Margaret Thatcher: The Autobiography (93 page)

Now I see that the underlying forces of federalism and bureaucracy were gaining in strength as a coalition of Socialist and Christian Democrat governments in France, Spain, Italy and Germany forced the pace of integration and a commission, equipped with extra powers, began to manipulate them to advance its own agenda. It was only in my last days in office and under my successor that the true scale of the challenge had become clear. At this time I genuinely believed that once our budget contribution had been sorted out and we had set in place a framework of financial order, Britain would be able to play a strong positive role in the Community.

Crucial to this was the European Council to be held at Fontainebleau, outside Paris, on Monday 25 and Tuesday 26 June 1984. On the short flight to Orly I finalized our tactics. Geoffrey Howe and I shared the same analysis. We wanted an agreement on the budget at this meeting but only if it was close enough to our terms. I was prepared to accept, if necessary, a different formula from that which we advanced, but the money rebated must be enough and the arrangement had to be lasting.

I arrived at lunchtime at the Château of Fontainebleau to be met by President Mitterrand and a full guard of honour. The French know how to do these things properly. Lunch took place in the Château’s Hall of Columns and then we went through into the Ballroom, which was heavily disguised by interpreters’ booths, for the first session of the Council. Without any warning, President Mitterrand asked me to open the proceedings by summing up the results of the recent economic summit in London. Others then joined in to give their own views and two hours elapsed. I started to fidget. Were these just delaying tactics? At last we got on to the budget. Again I opened, demonstrating what I thought unsatisfactory about the other schemes which had been put forward to provide a solution, and argued for our own ideas of a formula. There was further discussion. Then President Mitterrand remitted the matter to the Foreign ministers to discuss later in the evening. Our meeting now returned to generalities, in particular President Mitterrand’s lively account of his recent visit to Moscow.

That evening we drove back through the forest to our hotel at Barbizon. This little village attracts artists and gastronomes. Anyone who has eaten at the local Hôtellerie du Bas-Bréau will know why: the food was simply delicious.
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As we drank our coffee, we saw that the Foreign ministers were taking theirs outside onto the terrace and naturally concluded that they had done their work. Far from it. President Mitterrand did not conceal his displeasure and the Foreign ministers quickly went inside again to get down to discussing the budget.

At about 11.30 p.m. M. Cheysson emerged to tell us that the Foreign ministers had ‘clarified the points of difference’. In fact, the French had apparently managed to persuade the Foreign ministers to favour a rebate system giving us back a simple percentage of our net contribution. On such a percentage system there would be no link between net contributions and relative prosperity – unlike the ‘threshold’ system we had been arguing for.

But a percentage of what? The French proposed in calculating our contributions to take into account only those payments to the Community that Britain made under VAT. That formula, however, ignored the
considerable sums we also contributed through tariffs and levies. But in the end we had to accept the calculation.

And, finally, how big a percentage would the rebate be? I had in mind a figure of well over 70 per cent. But it seemed from the Foreign ministers’ meeting that we were now likely to be offered at most something between 50 and 60 per cent with a temporary two-year sweetener that would bring the refund up to 1,000 million ecus a year for the first two years. How Geoffrey had allowed the Foreign ministers to reach such a conclusion I could not understand.

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 the 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.