The Downing Street Years (125 page)

CHAPTER XXV

I have already described how during my second term of office as Prime Minister certain harmful features and tendencies in the European Community started to become evident. Against the notable gains constituted by the securing of Britain’s budget rebate and progress towards a real Common — or ‘Single’ — Market had to be set a more powerful Commission ambitious for power, an inclination towards bureaucratic rather than market solutions to economic problems and the re-emergence of a Franco-German axis with its own covert federalist and protectionist agenda. As yet, however, the full implications of all this were unclear — even to me, distrustful as I always was of that un-British combination of high-flown rhetoric and pork-barrel politics which passed for European statesmanship.

Indeed, the first three European Councils of my second term were very much of the traditional mould, dominated by finance and agriculture: and their outcome was equally traditional — a British victory on points. But from then on the Community environment in which I had to operate became increasingly alien and frequently poisonous. The disputes were no longer about tactical or temporary issues but about the whole future direction of the Community and its relations with the wider world changing so fast outside it. The Franco-German axis became more evident; and with the unification of Germany that relationship became still more lop-sided, with German dominance increasingly pronounced.

The Franco-German federalist project was wholeheartedly supported by a variety of different elements within the Community — by poorer southern countries who expected a substantial pay-off in exchange for its accomplishment; by northern businesses which hoped to foist their own high costs on to their competitors; by socialists because of the scope it offered for state intervention; by Christian Democrats whose political tradition was firmly corporatist; and, of
course, by the Commission which saw itself as the nucleus of a supranational government. In the face of these powerful forces I sought for allies within the Community and sometimes found them; and so my strategic retreat in the face of majorities I could not block was also punctuated by tactical victories.

Ultimately, however, there was no option but to stake out a radically different position from the direction in which most of the Community seemed intent on going, to raise the flag of national sovereignty, free trade and free enterprise — and fight. Isolated I might be in the European Community — but taking the wider perspective, the federalists were the real isolationists, clinging grimly to a half-Europe when Europe as a whole was being liberated; toying with protectionism when truly global markets were emerging; obsessed with schemes of centralization when the greatest attempt at centralization — the Soviet Union — was on the point of collapse. If there was ever an idea whose time had come and gone it was surely that of the artificial mega-state. I was, therefore, convinced not just that I was right about the way forward for Europe, but confident that if the Government and Party I led kept their nerve we would be vindicated by intellectual developments and international events.

After the 1987 general election I was in just the mood to force the Community to live up to its previous protestations of virtue. For all the talk of financial rectitude at and since the Fontainebleau Council of 1984, there had still been no effective budget discipline and no binding limits on spending under the CAP. The rebate I had won had limited our net contribution from rising to a totally unacceptable level; but several of our Community partners now wanted to cut or eliminate it. There was a large Community budget deficit which was starting to concentrate minds. But from the Commission it had provoked the traditional answer to any financial problem — an increase in the Community’s ‘own resources’. They wanted to increase that sum not just to the 1.6 per cent of VAT which we had agreed at Fontainebleau might happen in 1988, but to 1.4 per cent of Community countries’ GNP (equivalent to 2.2 per cent of VAT receipts). There was also on the table a pretty blatantly protectionist proposal, strongly supported by the French, for an Oils and Fats tax. This was, it is true, to be matched by measures to control spending
on agriculture where huge sums were going on storing and disposing of surpluses, and to improve budget discipline. But these were not tough enough. Moreover, the Commission was still trying to whittle away at what I had secured at Fontainebleau by proposing to change our rebate mechanism. And M. Delors also wanted to double the structural funds (that is, spending on Community regional and social policy). This last proposal was, naturally, more than welcome to the southern member states and Ireland which expected to gain most from it.

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 place, 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.