Geoffrey Archer, ITN
Prime Minister, why are you so opposed to a central bank in Europe?
Prime Minister
I see no reason for it and you could only have a central bank in Europe provided you all have an identical economic policy and there is effectively one government. I see no possibility of that during my lifetime.
Geoffrey Archer, ITN
But if this committee that is looking into monetary union in Europe decides that a central bank would be a good idea, will you change your views? [end p1]
Prime Minister
To get towards European monetary union, you do not even need a single currency, let alone a European central bank. As you know, that committee consists mainly of central bank governors and if you want to know what the most prominent and powerful of those things, there is a very good article of his which in fact I think makes it quite clear that a central bank is not necessary—far from being necessary.
Geoffrey Archer, ITN
So you think that committee will come down against the idea?
Prime Minister
I see no reason why it should even discuss it. That is not in its terms of reference.
Its terms of reference are to work by very practical steps to closer monetary union. That is, to make it easier for us to exchange currencies across Europe in a much more certain atmosphere than we have now.
Geoffrey Archer, ITN
Are you concerned by the reason that other countries, particularly Germany, want a central bank so strongly? [end p2]
Prime Minister
But I am not aware that Germany does want a central bank in any way!
There are one or two other countries that have not got nearly as far as we have on liberalising capital movements who are jibbing at really taking some of those steps without having tax approximation and all that kind of thing. It is quite a frequent device in Europe for people who are unwilling to take present practical steps to put up some kind of grandiose thing way way into the future. I am not aware that Germany wants a European central bank at all.
Geoffrey Archer, ITN
What about the pound and the exchange rate mechanism? How long will you keep the pound out of that mechanism?
Prime Minister
We have done very much better being outside the exchange rate mechanism than we would have done in it.
As you know, we have grown far faster in the last six years in Britain than they have on the continent of Europe and I think that has something to do with being outside the exchange rate mechanism and therefore being able to vary somewhat independently of Europe against the dollar. Of course, there are cross-rates that cannot be varied. [end p3]
So it has served our purpose well, but, you see, apart from Germany and Holland, most of the others in that exchange rate mechanism are protected by exchange rate controls and that, I believe, is one of the reasons why they have been able to keep in some reasonably stable balance with one another.
Now, many of them agreed to get rid of exchange rate controls and have free capital movement by 1990 and then it will be very interesting to see what happens at that time to see whether they can maintain the kind of relationship that they have had, because you know what happens: if your currency goes up too fast compared with another, then you are committed to pour money in—usually you pour your own money in usually by printing it—and take the value of your own down. That has great consequences for inflation.
If you are down right at the bottom and you are committed to pour in your slender reserves to try to maintain its value against others and if you cannot do that you go for a change in the valuation, so it is going to be very interesting, under totally different circumstances, to see how it works.
Geoffrey Archer, ITN
Are you saying Britain therefore will stay out of that mechanism for ever? [end p4]
Prime Minister
No. I am saying that we shall have a look at it very carefully. Those who tend to take us to task for not being in have not got anything like as far as we have on freeing up capital movements, on abolishing foreign exchange control, on having varied European currencies in our reserves or in actually dealing with the Ecu. We do all of those things and many of them do not do very many of them.
Geoffrey Archer, ITN
A single European market is going to relax border controls. Are you concerned about whether that will make it much easier for international crime and terrorism?
Prime Minister
Oh yes and I was right from the beginning and said straight away, if we are going to make it easier for the ordinary citizens of our countries to travel round Europe with fewer pieces of paper and so on, we have got to make very certain that we still maintain controls at the borders—first, for anyone who is dealing with drugs or crime or terrorism of any sort. We are out to catch those and convict them, so you must keep those border controls. [end p5]
Also, you must keep them for immigration purposes. You really cannot have someone, say, coming into Italy, say from Bangladesh, and then being able to travel freely right across Europe and enter straight across our immigration controls without us knowing. We have got to keep those immigration controls for every country against people from countries outside the Community, so that they just cannot flout our immigration laws, and we are considering how best to do that.
It will be a little bit easier when all our passports are in common European form. It will be a British passport in common form so that computers can look at it easily and quickly and so it will be much easier for people to travel about with them across Europe.
Geoffrey Archer, ITN
Finally, this was characterised before the Summit as the “Strawberries and Cream Summit” . Would you say that is the right atmosphere? [end p6]
Prime Minister
Oh was it? I did not know. I like strawberries very much indeed and we have had some, but it has been a very practical summit because we have been able to see the value of the work we did last time.
We had a really tough negotiation last time and all of those things which we agreed have now been put into proper legally binding regulations as far as the budget is concerned and as far as agriculture is concerned. That is very satisfactory. We have got rid of a lot more barriers to trade and we are going on further to do it and we have had a look at the monetary factor this time.