The Downing Street Years, 1979-1990

TWO VISIONS OF EUROPE

The wisdom of hindsight, so useful to historians and indeed to authors of memoirs, is sadly denied to practising politicians. Looking back, it is now possible to see the period of my second term as Prime Minister as that in which the European Community subtly but surely shifted its direction away from being a Community of open trade, light regulation and freely co-operating sovereign nation-states towards statism and centralism. I can only say that it did not seem like that at the time. For it was during this period that I not only managed to secure a durable financial settlement of Britain’s Community budget imbalance and began to get Europe to take financial discipline more seriously, but also launched the drive for a real Common Market free of hidden protectionism. It was clear to me from the start that there were two competing visions of Europe: but I felt that our vision of a free enterprise Europe des patries was predominant.

Now I see the period somewhat differently. For 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 has 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. I considered myself a European idealist, even if my ideals differed somewhat from those expressed with varying degrees of sincerity by other European heads of government. I told a dinner of Conservative MEPs on Thursday 8 March 1984:

It was also, incidentally, the vision on which we were to fight the European Assembly elections later that year and do remarkably well, winning 45 out of the 81 United Kingdom seats.

REFORMING COMMUNITY FINANCES: BRITAIN’S BUDGET CONTRIBUTION

Before there was any hope of moving far towards those wider objectives I had to get more understanding and support from other Community heads of government for our position. The French presidency of the first half of 1984 seemed to offer an opportunity which must be grasped. The events in Athens the previous December — where the only thing to record was disagreement — were widely considered to have reduced Community negotiations to the level of farce.[69] President Mitterrand was, I knew, someone who relished a diplomatic success and would probably be prepared to sacrifice French national interests — at least marginally — in order to secure one. In January (in Paris) and in early March (at Chequers) I had talks with him. In January Geoffrey Howe and I also discussed the Community budget and other matters with the Italian Government in Rome. The following month Chancellor Kohl and I held talks at No. 10. These meetings were pleasant enough, but no clear undertakings were given. The Foreign Affairs Councils — that is the meetings of Community Foreign ministers — in February and March advanced matters no further. But I was reasonably optimistic that the European Council in Brussels, which I was to attend on Monday 19 and Tuesday 20 March, might give us the lasting, satisfactory solution on the British budget contribution which I wanted.

By the time I reached Brussels three possible ‘solutions’ to the budget question had been advanced — one by the Commission President, Gaston Thorn, one by the Germans, and one by the French presidency. None was satisfactory to us, but all of them acknowledged the principle behind our ‘threshold’ proposal at Athens — that a country’s prosperity should be taken into account in determining its net contribution. We were getting down to brass tacks. I was also glad that President Mitterrand, unlike his Greek predecessor, had chosen a more sensible order of discussion at the Council, beginning with the issues of budget discipline and budget imbalances. After initial discussion, officials went away to work on the text relating to the budget while we moved on to the issue of increasing the Community’s ‘own resources’. On this, the line-up was predictable. The President of the Commission wanted an increase in the current VAT ceiling, not just to 1.4 per cent but to a minimum of 1.6 per cent. Garret FitzGerald wanted a minimum of 1.8 per cent. President Mitterrand suggested 1.6 per cent. Chancellor Kohl and I would have none of this: 1.4 per cent was as far as we could possibly go — and that was only after other matters relating to the budget and agricultural spending had been satisfactorily resolved.

The Council was due to meet again at about 11 o’clock the next morning. President Mitterrand and Chancellor Kohl had a working breakfast — something which was to become a feature of European Councils because it was widely and probably accurately believed that these were the occasion of the Franco-German deals which heavily influenced or in some cases virtually determined the outcome of the Council. I met President Mitterrand after his meeting with Chancellor Kohl and gained the impression that we were heading for a successful outcome.

When the heads of government reconvened later that morning the session began with a gush of Euro-idealism. Chancellor Kohl and President Mitterrand became quite lyrical on the subject of getting rid of frontier controls, which they seemed to invest with a high symbolic significance. Then President Mitterrand urged that Europe should not be left behind by the USA in the space race. The Italian Foreign minister became still more enthusiastic, urging that Europe should be in the vanguard of moves against the ‘militarization of space’. It seemed to me that it would be more sensible to concentrate on sorting out the Community budget first and at last we got down to business.

Now the high-mindedness quickly disappeared. The Irish Prime Minister tried and failed to gain a special exemption from the measures to limit milk production that the rest of us wanted. He promptly invoked the Luxemburg compromise and walked out. At 4 p.m. there was a long adjournment in order to study a new text of the draft communiqué. On resuming, we discussed once again the budgetary problems. The Italians and the Greeks stood out against giving Britain any permanent agreement to reduce our net budget contributions; more serious for us, President Mitterrand seemed to side with them. I intervened to say that I had fought this battle for five years and that I intended to have a system which was fair and which would last. At this point — whether spontaneously or by previous agreement with President Mitterrand I do not know — Chancellor Kohl upped and offered Britain a 1,000 million ecus rebate for five years — much less than I wanted and still only a temporary arrangement. Almost immediately France and the others agreed with Germany. I found myself isolated. I refused to accept his proposal. Nothing more could be done. No agreed communiqué was issued. To rub salt into the wound, France and Italy at a Foreign Affairs Council immediately after the heads of government summit broke up blocked payment of our 1983 refund.

I had not expected such a totally negative outcome. So the question immediately arose as to whether we should withhold payments to the Community budget. This was partly a legal and partly a political question. We had always been advised that if we withheld contributions we would almost certainly lose any subsequent case before the European Court. In this instance, however, we were on somewhat stronger legal ground because the Community was withholding rebate payments to which we were entitled by previous agreement. Probably, we would have lost the case anyway. But it might have been politically worth fighting — that is we might have thus secured a favourable compromise — if we had enjoyed the united backing of the Parliamentary Party. Unfortunately, there was a hard core of Euro-enthusiasts on the Tory back-benches who instinctively supported the Community in any dispute with Britain. Though a clear minority, they robbed us of the advantages of unity. So as on previous occasions, I decided not to go down the path of withholding contributions. And we had other cards to play.

On the basic question of whether I had been right to refuse what was on offer there was little dispute. A letter I received from one parliamentary colleague began:

Apart from my own summits with the other European heads of government in the run up to important Councils, I always received up-to-the-minute reports from our embassies and officials on what could be deduced of the private intentions of other governments and the state of public and press opinion in their countries. The two crucial players would be France — which still held the presidency — and Germany. Before the European Assembly election campaign got under way I tried to persuade President Mitterrand and Chancellor Kohl to agree to sort out the budget. In this I was certainly being a ‘better’ European than they were: for public opinion in Britain was all for intransigence. But I suspect that the French President, at least, was not minded to reach a deal until the elections had come and gone. My attempts failed.

As the Council approached it still seemed to us that President Mitterrand had not yet finally decided between two possible courses of action — a solution which would be a diplomatic triumph for France (in the chair) or a failure which would all be down to ‘Perfidious Albion’. Whatever his private political calculations, the French President was also now publicly calling for yet another ‘relaunch’ of the Community, something which was music to Chancellor Kohl’s ears. So when we prepared our own paper on the Community’s future for the forthcoming summit, I accepted that it should be liberally sprinkled with communautaire phrases.

The French President’s intentions continued to be unclear. Whether the French themselves were confused or whether these were tactics designed to confuse us in the best tradition of Gallic gamesmanship we could not yet tell. A number of apparently unco-ordinated French ideas to settle the budget were in circulation; which, if any, had the President’s own support was unknown. Then on the eve of the Council, President Mitterrand departed for Moscow with an air of nonchalance, which may itself have been an aspect of psychological warfare.

What would the German position be? There were some reasons for optimism. It seemed that Chancellor Kohl was now definitely anxious for a successful summit. At Brussels, where he had been blamed for the failure of the budget negotiations, he had learnt the danger of taking ill-thought-out initiatives. We thought that he would support the French presidency and that he would probably be willing to agree to a better deal for Britain than he had proposed at Brussels. The most encouraging consideration was that he needed the Community’s agreement to enable him to provide a politically necessary subsidy for his farmers — and for Chancellor Kohl domestic political considerations always came first. As by far the largest net contributors to the Community, the Germans wanted both to set a limit to their contributions — as we did — and to ensure that they did not finish up paying for the whole of our own rebate. But they were surprisingly vague on how precisely to achieve this.

THE FONTAINEBLEAU EUROPEAN COUNCIL

The European Council was held at Fontainebleau, just outside Paris, on Monday 25 and Tuesday 26 June. On the short flight in the And-over from Northolt to Orly I finalized our tactics. Geoffrey Howe and I shared the same analysis. We wanted an agreement at this meeting but only if it was close enough to our terms. We had our reasons. After France the presidency would go to Ireland which would be no improvement — indeed worse because the French themselves, for the reasons I have outlined, were likely to be more difficult when they were not in the chair. Moreover, we had no agreement on rebates for the current year, nor for the future; and our 1983 refund of 750 million ecus (£400 million) was still being held up. I was prepared to accept, if necessary, a different formula from that which we had 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. Whereas Versailles provided the heads of government with an experience of the splendour of France in the Grand Siècle, Fontainebleau — the creation of Francis I who vied with our own Henry VIII on the famous Field of Cloth of Gold — represents the height of French Renaissance culture. 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 along the road 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.[70] Over dinner I was wondering what the Foreign ministers were going to come up with. As we drank our coffee, we saw that the Foreign ministers were taking theirs outside on to the terrace and naturally concluded that they had done their work. Far from it. It appeared that over dinner the French Foreign minister, M. Cheysson, had been regaling his colleagues with his own recollections of Moscow. President Mitterrand did not conceal his displeasure and the Foreign ministers quickly went inside again to get down to discussing the budget.

For our part, the heads of government spent some time discussing the future of the Community. We got on to the question of the number of commissioners once enlargement to take in Spain and Portugal had occurred. I was alone in being prepared to settle for one commissioner per country so as to reduce the number from sixteen to twelve. I asked M. Thorn (with whom I often saw eye to eye — he did not have the grandiose ambitions and bureaucratic leanings of his successor) whether there was really enough work for seventeen commissioners. He said no. But my colleagues from France, Germany and Italy were not prepared to reduce their representation. So the Commission ended up with the full complement — and the devil makes work for idle hands.

At about 11.30 p.m. M. Cheysson emerged once more 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. We had privately envisaged that this is how matters might eventually turn out.

But a percentage of what? Everyone could agree that it would be a percentage of the gap between the sums we paid into the Community and the sums we received from it. 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. All our previous proposals had been based on this larger sum, but in the end we had to accept the calculation based on VAT.

And, finally, how big a percentage would the rebate be? If we were to drop the threshold idea — and therefore any link between net contribution and prosperity — it would need to be pretty big. Indeed, 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 1000 million ecus a year for the first two years. How Geoffrey, who had been splendidly staunch in the negotiations so far, had allowed the Foreign ministers to reach such a conclusion I could not understand.

I was in despair. I told the heads of government that Britain had never been treated fairly from the beginning: 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 — who, I knew, had the brains, experience and determination required to retrieve something from this débâcle — 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? As I have said, there were good reasons for my wanting a settlement now. And with the Community running right up against the financial buffers of the 1 per cent VAT ceiling (on raising which they knew we had a veto) there were equally good reasons for other Community members to be cooperative. 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 carefully appraised the situation and 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.

Immediately, Chancellor Kohl raised his point about a special subsidy for his farmers. He said that as Germany had facilitated the budget settlement by providing the greater part of the money, he felt he was entitled to subsidize his own farmers, in effective contravention of the CAP. This did not please the Dutch because they would in practice have to subsidize their farmers to the same extent; but the Netherlands had neither the stomach nor the strength to oppose Germany. So Chancellor Kohl got his way.

After more argument, principally between me and Garret FitzGerald, about how to deal with the already overspent 1984 Community budget, President Mitterrand wound up the conference and we retired to a late lunch in high spirits because the deadlock on the budget had been broken.

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.

ENLARGEMENT OF THE COMMUNITY

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. The Irish Government and Army went to great lengths to achieve this and I always expressed my gratitude to them for it. But 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 — and with some justice. 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, suddenly treated us to some classical theatre. A charming and agreeable man in private, his whole persona changed when it was a question of getting more money for Greece. He 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, nor even the particular tactics used, 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. I had earlier stressed to President Mitterrand just how vital it was to get Spain and Portugal in quickly and not let short-term selfish considerations stand in the way of what must be done to strengthen democracy in Europe. But I now cautioned Sr. Gonzalez 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’. The Germans seemed strangely reluctant to defend their own financial interests and refused our attempts made at ministerial and official level to set up a working partnership with them. Even France and Italy turned out to be net contributors. Greece could expect a bonanza.

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. In my statement to the Council, I employed a little ridicule to make my point about the way in which directives spewed forth from Brussels. 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 would take more than this modestly useful gesture to change the way the Commission worked: and soon we would entrust still further powers to it.

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. The French socialist is an extremely formidable animal. He is likely to be highly educated, entirely self-assured, a dirigiste by conviction from a political culture which is dirigiste by tradition. Such was M. Delors.

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. I always paid tribute to the contribution he made to the Single Market programme. 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 reregulating 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 — even if a lively one — 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.

The pressure from most other Community countries, from the European Commission, from the European Assembly and from influential figures in the media for closer European co-operation and integration was so strong as to be almost irresistible. But what kind of integration? My aim had to be to ensure that we were not driven helter-skelter towards European federalism. The thrust of the Community should be towards achieving the genuine Common Market envisaged in the original treaty, a force for free trade not protectionism. To do this I would have to seek alliances with other governments, accept compromises and use language which I did not find attractive. I had to assert persuasively Britain’s European credentials while being prepared to stand out against the majority on issues of real significance to Britain. Such an approach was never going to be easy.

THE MILAN EUROPEAN COUNCIL

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. The language and direction of this paper were ostentatiously communautaire. It covered four areas: the completion of the Common Market, strengthened political cooperation, 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.

At that time there seemed a number of good reasons for this approach. The Falklands War had demonstrated to me how valuable it would be if all Community members were prepared to commit themselves to supporting a single member in difficulties. President Mitterrand had been a staunch ally: but some of the other members of the Community had wavered and the instincts of one or two were downright hostile. Even more important perhaps was the need for western solidarity in dealing with the eastern bloc. Foreign policy co-operation within the European Community would help strengthen the West, as long as good relations with the United States remained paramount. What I did not want to do, however, was to have a new treaty grafted on to the Treaty of Rome. I believed that we could achieve both closer political co-operation — as well as make progress towards a Single Market — without such a treaty; and all my instincts warned me of what federalist fantasies might appear if we opened this Pandora’s box.

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 co-operation 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 learnt 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, in its way, 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 is worth recalling just how the pressure for an IGC had built up in the first place. A year earlier, in one of those gestures which seem to be of minor significance at the time but adopt a far greater one in the light of events, we had agreed (at Fontainebleau) to set up an ad hoc committee under the chairmanship of the Irish Senator James Dooge to suggest improvements in European co-operation. Some of the committee’s proposals were sensible, such as its stress on more effective political co-operation and a Single Market; some were objectionable like the ‘achievement of a European social area’, which prefigured the approach of the later Social Charter; and some were plainly dotty, such as the promotion of ‘common cultural values’. But above all the Dooge Committee proposed an IGC to ratify all its proposed treaty amendments with a view to the creation of a ‘European Union’. So such a proposal was inevitably on the table at Milan. And once this happened the proposed IGC seemed the perfect vehicle for almost everyone else’s particular ideas about European development. This made it difficult to resist.

It was, in fact, Sig. Craxi himself as President who suggested at the Council that we should have an IGC. Battle lines were quickly drawn. 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. Having come to Milan in order to argue for closer co-operation 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.

In any case, 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 — not just at the Council but all of those days of work which preceded it — 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.

SINGLE MARKET-MINDEDNESS

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’. There has to be a major matter of principle at stake to justify any nation’s refusing to take part in Community discussions. That was not the case here: we agreed with the aims of enhanced political co-operation and the Single Market; we disagreed only with the means (i.e., the IGC) to effect them. In general, too, I believed that it was better to argue our case at the earlier stage, either in the Council or in the IGC, rather than in the last ditch, when the proposal had become an amendment to the Treaty of Rome. My calculations here, however, depended upon fair dealing and good faith in discussions between heads of government and with the Commission. As time went on, I had reason to question both.

There now followed an apparently endless stream of meetings and texts in preparation for the European Council which would meet at Luxemburg in December. The reports of some of these discussions, which I read, illustrated how widely differing were the objectives of different participants. M. Delors urged fulfilment of what he had described as the ‘two great dreams’ for Europe — an area without frontiers and monetary union. Every exemption or derogation which other countries, like Britain, sought seemed to be regarded as a kind of betrayal. I was told that at one time or another he had denounced almost every member state except Italy, Belgium and the Netherlands.

The second prize for overambition had to go to the Italians. Sig. Craxi and Sig. Andreotti had come to regard the expansion of the powers of the European Assembly as the touchstone of their federalist principles. They wanted to give the assembly a power of ‘co-decision’ with the Council, something which would have effectively paralysed the Community by subjecting heads of government to perpetual interference by this incohate, inexperienced and frequently irresponsible body.

The smallest European countries were really aiming at the fastest and — for them — cheapest route to European economic and political union and so were likely to go along with any moves in that direction which did not alienate the Germans and the French. It was all summed up in a letter to me from M. Jacques Santer, the Prime Minister of tiny Luxemburg, which would host the Council. He urged that we should ‘recall our great objective of monetary and economic union’, and added: ‘a resolutely ambitious attitude will without doubt allow us to achieve stimulating results and provide a starting point for the economic and psychological changes which are essential as Europe assumes its new role.’ We in the British delegation were inclined to dismiss such rhetoric as cloudy and unrealistic aspirations which had no prospect of being implemented. We were correct in believing them to be lacking in realism; where we were mistaken was in underestimating the determination of some European politicians to put them into effect.

More important to British calculations at the time was what the French and Germans wanted out of it all. By now, the Franco-German axis was again as strong as it had been under President Giscard and Chancellor Schmidt. President Mitterrand and Chancellor Kohl, in contrast to their predecessors, had little in common personally. Chancellor Kohl has the sure touch of a German provincial politician, which has always stood him well politically. Only recently — since German reunification in fact — has he struck out with a distinctive German foreign policy. For most of the 1980s, he seemed willing to subordinate German interests to French guidance, since this reassured Germany’s neighbours. Furthermore as a Christian Democrat, he is more of the social than of the economic Right and so sees the world from a perspective far closer to that of the Socialist President of France than would any British Conservative. President Mitterrand is cultivated and cosmopolitan, but somewhat aloof in French domestic politics. Like so many Frenchmen of his generation, he is driven by a fear of the consequences of German domination. But, whatever he said to me in private, his public line and his actions would for this very reason always be directed towards keeping the Germans bound into the European Community, where the French might be able to exercise greater influence over them. Consequently, I knew that the French attitude at the forthcoming Council would be to press hard for closer ‘European Union’, since this is the phrase which allows both nations to pursue their own national interests with respectability. These trends were, as I shall describe, to become still more important as time went by.

I had one overriding positive goal. This was to create a single Common Market. The Community’s internal tariffs on goods had been abolished by July 1968. At the same time it had become a customs union, which Britain had fully accepted in July 1977. What remained were the so-called ‘non-tariff’ barriers. These came in a great variety of more or less subtle forms. Different national standards on matters ranging from safety to health, regulations discriminating against foreign products, public procurement policies, delays and overelaborate procedures at customs posts — all these and many others served to frustrate the existence of a real Common Market. British businesses would be among those most likely to benefit from an opening-up of other countries’ markets. For example, we were more or less effectively excluded from the important German insurance and financial services markets where I knew — as I suspect did the Germans — that our people would excel. Transport was another important area where we were stopped from making the inroads we wanted. 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 more healthy 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, for which a government must answer to its own Parliament and people. 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 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 had discussed this with the Chancellor of the Exchequer and he and I were at one. A few days before the Council began Nigel Lawson set out his views with admirable clarity in a note urging me to stand firm. He recalled that Chancellor Kohl had told me the previous day that the Germans, like us, were totally opposed to any amendment to the monetary provisions of the Treaty of Rome. But he added that if the position deteriorated I would have to have some possible form of words up my sleeve. Nigel stressed that it would be essential that the language used should contain no obligation on us to join the ERM, make it clear that exchange rate policy is the responsibility of national authorities, minimize any extension of Community competence and avoid any treaty reference to EMU. He concluded that having reviewed the options he was bound to say that the better course by far looked to be not to get caught up in this whole exercise. I agreed.

THE LUXEMBURG EUROPEAN COUNCIL

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. At first the discussion dragged on, with several hours being spent on a single clause. The ability of those present to argue at great length and with much repetition about matters 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. But of course it would have been better if, as I had wanted originally, there had been no IGC, no new treaty and just some limited practical agreements.

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.

Perhaps even those heads of government with the most insatiable thirst for Euro-jargon had become a little bored after the first day. Certainly, 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.[71] 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:

I had insisted on the insertion of this statement. I said that otherwise terrorists, drug dealers and criminals would exploit the provisions of the act to their own advantage and to the danger of the public. Without it I would not have agreed the Single European Act. In fact, neither the Commission, nor the Council nor the European Court would in the long run be prepared to uphold what had been agreed in this statement any more than they would honour the limits on majority voting set out in the treaty itself. But this is to anticipate.

The first fruits of what would be called the Single European Act were good for Britain. At last, I felt, we were going to get the Community back on course, concentrating on its role as a huge market, with all the opportunities that would bring to our industries. Advantages will indeed flow from that achievement well into the future, even though harmonization and standardization regularly threaten to become ends in themselves. The trouble was — and I must give full credit to those Tories who warned of this at the time — that the new powers the Commission received only seemed to whet its appetite.

Even at the time different people had very different ideas of the significance of what had been agreed at Luxemburg. M. Delors described it as a ‘compromise of progress’, regretted that his proposal for extra power for the European Assembly did not find favour, but welcomed what had been said about monetary matters since he regarded the ecu as ‘part of the European dream’. The Dutch, natural federalists, were also disappointed. But some of them lived in hope. A comment in one of the Dutch papers said that ‘the ideal of European unity would have to wait until there was a new incumbent in No. 10.’ The Germans, rightly, saw that the momentum towards their objective of European Union had been resumed. Welcoming the outcome, Chancellor Kohl told the Bundestag that the Council had ‘taken the political and institutional development of the Community a decisive step forward’.

At the time I had a different view. Answering questions in the House of Commons on the outcome of Luxemburg I said at one point:

Looking back, I was wrong to think that. But I still believe it was right to sign the Single European Act, because we wanted a Single European Market.

European affairs took second place for me during the rest of this Parliament, with just a few exceptions. The main decisions had been made and even the Commission’s search for new ‘initiatives’ had been slowed for the moment by the need to work out and implement the Single Market programme. The Community was overspending its resources, but had not yet reached the new limits of VAT revenue which had been set. Enlargement had to be carried out. There was plenty to be getting on with.

THE LONDON EUROPEAN COUNCIL

Britain took up the presidency and the European Council met in London on Friday 5 and Saturday 6 December 1986. We were to meet in the Queen Elizabeth II Conference Centre. The great expense and unpleasing design of this building can only be justified by the unsightliness of the original gaping hole — an overflow car park — which it filled. I took a close interest in the physical as well as the diplomatic preparations for our big summits. For example, I had earlier had the swivel chairs around the big conference table at the ‘QE II’ replaced by light wooden ones: I always thought there was something to be said for looking at your opposite number in the eye without his being able to swivel sideways to escape. On this occasion I took care to have the battleship-grey walls covered up with beige hangings and pictures, deliberately having some drawings by Henry Moore, borrowed from the Moore Foundation, placed opposite President Mitterrand, who I knew loved Moore as much as I did.

Undoubtedly, the main achievement of the British presidency was adoption of or agreement to a record number of measures to implement the Single Market. This was the sort of solid progess the Community needed, rather than flashy publicity-seeking initiatives which came to nothing or just caused bad feeling.

But the London Council itself could only be a modest success. On the way into dinner Chancellor Kohl had made it clear to my private secretary, Charles Powell, that there was no question of Germany being able to take major decisions on agriculture — the most vexed question at this time — before their forthcoming elections. If nothing dramatic could be accomplished on agriculture or the budget, however, the Council was notable for the emergence of M. Delors as a new kind of European Commission President — a major player in the game. I had a brief foretaste of this at the first evening’s dinner, when, to my surprise and unconcealed irritation, he used the discussion period before dinner to launch into a long speech about the parlous financial state in which the Community found itself as a result of the CAP and to put forward a range of quite detailed suggestions. I replied that we should have all been told this before: it was plain from what he said that the Community was broke. I agreed that M. Delors should visit European capitals, as he proposed, to try to find a solution. But this sort of thing ought not to be repeated. I reflected to myself that no one could have imagined a top British civil servant springing surprises on ministers in this way: it illustrated all too well what was wrong with the Commission — that it was composed of a new breed of unaccountable politicians.

As President of the Community I had to give a press conference reporting on the outcome, at which I was accompanied by M. Delors. This time — again to my surprise — he refused to say anything, even when I asked him to comment on one of my answers. I continued to urge him, but to no avail. ‘I had no idea you were the strong silent type,’ I remarked.

M. Delors soon broke his silence. Three days later I gave a speech reporting on the presidency to the European Assembly in Strasbourg on Tuesday 9 December. It could not have been more communautaire. But when I sat down, M. Delors — a quite new M. Delors whom I had never seen or heard before — began to speak. It was Euro-demagogy, designed to play to the prejudices of his audience, to belittle the British presidency and to ask for more money. I was not having this. When he finished I stood up and demanded a right of reply — something quite unknown, apparently, in this ‘Parliament’. Speaking off the cuff, I answered the points which had been raised, as I would in a wind-up speech in the House of Commons. And I did not fail to observe how he had said none of this when he had had the chance at the press conference we had held together. He came in late to the lunch afterwards and took his place beside me. I told him then that time after time I had stood up for his position in the House of Commons, refusing to rule out extra money, even though under the most intense pressure. Of one thing he could be sure, I said: that would never happen again.

In the two years of European politicking that led up to the Single European Act, I had witnessed a profound shift in how European policy was conducted — and therefore in the kind of Europe that was taking shape. A Franco-German bloc with its own agenda had re-emerged to set the direction of the Community. The European Commission, which had always had a yen for centralized power, was now led by a tough, talented European federalist, whose philosophy justified centralism. And the Foreign Office was almost imperceptibly moving to compromise with these new European friends. We could, of course, look to the veto, to legal safeguards, and to declared exemptions. In the future, however, these would increasingly be circumvented where they were not overthrown entirely.