Ladies and Gentlemen,
Can I welcome all overseas journalists to London for the holding of this European Council. I am sorry we have had to keep you waiting for such a long time. That has been due to the fact that we have spent many hours on discussing the European mandate.
If I might make a few comments about that first.
We had a very thorough discussion of all three Chapters, agreeing at the outset that agreement on any one Chapter or on the contents of any one Chapter, would depend upon agreement on the other Chapters. We went through it really, almost section by section, in a detailed way which I have never seen in the European Council before, really trying to test out and see where were the areas of agreement and where were the areas of disagreement. We agreed on very many things and the areas of disagreement resolved themselves under four headings:
First, the whole of the milk problem.
Second, the guidelines on agricultural expenditure.
Thirdly, the Mediterranean agricultural, and
Fourthly, the budget problem itself. [end p1]
We came to the conclusion, after many hours of discussion, that the best way to resolve those four problems would be to call a special meeting consisting of Foreign Secretaries, that they should convene as soon as we can possibly arrange it, and make attempts to resolve these matters either in conjunction with the Ministers concerned or with other officials, or both. That they should then make recommendations to Heads of Government. It is possible we may then be able to clear this in correspondence, if not of course, it would have to be referred to the next Council.
Those then are the conclusions on the Mandate.
We also had a long and very useful discussion on economic and social situation, introduced by Monsieur Auteley on the basis of a paper presented by the Commission to Heads of Government. We endorsed the conclusions of Vice-President Auteley which you probably have towards the back of that document, on a number of guidelines set out which we found so very nearly what we wished to say that we thought it best to adopt them with one or two modifications.
You will realise that in some respects the Commission is more optimistic about growth prospects than are some other commentators, but it is nice to attend something where we have a lot of optimistic people present.
I do not wish to overemphasise that, because we know there are many many problems ahead and we made it very clear during our discussion that one of the things which concerns us most of all is the problem of youth unemployment and the need to provide more training for school-leavers. [end p2]
In the general economic sphere, of course we said that the objectives of fighting inflation and unemployment require public deficits to be kept under control and monetary policy within tight limits and pointed out that where the deficits get very high the interest rates also get high and that itself stultifies any attempt at increased growth. There are nations, of course, which have something like 14%; to 15%; of their GDP in deficit. Let me put it another way: the deficit is equal to 14%; to 15%; of their gross domestic product. That, of course, is unusually high and they pointed out the consequences for interest rates and therefore that that high interest rate can strangle growth, whereas in a way, a high deficit is meant to stimulate it, but it does not succeed in doing so.
You will be aware that we also discuss matters of foreign affairs which are of especial importance to us, and this time at the dinner last night we spent most of the time discussing with Chancellor Schmidt the results of President Brezhnev 's visit to the Federal Republic. He went through it in very considerable detail and we had long discussions about it, and also the problem of Poland. The Foreign Ministers have also discussed other matters under the Committee of Political Cooperation and I believe that you have the communiques with us.
It was therefore a very very busy European Council.
We discussed very openly. I think we got to grips in a very candid way with the difficult parts of the Mandate. Much was agreed in the body of the document, but of course we recognise that all of the agreements are provisional upon [end p3] an agreement being reached upon the total, but there was never any acrimonious discussion in any way. The atmosphere was extremely good, extremely constructive, Heads of Government very very much aware that we were perhaps negotiating in detail on matters which would normally have been left to the Specialist Councils.
I think perhaps that is as much as I can help you in an opening statement at the outset. If we call upon Mr. Thorn to give his statement, then we can open up to questions. [end p4]
M. Thorn (In French)
Thank you, President. Ladies and Gentlemen, I should like to say at the outset a few words to you.
To pay homage or to be fair to this European Council, I must say there was a vast field, there were many problems, which were all interconnected; very complex cereal prices, milk and all sorts of mechanisms and it is not easy to discuss all these things and it required a long and intense preparation for all this and you know we wanted to come to grips with the Mandate, a problem started by the budgetary end of it. Of course, there are budgetary anomalies to be corrected, but we had agreed that in order to do so it was necessary to re-examine and to try and restructure the CAP and to work out certain means to do so and at the same time make further progress in finding new policies for the present and future which would be added to this Agricultural Policy, Regional Policy, Social Policy. I am sorry to note, as the Prime Minister has done, that despite intense preparation, particularly on the part of the British Presidency and on our part, there were long discussions between Heads of State and Government, but nevertheless it has not been possible to reach an overall detailed full agreement which we all would have liked to see. But as the President of the European Council has said and to whom I pay tribute for her devotion and for the manner and the lively and determined manner in which she has run this Council, and despite all her efforts we have left too many points to solve on the agricultural and budgetary sector, but in all these points nevertheless some progress has been made. [end p5]
It is already progress to know where the limits of everyone are and as President of the Commission, I must say that it is regrettable for the President and worrying to see that in a difficult period there are so many complications and despite all the documents and the long preparation, it has not been possible to show more spirit of compromise and a greater effort of solidarity. This was not the fault of the two Presidents if I may say so.
But let us look at the positive side. We have serious reasons to hope, because other than those four points which are still outstanding, significant progress has been made, particularly and precisely concerning the future policies—that is to say the new policies as we call them. It was quite clear that the ten Governments, together with the Commission, do not wish to wait any longer, but wish to move forward and to get in tune.
Secondly, political union, European union; the Genscher-Colombo proposals were very well received and, as Mrs. Thatcher said, in political cooperation there has been an evergrowing agreement and concord, and the last point is this—it is not the least—that on the proposal of the Presidency, we have tried to draw our lessons from what has happened. We are not trying next time to repeat the same experience and to have all the preparations and the same mechanisms, with probably the same risk of failure, but this time we are going to put the General Affairs Council in an unofficial meeting, accompanied by very few collaborators, in order to take the time that is necessary and as soon as possible, so that by the next … we shall get [end p6] a result as quickly as possible and the Presidency will do everything to see that we reach this result, and though I am sorry that we have not been able to do it today, I am quite confident we shall do it and that we shall do it in a brief span of time. [end p7]
John Dickie (Daily Mail)
Prime Minister, with all due respect to the much-admired negotiating skills of the Foreign Secretary, how do you expect Lord Carrington and his colleagues to solve problems which have denied solution at Heads of Government level?
I think one of the problems here was that we had not got down to quite sufficient detail in the preliminary stages on some of the complicated agricultural matters and obviously, some of those will have to be sorted out before we get to this very special meeting of Foreign Ministers. A lot of preliminary work will have to be done.
In view of the failure of the Arabs in the first Summit, does that mean that European policy on the Middle East is now going to have to change to take account of the failure, or does that mean in fact the European initiative is going to go on to cold ice until Camp David takes over?
No. We made our statement on the Middle East at a time when we said we would participate in the Sinai Force and we did not really wish to alter anything that we said in that statement; we therefore merely affirmed it. [end p8]
In view of the decision to have a very special meeting of the Foreign Ministers, do you expect this could lead to another Summit Meeting before the British Chairmanship ends?
Not another Summit Meeting of Heads of Government, not between now and Christmas, I just do not think that that is practicable. We hope that the Foreign Ministers may be able to arrange their special meeting before Christmas. If not, it will have to be held very soon after. There is, of course, quite a lot of preliminary work to be done.
Prime Minister, your Government said in advance of this Summit, that there would have to be substantial progress on the key issues for it to be deemed not a failure. Can we therefore fairly conclude that the absence of substantial progress on the key issues being remitted to the Foreign Ministers does ensure that this Summit is in that sense a failure, and, secondly, might I ask you are you entirely convinced of the political goodwill of all the other Heads of Government present in tackling some of these key agricultural issues, perhaps in view of their own difficult domestic political and electoral situations? [end p9]
Well, we got a very long way in the many hours that we discussed that Mandate. There is the initial Mandate from the Commission, but then we had a document before us, twenty closely-typed pages, of a great deal of detail, and we went over it paragraph by paragraph discussing where we agreed and where we differed. That took a very long time. We agreed on a considerable number of things, subject to agreement on the whole, and I would say that we had two very very useful days in that respect and isolated the things where there really are difficulties, fundamental difficulties, to solve.
There was a great deal of goodwill. You have to remember that the nature of the Mandate is such that almost everyone wants something out of it under one of the Chapters and we were not therefore in the position where no-one wanted to make progress; most people wanted to make progress, because they wanted some positive results from one Chapter or another. But we made it perfectly clear at the outset that we had to have total agreement or agreement in parallel on all three Chapters.
No, I would not account it a failure at all. On the contrary, I say we did more detailed discussion than I have ever known in any European Council before, and I think understood exactly where the agreements and disagreements were to be found. [end p10]
Keith Richardson (Sunday Times)
Prime Minister, we are still very much in the dark here. You have given us four points on which there is no agreement, but could you please tell us something of substance about the agreements that have been reached? What positive steps have been taken, what is the substance of this progress? You have not told us anything about this yet so far.
There was obviously more progress on Chapter 1, but some of that obviously depends—which is the economic and industrial matters and things like a new Community instrument, things like the slanting of regional policies towards the poorer countries and there was a good deal in Chapter 1 about energy. In Chapter 2, we were very nearly agreed on cereal prices and other matters relating to cereals, again subject to agreement on other parts, both of the Common Agricultural Policy and on both other Chapters.
The Budget Chapter we took as a whole and I think there is a recognition that unacceptable—or some people call them unbearable—circumstances have to have special provision made for them. We did not discuss in detail that particular kind of provision.
Prime Minister, are you expecting the Foreign Ministers to come up with a kind of definitive solution to this programme or would you more expect them to provide guidelines or time-tables for acting upon by the next European Council, and [end p11] could you also give some idea of the time-table for the Foreign Ministers' meeting?
I think to go further than guidelines. We want them to go really for specific propositions on these matters, which can then be put to Heads of Government. It is possible that the Foreign Ministers will resolve many of the matters. Of course, they will be given authority by their Heads of Government, in keeping with the policies of the separate national countries, and it is possible that they might get compromise solutions on a number of these things, which suit all countries. Insofar as they do not, the matter will have to be referred to Heads of Government.
We are thinking of a time-table of well before the next European Council, which is in March.
Prime Minister, could you be more specific about the areas of fundamental disagreement on agricultural progress?
No, I do not think I can, without revealing the whole contents of the whole document.
Obviously, we discussed things like structural surpluses and national aids and so on. [end p12]
Madam Prime Minister, six months ago there was a great concern expressed about the level of US interest rates and the impact on the European economies. I wondered if there was any discussion about it this time in the economic and social policy discussion and whether there was any concern expressed about the US recession and the depth of the recession that might take place?
Yes, what happens in the United States affects all the economies of Europe. We are very well aware of that and we made a point of saying that we really need closer cooperation between the various economies if we are all to move ahead. At the same time, we are all very much aware that one of the main reasons for high interest rates is high deficits and therefore we each of us have to try to put our own economies in order as well. The United States too, has a deficit problem which is not yet resolved. A number of our countries have problems of high deficits and they have particularly high interest rates.
If you look apart from that, you will find that your interest rates tend to be a number of percentage points above your rate of inflation, because the difference between this world recession and the last one, or one of the differences, is that whereas last time the interest rates at which people were prepared to lend their money tended to be below the level of inflation, this time the interest rates are well above it. We were all concerned especially about interest [end p13] rates, because we realise that unless we can get them down, which means getting deficits down and running sound financial policies, then we have blocked off one of the means to recovery which we would wish to pursue, which of course comes through high investment. You do not get much higher investment if you have very high interest rates.
Following on your point, Prime Minister, about closer cooperation between member states, some of Britain's partners today expressed a view that Britain should join the European Monetary System. Could you tell me what your reply was?
The European Monetary System is going to be discussed at the next Council, because it is three years since it came into operation. It therefore will be one of the main subjects for discussion at the next European Council. I did not answer a question as to whether we are to join the EMS or not. We have no further statement to make upon it at the moment.
Prime Minister, in your discussion a moment ago of the time-table which you say unfolded, did you mean to suggest that there might be another meeting of Heads of Government on this problem before the meeting that is scheduled to take place in March in Belgium? [end p14]
No, I do not think so.
Prime Minister, I understand that Chancellor Schmidt said at one point, during your meetings, that he would like the issue of the British excess budget contribution removed from being a political issue in the next UK election. Did you find any substantial measure of agreement that there should be an arrangement limiting Britain's budget payments over a period of sufficient years to take you past the next general election?
It is generally accepted that if any one country has what is called an unacceptable or unbearable problem, then the Community must make arrangements to overcome that problem, and the time during which that arrangement should continue has not been decided. A number of us thought that so long as an unbearable situation continues, so long must the solution continue, because you simply cannot have an agreement between you that unacceptable solutions must have special arrangements made to overcome them, and then put a time limit on the solution; it would not make sense.
Prime Minister, on that same point, the Presidency document suggested in Chapter 3 that seven years might be an appropriate period. Could you give us some idea as to [end p15] whether Heads of Government felt that was much too long or whether there was some agreement on that?
The Presidency document had seven years. I think the financial mechanism lasted seven years, M. Thorn. We put in seven years, but the reason why we put in seven years was because there is a Community financial mechanism of seven years' duration, so there is a precedent for seven years. The present budgetary arrangement has lasted three years only. We thought that was very short at the time, because we could foresee that three years, frankly, brings you up very quickly to another negotiation and we really do not wish to have negotiations as frequently as that. I do not think it is good for the Community, but I must be absolutely candid, there is no agreement about the length of a solution, but we, putting on a national hat, should argue fiercely for longer than three years. After all, it is not long; it is the second time I have come up to arguing about a budgetary situation, and I am only halfway through my initial term of office.
Did you have the time to discuss about trade relations between Japan and EEC?
The matter was mentioned during our economic discussion and a number of colleagues would like there to be an arrangement between the EEC and Japan and they would [end p16] particularly like Japan to be as open a market as we feel that our markets are open, but in the absence of an EEC Japanese arrangement, we have to have the several voluntary arrangements which are different from country to country about which you know. Most of us have some kind of voluntary arrangement on certain commodities.
Prime Minister, does your mention of a solution for an unbearable situation imply that there could be an agreement on limiting of budget contributions for one year, say, of Germany?
We were very determined, some of us, to make it quite clear that we agreed with Germany that the present situation is unacceptable for her, and it was made very clear by those representing the Federal Republic of Germany that they simply could not go on paying more and more, and we, speaking with my national hat on for the United Kingdom, accept that wholly. We know the resentment that we felt when our bill was likely to be something of the order of the present bill of the Federal Republic of Germany and we tried to protect their position all the way along the line. It is not good [end p17] for the Community to have one contributor so far ahead of the others or, before we had our own budget, temporary solution, to have two people contributing reasonably heavily and virtually no-one else contributing. It is a bad Community position to get into and we feel that it must be dealt with and that is one reason for attempting a major restructuring of the budget.
Prime Minister, have you discussed the announced Israeli refusal to allow European countries to participate in the MFO in this Sinai force in the light of the Israeli statement that came last night from Israel that they will not complete their withdrawal from Sinai if the force is not yet formed?
Could someone say it slowly?
I think it is a mistake to assume that the Israeli Government has refused the offer of help by the European Community, the four countries of the European Community and I do not think that one should take at face value what is said in an interview by someone last night. Mr. Shamir is in Washington today and I think we must wait and see what happens when the Israelis discuss our offer of help on Sunday. [end p18]
There have been suggestions that in return for an extension of the British deal on the budget, the British Government might be prepared to moderate or withdraw some of its resistance to reforms in the Agricultural Policy, specifically there were suggestions that you might be prepared to allow certain concessions for perhaps small farmers in Europe. Could you comment on this and say to what extent you adhere to your proposals for wholesale reform of the Common Agricultural Policy?
When you discuss the Common Agricultural Policy, we are the first to want a number of reforms in it and some of those reforms are in the paper. We hold very definite views about structural surpluses, about food and pricing policies, about the need to get the gap between Community prices and world prices smaller, which of course would keep down the amount spent on the Common Agricultural Policy, and we do hold very definite ideas—though not all of them are held by others of our colleagues in the Community.
When it comes to negotiating a particular thing with regard to very small farmers, we have to look obviously at the position of our farmers, particularly on milk. We are not in this country, speaking with my national hat on, in [end p19] surplus with milk production for all our needs, including the butter and so on, and other dairy products, and we obviously have to look at anything from the viewpoint of how it affects our farmers in the same way as every other country looks to see how it affects their farmers. I am not in a position to say what the precise effect would be on our own, although there are certain figures which indicate that if the Commission proposals were followed, I think it would be something like less than 10%; of our farmers would benefit from them, and of course, it could harm the interests of some of the rest.
These are exactly the kind of measures which really cannot be discussed at Heads of Government level and must be really sorted out behind the scenes before any further discussion between Foreign Ministers is done.
Is there any possibility, Prime Minister, that there may be a special meeting of the Foreign Ministers and the Agricultural Ministers together?
Let us try and get a meeting of the Foreign Ministers. I assume that they will have been in very close discussion with their Agricultural Ministers before they go to that meeting, but you know, I must say, the larger a meeting gets, the more difficult it is to negotiate. The fact is you reach conclusions when you are smaller, when you have pinpointed the precise problems—after all there are a [end p20] lot to be pinpointed within these four matters—when each person who is negotiating knows the limits within which he can negotiate and why, but the moment you double the number of Ministers there, you really find it very difficult to get anywhere.
Prime Minister, on the enlargement of the Community, is the enlargement of the EEC in any way dependent on the speedy resolution of the internal problems which the ten are now facing?
No. You are thinking obviously about Mediterranean products and the whole of agriculture generally. Of course it is related to those and of course, in the discussions on Mediterranean agriculture and guidelines on agricultural expenditure the enlargement would have to be taken into account, but I think a number of us feel very strongly that we would like to have Spain and Portugal in and we must try to find answers to the Mediterranean agricultural problems, because people like me really belong to the Community because we believe it is a Community of democratic nations, that it is important to keep … to enlarge the area of democracy … to make it apparent that it can work together and to make its greater stability apparent, and that really is the reason why many of us would like extra countries in the Community. [end p21]
Prime Minister, has there been an opportunity, and has there been any progress on moves to block finance to Turkey whilst the present regime denies democratic rights in that country?
We did not discuss Turkey in our session. Maybe we should have done, but we discussed quite a lot else, but we do recognise its importance to the Western Alliance.
Prime Minister, would you like to throw more light on the political discussion, as for instance Afghanistan and East-West relations?
There is a communique on Afghanistan. It was particularly important to have one. There was in the United Nations of course the biggest vote in favour of not accepting the present situation that we have ever had. We have therefore put out a special communique on Afghanistan.
And also, of course, both the Prime Ministers, the Heads of Governments and the Foreign Minister, discussed the whole question of East-West relations, in particular relating to the visit of Mr. Brezhnev to Bonn and also President Reagan 's speech and we had a good discussion [end p22] about the whole aspect of East-West relations.
We have, in fact, welcomed President Reagan's speech I think in part of the communique. You will find various statements about all those things in the communique, Afghanistan, Poland, follow up to Madrid, and we welcome the commitment to the United States in answer to President Reagan's speech of 18th November that the goal of major disarmament by means of mutual reductions in nuclear conventional forces and corresponding measures, etc.