The Downing Street Years (126 page)

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.)
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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.

I had a long discussion with Geoffrey Howe and my officials. We argued through each element. It seemed to me that the discipline was going to prove tighter and more effective than I had earlier thought — and perhaps than others had really understood. So when the full Council reconvened I was able to join in giving broad support to the proposals in the paper which was now circulated.

Anyone who imagined that it would now all be plain sailing underrated the French. The agreement we had reached covered the main agricultural products at issue. But it assumed that the other products for which stabilizers had been agreed at Copenhagen would also be
covered. To everyone’s surprise President Mitterrand and M. Chirac would not agree to this. A heated argument erupted which lasted more than four hours about their proposal to have the stabilizers for ‘other products’ referred to the Agriculture Council. In the end a Danish suggestion that it should go to a Foreign ministers’ meeting in ten days’ time was agreed. Ruud Lubbers and I insisted that our agreement to the overall package was conditional on the Foreign ministers not reopening the Copenhagen agreement on ‘other products’. In fact, the French had to concede the issue when the Foreign ministers met.

I was right to settle when I did. I had secured my basic aims: effective and legally binding controls on expenditure, measures to reduce agricultural surpluses in which automatic price cuts were the principal weapon, no Oils and Fats tax, and Britain’s rebate which had saved us some £3 billion in the past three years secure. I had had to concede a little on the threshold at which stabilizers began to work. I had had to compromise over the structural funds. I had reluctantly agreed a new 1.2 per cent of GNP ceiling for Community ‘own resources’. But it was much better than a draw. Agricultural surpluses started to fall quite sharply and the new measures to enforce budget discipline were successful. None of that, of course, changed the fundamental direction or defects of the Community. The CAP was still wasteful and costly. Britain was still making a financial contribution which I considered too high. The bureaucratic and centralizing tendencies remained. But within its limits the February 1988 Brussels Agreement was not at all bad.

It is fair to say that from about this point onwards — early 1988 — the agenda in Europe began to take an increasingly unwelcome shape. It also began to deviate sharply from that being pursued in the wider international community. That does not mean, however, that my own relations with other European heads of government worsened at a personal level; far from it. I was sorry — though not surprised — to see the Right beaten in the French presidential elections. But I sent a message of congratulations to President Mitterrand and went to see him in Paris that June to talk about the international scene in general and the forthcoming Toronto G7 summit and Hanover European Council in particular.

I found him in understandably good humour now that he had been
freed from the domestic torment of ‘cohabitation’ with the Right. He was pressing a scheme — not dissimilar to one advanced by Nigel Lawson — to tackle the crippling level of Third World debt. I would have had more sympathy with his ideas if France had not been so determinedly protectionist, an approach which did far more harm to poorer countries than any amount of overseas aid did good. The French line was expressed — or rather concealed — in a splendid piece of Euro-jargon: the concept of ‘globality’. That is to say progress must be made on all the issues before the GATT at roughly the same pace, a transparent device for avoiding concentration on the thorniest issue — that of agricultural subsidies and protection. He was also keen to have a committee of ‘wise men’ set up to report on how to achieve economic and monetary union; he specifically hankered after a European Central Bank. I roundly rejected this. I said that the proposal for such a bank was motivated by political not technical considerations and that this was not an area for playing games. The President smiled and said that it was nice to be reminded that I knew how to say no. But I had no illusion that he was going to desist because of that.