Who were my allies? However unreliable the French and Germans would be when it came to cutting agricultural spending on which their politically influential farmers depended, I knew that at least I could look to them for support in trying to resist the huge increase in structural funds. I also had in M. Chirac, the Gaullist French Prime Minister, an ally in resisting the large increase proposed in ‘own resources’. But my main allies — though inclined to be critical of our rebate — were the Dutch. Such then was the technically and politically complicated scene which I knew confronted me when I went to Brussels for the European Council meeting on Tuesday 29 and Wednesday 30 June 1987.
It was an intensely hot, humid day when I arrived. On the way from the airport, my car was pelted with water balloons by the less dangerous Euro-fanatics outside the Council. Inside, the possibilities of bad-tempered disagreement were maximized by the weak chairmanship of M. Martens, the Belgian Prime Minister and Council President. He allowed no less than four hours of discussion of the proposed Oils and Fats tax, which the Germans, the Dutch and I had not the slightest intention of accepting.
Generally, I was among the best briefed heads of government on these occasions — partly because I always did my homework and partly because I had a truly superb official team to help me. Perhaps the mainstay of this was David Williamson, who came from the Ministry of Agriculture to the key European policy role in the Cabinet Office and finally — and deservedly — became Secretary-General of the Commission. The intricacies of European Community policy, particularly finance, really test one’s intellectual ability and capacity for clear thinking. With the exception of those of the presidency, the different delegations’ officials were not present during the proceedings themselves; so the Foreign Secretary of the day wrote manuscript notes which were passed out to our people, against which the conclusions recorded by the presidency would be checked.
On this occasion (and at Copenhagen later) the complexity of some of the matters under discussion was absurd. They should have been dealt with by Agriculture or Finance or Foreign ministers: but there never seemed the will to take real decisions at this level and so heads of government would be left discussing matters which would boggle the mind of the City’s top accountants.
The general view was that this first Brussels Council was a ‘failure’ and that I was responsible for it. There was only a little truth in either proposition. It was in any case unreasonable to think that with such a large number of contentious and complicated matters on the agenda agreement would be reached on the first serious attempt. Moreover, a good deal of progress was made on the key questions of finance and agriculture. It was accepted that budget discipline should be ‘binding and effective’, that it should apply to ‘commitments’ (that is basically what the Agriculture ministers agreed to spend) as well as actual payments, and that additional regulations (that is Community ‘laws’) would be adopted to keep the level of spending within the budget. The worst aspect — unacceptable to me — was that they wanted to build into the ‘agricultural guideline’ — that is the total permitted spending on agriculture — the present level of overspending. The package as a whole was not sufficiently tight for me to agree to an increase in ‘own resources’. So the other heads of government left Brussels aware that I had lost none of my willingness to say no.
I met two of the key players in Berlin in September, where I was attending the IDU Conference. I had a working breakfast with M. Chirac at the British Ambassador’s residence. Not for nothing was he known by his compatriots as ‘le bulldozer’: and on more than one occasion I had to make it clear that the lady was not for bulldozing. He was a marked contrast to President Mitterrand. M. Chirac was blunt, direct, forceful, argumentative, had a sure grasp of detail and a profound interest in economics. The President was quieter, more urbane, a self-conscious French intellectual, fascinated by foreign policy, bored by detail, possibly contemptuous of economics. Oddly enough I liked both of them.
M. Chirac had apparently chastised me as a ‘housewife’ in Brussels in June 1987 and was to make an unprintable remark about me in a heated exchange at Brussels in February 1988. But I generally found him somewhat easier to deal with than President Mitterrand, because he said what he thought and because his public actions bore a greater similarity to his privately expressed views. I was, as M. Chirac knew, none too happy about the arrangements which led to the release of French hostages from the Lebanon and which were widely considered to have overstepped the mark as regards the principle of refusal to deal with terrorists. (M. Chirac furiously reproached me at a reception at the Copenhagen Council for allegedly leaking criticism of what the French had done: in fact I could lay my hand on my heart and assure him that we had done no such thing.) To be fair, the French had been of great assistance to us in the matter of intercepting the arms shipment from the Eksund* And of course M. Chirac and I were very much on the same wave-length politically. He had done much to make the Gaullists (the RPR — Rassemblement pour la République) into a modern right-of-centre party, committed to free enterprise. This was of great significance not just to France but in the long term to Europe and the western alliance. I was disappointed, though not very surprised, at the way in which the wily President Mitterrand managed to turn the process of ‘cohabitation’ against the Right. At this time, though, it was the imminence of the French elections rather than their likely outcome which was the problem. For it was clear to me that neither M. Chirac nor President Mitterrand would be anxious to be seen taking tough action on agriculture when French farmers’ votes would soon be needed.
Nor for that matter would Chancellor Kohl whom I saw for tea that afternoon in the German government guesthouse. He confessed to me that he too had had his domestic political difficulties. His farming supporters had stayed away from the polls in two recent Land elections which had led to bad results for the CDU. The small farmer was, he said, a great element of stability in Germany. He said he was prepared to make some sacrifices but it would take four or five years to ‘get over the hill’. I retorted that we did not have four or five years. We must act on agricultural overspending now. But I did not come away from the meeting any more optimistic about the likely outcome of the next Council.
It was too much to expect, when I landed at an icy Copenhagen on Thursday 4 December, that the papers would not be full of allusions to the famous battle of Copenhagen, when Nelson, ignoring signalled orders by the device of holding a telescope to his blind eye, attacked and blew the opposing fleet out of the water. In fact, as at Brussels earlier, it was a magnifying glass — or perhaps a pocket calculator — which were most in order on this occasion, such was the complexity of the matters under discussion. At least we had the amiable Poul Schluter, the Conservative Danish Prime Minister, in the chair. The Danes were anxious to continue receiving as much as possible from the CAP. But of all the other Community countries they were the most anti-federalist. So there was a basic sympathy between us, even if not always a meeting of minds.
Discussions of the ideas put forward at Brussels had been continuing in the Agriculture Council and between officials and the Commission. But since then the pressure had increased to cut back our rebate. The Danes had unhelpfully brought it back into the limelight in their ‘bidding letter’ inviting heads of government to the Council. There was also continuing discussion about what should constitute the Community’s ‘own resources’. But for me everything really hinged — everything that is apart from the maintenance of our rebate on which I would not compromise — on the measures to control agriculture spending. The position here was far from satisfactory. I was still unhappy about the ‘agricultural guideline’ being proposed. But even more important was the way in which the Commission’s idea of applying ‘stabilizers’ was to be put into effect. There were basically two possible ways of cutting agricultural subsidies. One was to tax overproduction by means of what — in another piece of Community jargon — was described as a ‘coresponsibility levy’. This might have a pla
ce, but it was not the best method. The other way was to apply automatic and cumulative price cuts once a certain level of production was breached. This was the ‘stabilizer’ mechanism. It then fell to be discussed what the ‘minimum quantity’ of any particular commodity would be before the mechanism began to operate — for different agricultural products would require different formulae according to the market in which they were being produced — and what the price cuts should be.
It is also worth adding, however, one other possibility which I never actually advanced as an alternative to either of these routes but which from time to time I considered. This was to revert to a national system of subsidy for agriculture, thus bypassing the whole cumbersome Community apparatus altogether. It would, of course, have required a complete rethink of the regime imposed by the Community and could only have been possible if other countries had wanted to pursue the same approach. The disadvantage would have been that individual countries would have been competing in subsidy and probably our farmers would have lost out in that race to the French and Germans. It would only have been desirable if agriculture had been brought effectively under the GATT — and the difficulty of doing that was to become increasingly evident. But I was definitely attracted to a scheme by which each nation took financial responsibility for writing off surplus agricultural stocks and proposed this, without much success. I also raised with Helmut Kohl, when I saw him just before the Copenhagen Council, whether it might not be better if Germany used nationally financed aids to assist her small farmers — though these must not be used to finance increased production. (I recalled, of course, how he had essentially adopted this approach at an earlier Council.)* But though he took the point nothing came of it. I realized that the only immediate way to rein in Community spending on agriculture was within a Community framework.
My pre-Council meeting with Chancellor Kohl also revealed him to be even more preoccupied than before with his farming vote. He wanted a Community-financed ‘set-aside’ scheme, by which farmers would essentially be paid not to farm efficiently — something which ultimately demonstrated the Mad Hatter economics of the CAP. I was prepared to agree to this, as I told him, as long as we got effective stabilizers as well. I was also very tough with him about the prospect of increases in the Community’s ‘own resources’, on which I knew Chancellor Kohl was willing to see a large increase (ultimately at the expense of the German taxpayer) in order to keep his farmers happy. So by the time the Council opened we knew where we stood.
Once it was clear that the French — principally for electoral reasons — were prepared to back the Germans on a formula for stabilizers which could not conceivably contain agriculture spending, it was evident that no satisfactory conclusion could be reached. Neither I nor Mr Lubbers of the Netherlands would agree to anything on these lines. The Commission added another split by pressing hard for a doubling of the structural funds, which pitted the northern against the southern Europeans. But it was not an acrimonious occasion. It was agreed that a special European Council would be held in Brussels the following February.
There were a number of long faces at the end of the Copenhagen Council. But mine was not among them. I knew that little by little I was winning the argument inside and outside the Council for the kind of solution I wanted. I told the other heads of government to cheer up and reminded them — with a little irony, for I suspected that some of them needed no reminding — of how difficult things had been at Brussels on the eve of the Fontainebleau summit and then how at the next moment what was insoluble suddenly seemed easy. Why should it not happen again in Brussels? President Mitterrand observed wryly that he was really not quite sure whether it was easier to deal with Madame Thatcher when she was difficult or when she was cheerful. Evidently he did remember.
But it was by no means certain that we would reach agreement at the forthcoming special European Council. I was prepared to make some compromises; after all, the question of precisely when and how agricultural stabilizers would bite was the sort of matter even people intent on checking agricultural spending could legitimately disagree about. But far more difficult to gauge was whether Messrs Mitterrand and Chirac and Herr Kohl would think it worth their while achieving a settlement on terms which some of their farmers would find unpalatable.
By now the French election campaigns were in full swing and the rivalry between President and Prime Minister was intense, with ‘cohabitation’ nothing more than a fiction. Accordingly, when they arrived in London for an Anglo-French summit on Friday 29 January 1988, the important discussions I had with President Mitterrand and Prime Minister Chirac had to be at separate meetings. The contrast between their respective styles was once again evident. President Mitterrand was not in good form and had a heavy cold, which I hoped he would not pass on to me: I seem to have an unfailing ability to attract any passing cold germ. Nor was he properly briefed about the difficult European Community matters on which I wanted to concentrate and he had to break off half way through to receive explanations from Jacques Attali, his adviser. He was obviously relieved when the conversation turned to defence and foreign affairs. I was not sure that I had got very far by the end of the discussion, though as always it had been agreeable enough.
The same could not, however, be said of my meeting with M. Chirac, who was in robust form. He began very frankly, saying that with the presidential elections just three months away he had a real political problem with the forthcoming Council. His own interest, he said, lay in a failure at Brussels. But for wider international reasons he was prepared to work for success. Lest I conclude that this meant he was going to be a push-over, he spelt out for me precisely what his strategy was. He said that we could either settle at Brussels or wait until the financial pressure built up on the Community because of its lack of money. But in that case we would be under the Greek presidency, which he was certainly right in describing as offering an ‘uncertain prospect’. If the British continued to block the settlement on agriculture at Brussels which the rest of the Community — by which he meant the French and the Germans — wanted we would be isolated and attention would focus on our rebate. I replied that this was evidently no time for diplomatic language. If he thought that ganging up with the Germans to ‘isolate Mrs T’ was going to work, he was sadly mistaken. I had no fear at all of being isolated because I was demanding that agricultural surpluses be brought under control. M. Chirac again insisted that if there was to be a row it would turn out not to be about surpluses but about Britain’s rebate. I advised him not to threaten me and promised that if there was no satisfactory solution on agricultural spending and our rebate, there would be no increase in ‘own resources’. But he continued to insist then and over lunch that the present German presidency’s proposals were the furthest France was prepared to go.
How much of this was Gallic bluff I could not know. But it certainly made it all the more important to gauge precisely what the German position was. The fact that the Germans had the presidency meant, as always, that they had less scope for openly advocating their own interests, but this was more than made up for by the extra influence it would give them behind the scenes.
On the morning of Tuesday 2 February I had three hours of talks with Chancellor Kohl at No. 10. This was a business-like and quite successful meeting. Both of us had come with detailed proposals on each of the main elements of the package which would be on the table at Brussels. There were still large differences between us on the agricultural guideline and the stabilizers. He was also minded to be more accommodating to the southerners and the Commission over the structural funds than I was. But I was glad to find that he did not press me at all hard on the British rebate. We ended by discussing what the French attitude would really turn out to be. With some prescience (or perhaps knowledge) Chancellor Kohl thought that though it would be very difficult they might prefer a reasonable settlement now to postponement.
I flew into Brussels some time after midnight on Wednesday 10 February after having spoken at a
Conservative Party National Union dinner. My first appointment the next day was a breakfast meeting with Mr Lubbers to agree tactics for the Council. In my speech later that day I warned against any temptation to run away from the problem of food surpluses which we all knew had now to be tackled. The battle lines formed much as could have been predicted. The Dutch and we were up against the French and the Danes over the agricultural guideline. The German presidency put forward proposals for the new ‘own resources’ ceiling, which were attacked as too high by the Dutch, the French and us and as too low by everybody else. M. Chirac argued passionately for a higher threshold on cereals before the stabilizer started to work than I and others were prepared to accept. He also tried, as he had threatened in our earlier conversation, to link Britain’s budget rebate with the issue of stabilizers. But it was quickly apparent that this was not going to work. Throughout there was an odd, slightly theatrical air to his performance which was clearly designed to impress a domestic audience. President Mitterrand sat in complete silence throughout these proceedings, restricting himself to a lengthy speech at dinner about future European developments. Not much progress was made that day.
Overnight the Commission came up with a compromise package. But this was rejected by the Germans and the Council broke up for bilateral meetings without any paper as a basis for discussion. Chancellor Kohl was now the key, both as President of the Council and because if the Germans were prepared to do a deal on agricultural spending the French were unlikely to stand out against it. So late that afternoon Ruud Lubbers, Hans van den Broek, Jacques Delors, Geoffrey Howe and I went in to see Chancellor Kohl who was accompanied by Herr Genscher and several other officials. Chancellor Kohl’s style of diplomacy is even more direct than mine. He was never above banging the table and on this occasion he spoke in a parade-ground bellow throughout. He said that Germany was making sacrifices, particularly the German farmers. I replied that British farmers were facing sacrifices too and that I was being asked to accept too large an increase in structural funds and too high a ceiling — 1.3 per cent of GNP — for Community ‘own resources’. The argument went back and forth. M. Delors now proposed a 1.2 per cent ceiling. This prompted alarmed protests from Chancellor Kohl who thought that it might jeopardize his farmers’ set-aside scheme. But I said that I would think further about what had been proposed. I was aware that the Dutch were becoming restive and would probably not be prepared to stand out against what was now on offer. In any case, it was necessary to discuss with my officials precisely what the package would mean and I could only do this in private. What I did insist upon, however, was that it should all be set out clearly on paper. As it turned out this was one of my better decisions.
The Downing Street Years Page 97
