Prime Minister
Ladies and Gentlemen:
I will make a fairly brief statement.
This has been a workmanlike Council. It has done some very useful work in three areas:
First, the Single Market. Before we came to Hanover, some excellent progress had been made on several areas of great interest in the United Kingdom: free movement of capital, abolition of quotas for lorries and mutual recognition throughout the Community of national qualifications in the professions. We were able to register our satisfaction at this progress and at the same time to agree on priorities for the next stage, in particular, further liberalisation of banking and financial services; opening-up of public purchasing; recognition throughout the Community of national standards and norms rather than harmonisation; and intellectual property, that is, patents and trade marks. These measures will take us a further very important step towards completion of the Single Market. [end p1]
At the same time, we have made very plain our view that the Single Market must mean fewer regulations and directives and not more, and I believe this general approach has wide acceptance.
Also under this heading, we discussed what are called the social aspects of the Single Market and I am glad to say that the conclusions reflect very satisfactorily our main point, which is that the key to improving everyone's living standards and working conditions is to follow sound economic policies which produce non-inflationary growth and which create jobs.
Second, monetary cooperation: as you know, before we came to Hanover, there was a lot of pressure to set up a group whose task would be to study the setting up of a European Central Bank. You will have seen the Conclusions and know that that was not agreed. Instead, we are to have a group which will consist predominantly of central bank governors, which will look at further concrete steps towards the progressive realisation of an economic and monetary union. Those words you may recognise. They are, of course, in the Preamble to the Single European Act which has gone through all our parliaments. I hope that the study will indeed focus on practical and realisable steps. There is a lot that can be done in this area.
May I also point out in passing that Britain is among the leaders in this area, having removed all controls on capital movement and abolished foreign exchange control some eight years ago, and it is only now that many of the others are beginning to come up to the point that we reached some time ago. [end p2]
Third, political cooperation, where we agreed Declarations on East-West relations, Afghanistan, the Middle East and Southern Africa. We shall all be watching Mr. Gorbachev 's party conference, which starts today, with very great interest.
I am grateful to Chancellor Kohl—who will be coming to see me at Chequers next week—for his very successful chairmanship both of this meeting and of the Community as a whole over the last six months. In particular, the German Presidency have done very well indeed to complete work on the binding legal decisions on budgetary decisions and on agriculture which we took at the Brussels European Council in February. That is a very considerable achievement.
All in all, it is a meeting which has been a useful milestone in the European Community's further development in practical ways which benefit all our peoples.
Your questions, please! [end p3]
John Dickie (The Daily Mail)
In the light of your discussions in the last two days here, is it correct to assume that you have told your partners that there is a limit to the price you are prepared to pay for the Single Market—a limit in terms of harmonising taxation, excise duties, a limit in terms of monetary cooperation?
Prime Minister
No. One has pointed out that you can have a Single Market without having harmonisation of taxation and without having harmonisation of other laws which some of our partners want, and in that connection, I was very anxious that we should not proliferate regulations—rather, that we should have as much deregulation as possible, only the amount which is necessary to create a framework for the Single Market to work.
John Palmer (The Guardian)
Prime Minister, the Belgian Prime Minister, Mr. Martens, said a few moments ago that the commission that has been set up to look at monetary questions will of course be free to examine the role which a central bank could contribute to the objectives of economic and monetary union. Is that your reading of the terms of reference? [end p4]
Secondly, if I might just ask you: President Mitterrand has said that he found the South Africa Declaration as originally drafted unsatisfactory and insisted on it being changed at the last minute to include a warning to South Africa that relations might deteriorate if clemency of the Sharpeville Six is not approved. What do you think the implications are of that common position that you have now committed yourselves to in the event of clemency not being approved?
Prime Minister
Shall I deal with the first one and then as the Geoffrey HoweForeign Secretary was at the discussion on South Africa last evening which we were not, because we were dealing with other matters, he will deal with the South African one.
First, you will see that the terms of reference for the gorup are:
The member states confirm the objective of progressive realisation of economic and monetary union. They therefore decided to examine the means of achieving this union.
Now, as you know, you do not even need a single national currency to achieve monetary union and you certainly do not need a European [end p5] central bank. One is not in fact putting constraints on what they discuss, but I am only pointing out that the objective we have chosen is one that is in the Single European Act. It is an objective of economic and monetary union and with progressive realisation by practical steps towards that, and the other things are not necessary to that, although we are not obviously putting limits upon anything which they wish to discuss, but that is the objective which they will seek.
Now, South Africa!
Geoffrey HoweForeign Secretary
On South Africa, both last night and this morning, our concern as always was to ensure that any action we took or words we used was likely, if possible, to promote the objectives we have in mind and one of those, of course, is clemency for the Sharpeville Six.
The wording under discussion last night would not have helped in that respect. The formula as it has now appeared, starting off by drawing attention to the great concern of the European Council that relations between the Twelve and South Africa run the risk of being worsened, then goes on specifically and separately to urge that all the legal options available in South Africa—including if necessary the grant of clemency by President Botha—should be used [end p6] to prevent the death penalty being carried out. That, in our judgement, is the best way of expressing the position we have expressed many times before. We all have the same objective. The conclusions as here set out are acceptable to all of us.
Question
Was the wording involving the risk of worsening relations in the original draft presented to the Heads of Government this morning?
Foreign Secretary
No. The wording discussed last night, which was not accepted, would have had wording of that kind in a different form and in a different place, but the discussion this morning led without difficulty to the acceptance of the wording here set out.
We are all concerned all the time to see that our view is expressed clearly and if possible in a way that will produce the result we want, namely, clemency for the Sharpeville Six—that is our overriding objective. [end p7]
David Osborne (The Independent)
Prime Minister, you mentioned regulations that other partners would like that you would not like. Do we take it you would include a single EC merger control in this and have you made up your mind that you do not want a single merger control?
Secondly, can I ask you whether Britain can honestly claim to be a leader in matters of monetary union, capital movement and so forth, when we are still not prepared to join the exchange rate mechanism?
Prime Minister
With regard to the last question, we are a long way in front of those who are seeking a good deal more than we are.
Germany has freedom of capital movements and no exchange control. I think the same is true of Holland. We have absolute freedom of capital movements and no exchange control and we have never sought any constraint whatsoever on capital taxes, on savings. That is not necessary and anyone who seeks it, it is a sign of weakness. So we are, in fact, a long way ahead of most of the others who are talking about going much further.
You know the tendency: when you disapprove of some of the practical things that you can do, you tend to invoke a great big vision with a lot of words which takes a lot of time. What you really need to do is to take the practical steps to go to closer monetary union. [end p8]
Not only have we those two things, but we also have in our Bank of England reserves a mixture of currencies. That is not true of some of the other banks. We also deal through London in the Ecu as a value of money, so in fact, we are already streets ahead of many others here who are wanting far more things in general while not necessarily prepared to take all the steps in particular.
With regard to the merger control, we do not like the present proposals. I think there is a great danger which they do not fully face: that there are in Europe a number of covert barriers to mergers. There are all kinds of bank shareholdings; there are all kinds of special shareholdings in companies which enables them to prevent a merger, some of which we do not have, and it would be possible, therefore, for us to be caught and to be rendered liable to mergers from Europe when at the same time they, by various covert methods, were not in fact open to mergers from us, and we have to look at this very carefully indeed, and therefore, I made it quite clear that we are not in favour of the present proposals and that a lot of work must be done upon them. [end p9]
David Buchan (Financial Times)
Prime Minister, just to clarify your vision of monetary union: if that does not mean necessarily a single currency, it presumably must mean an irrevocable fixing of the twelve currencies. Can you confirm that your vision, therefore, of monetary union would include at some point an irrevocable fixing of sterling to the rates of the other currencies?
Prime Minister
Look! I think even the exchange rate mechanism of Europe has shown that there is no such thing as an irrevocable fixing of currencies. There cannot be! The markets change, the products change, the prosperity changes, the success changes, so even on the exchange rate mechanism there have of course been movements in valuations. Indeed, I think the Geoffrey HoweForeign Secretary, in his previous incarnation took the chair at some of them, did you not, from time to time?
Geoffrey HoweForeign Secretary
A number of them. [end p10]
Prime Minister
You see, we were not in it, so he was able to take the Chair when they wanted to have a week-end re-fixing!
But if you are looking at Mr. Werner 's definition in general terms when the phrase “Monetary European Union” [sic] first came to have some currency, you are quite right, in that he defined it as “monetary union requires a complete and irreversible convertibility of currencies, the elimination of exchange rate bands, irrevocably fixed parities and the complete liberalisation of capital movements.” I was tempted from time to time to read that out to some of my colleagues, but wisely refrained from doing so!
Question
Prime Minister, could I ask you, on EMS, have you come under pressure at this meeting to consider joining in the near future? It is suggested that other countries could not in fact tolerate free capital movements from July 1990 while Britain is moving outside the system.
Secondly, since I have the opportunity, you are going to meet Mr. Haughey, the Irish Prime Minister, this afternoon. It seems to be an unusually long meeting. Can you say what matters you will be discussing with him? [end p11]
Prime Minister
With regard to the last, no, I do not say what matters I shall be discussing with someone before I have met to discuss them, so I think you will have to contain yourself in patience or impatience for a little bit longer on that.
With regard to the European Monetary System, we belong to the European Monetary System, but we do not belong to the exchange rate mechanism. That is to say, that some of our reserves are available to the system in the usual way and our currency is one which constitutes the Ecu basket—it is just that we do not belong to the exchange rate mechanism.
There will be some people who will say that the exchange rate mechanism has worked because most of the currencies other than the lead one of Germany and its closely-allied one the guilder, have had foreign exchange control, and that is why, of course, it has taken them such a long time to come to freedom of capital movements and why some are a little bit fearful of what might happen when they can no longer protect their currency through exchange rate control if they have got freedom of capital movements, and I think it is a matter of conjecture as to what may happen when full freedom of capital movements come into operation and that is probably why some people are trying to put constraints upon taxation of capital and trying to say that you should get similar taxation of capital on savings. That is not true in any way. [end p12]
You have to remember Europe is not a closed box and if you try to harmonise all savings on capital—which we could not possibly agree to—all that may happen is that you could get the money moving out of Europe—and that would not be the idea at all!
Question (Market News)
Have you got any comment to make about today's interest rate rise and are you worried about the increasing trade deficit?
Prime Minister
The trade figures were very disappointing and let us not conceal that in any way—they were. It was thought that monetary conditions in any event were in fact getting a little bit loose, which is why there have been previous increases at a half-percent a time on the interest rate, and the main reason today why the interest rate went up a further half-percent was to make it quite clear that our overall objective of downward pressure on inflation is one that remains and will be honoured. That is why the interest rate went up again today. [end p13]
Question (Irish Television)
I wondered, since you are meeting the Irish Prime Minister today, what your views are in relation to the publication today of the Amnesty International Report, which appears again to be critical of the RUC in Northern Ireland over what is called the “John StalkerStalker-Colin SamsonSamson affair” .
Prime Minister
I am not going to comment on a meeting with Mr. Haughey which has not yet taken place and with regard to the Stalker-Samson affair, the Attorney General made a very full statement in the House of Commons which I am not going to put a gloss upon in any way. That statement stands.
Alan Osborne (Daily Telegraph)
Prime Minister, are you prepared to support Lord Cockfield for renomination for the European Commission at the end of his term this year?
Prime Minister
Decisions have not yet been made upon the Commissioners for the next time, except M. Delors, whose reappointment we whole-heartedly supported. [end p14]
Chris Redmond (Time Magazine)
You said that you did not think that a European central bank or, indeed, a single currency, was not (sic) a prerequisite either for 1992 or your definition of economic and monetary union, but if this commission that is established today were to report back and say that a central bank and indeed a single currency would actually enhance Europe's economy, would benefit us all in terms of growth and jobs, would you be prepared in those circumstances to support a central bank and a single unit?
Prime Minister
You will see from an article that Otto Poehl wrote, which is excellent—if you have not read it, do! It is all there. I think I agreed with every word—that single currency is not necessary for monetary union. He said the creation of monetary union does not necessarily demand either a European system of central banks. He went on to make some comments about the kind of powers that would have to be given up if one had a European central bank which would mean giving up many many national powers, being clear of national governments, being clear of the European Central Council and also being clear of the Commission. I do recommend that article to you. You should read it in full. I have got it in translation, so it is accurate. It is 28 May 1988 from the “Frankfurter Allgemeine Zeitung” . You will find it all written out there.