The Downing Street Years (95 page)

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.

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.

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.
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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’.