from non-EC countries), to combat terrorism, crime, and drug trafficking and to take measures on human, animal and plant health, keeping out carriers of dangerous diseases – all of which required proper frontier controls. There was, I felt, a perfectly practical argument for this: as an island – and one quite unused to the more authoritarian continental systems of identity cards and policing – it was natural that we should apply the necessary controls at our ports and airports rather than internally. Again, this was an essential matter of national sovereignty. I was prepared to go along with some modest increase in the powers of the European Assembly, which would shortly and somewhat inaccurately be described as a Parliament: but the Council of Ministers, representing governments answerable to national Parliaments, must always have the final say. Finally, I was going to resist any attempt to make treaty changes which would allow the Commission – and by majority vote the Council – to pile extra burdens on British businesses.
Right up to the beginning of the Luxemburg Council I thought that we could rely on the Germans to support us in opposing any mention of the European Monetary System (EMS) and economic and monetary union in the revisions of the treaty. Then, as now, however, there was an inherent tension between, on the one hand, the German desire to retain control over their own monetary policy to keep down inflation and, on the other, to demonstrate their European credentials by pressing further towards economic and monetary union.
I arrived in Luxemburg at 10 o’clock on Monday morning, 2 December 1985. The first session of the Council began soon afterwards. The heads of government went through the draft treaty – what would become the Single European Act – which the presidency and the Commission had drawn up. The ability of those present to argue at great length and with much repetition about m
atters of little interest was, as ever, astonishing. It would have been far better to have agreed on the principles and then let others deal with the details, referring back to us.
I was also dismayed that the Germans shifted their ground and said that they were now prepared to include monetary matters in the treaty. I was, however, able in a side discussion with Chancellor Kohl to reduce the formula to what I considered insignificant proportions which merely described the status quo, rather than set out new goals. This added to the phrase ‘Economic and Monetary Union’ the important gloss ‘co-operation in economic and monetary policy’. The former had been the official objective, unfortunately, since October 1972: the latter, I hoped, would signal the limits the act placed on it. But this formulation delayed M. Delors’s drive to monetary union only briefly.
Tuesday’s discussions, though long and intense, were far more productive. It was midnight when I gave my press conference on the conclusions of the Council. I was pleased with what had been achieved. We were on course for the Single Market by 1992. I had had to make relatively few compromises as regards wording; I had surrendered no important British interest; I had had to place a reservation on just one aspect of social policy in the treaty.* Italy, which had insisted on the IGC in the first place, had not only applied the most reservations on it but also demanded that it must be agreed by the European Assembly.
Perhaps I derived most satisfaction from the inclusion in the official record of the conference of a ‘general statement’ recording that:
Nothing in these provisions shall affect the right of member states to take such measures as they consider necessary for the purpose of controlling immigration from third countries, and to combat terrorism, crime, the traffic in drugs and illicit trading in works of art and antiques.
Margaret Thatcher: The Autobiography Page 72
