Ladies and Gentlemen, you have heard the Charles HaugheyPresident of the Council and Jacques Delorsthe President of the Commission. This has been a routine Council with no great decisions but some useful work in most areas. It has to some extent been overshadowed for us by the terrorist bomb at the Carlton Club. All those who were injured have our deepest sympathy and we utterly condemn those responsible. Even though their main target was obviously Conservatives, it is clear that they were prepared to kill and maim passers-by, tourists and anyone. I hope the timing of the attack to coincide with this European Council will bring home internationally just what depraved and evil criminals we face.
To come back to the business of the Council, we had a useful discussion of the Single Market and the agreed priorities for the Italian Presidency are very much the ones that we want to see. I was delighted that the Commission circulated a table showing clearly that Britain leads the Community when it comes to implementing Single Market decisions. We also called on Germany to reconsider its discriminatory tax on lorries. The Commission are of course talking to the German government, taking the German Government to the European Court about this. [end p1]
We agreed to begin an inter-governmental conference on political union in December. Our concern to see national institutions and national identities respected and preserved has been taken on board. What we shall be considering in essence is how the functioning of existing Community institutions can be improved.
We discussed economic and monetary union and confirmed that an inter-governmental conference on this will also start in December. I explained our proposals for a hard ECU and a European Monetary Fund and they will go forward with other proposals for further work.
We agreed a declaration on the environment, including a proposal for aid to help preserve tropical forests, an area in which Britain has given a lead.
We also called for more rapid implementation of measures against drugs and in particular the British proposals for a European Drugs Intelligence Unit and for an early conference of Eastern and Western European countries on drugs issues.
We underlined the very great importance the Community attaches to a successful outcome of the Uruguay Round of trade negotiations and our intention to make a full contribution to that. This is a subject which will be prominent at Houston.
Last night we had a very thorough discussion of assistance to the Soviet Union. Britain has constantly been at the forefront in giving support to Mr Gorbachev and his policies of greater democracy and reform. We are very ready to consider financial assistance provided it is clearly linked to economic restructuring so that we know it will actually be effective. [end p2]
I favour support for economic reform but there has to be reform to support. After all, we only gave aid to Poland and Hungary when they committed themselves to full scale economic reform programmes.
The first task, as pointed out by Mr Haughey and Mr Delors, after consultation at the Economic Summit, is a thorough analysis to be conducted by the Commission and experts from the new EBRD, the World Bank and the IMF, the OECD and others. Then we and our other western partners can see what really needs to be done and the matter will come back to the Council to take decisions.
Foreign Ministers discussed a number of foreign policy issues and agreed statements. The principle of a gradual relaxation of sanctions for South Africa, for which we have pressed for months, has been accepted. I think it is a great pity that the Twelve were unable to agree publicly to make a start now in easing sanctions against South Africa, several have of course done so privately. But we did at least call on everyone in South Africa to refrain from violence and advocacy of violence which of course covers the ANC's support for armed struggle. I am sure that in practice restrictions on South Africa will continue to be eased.
All in all a useful Council, and may I congratulate Ireland on its success in the World Cup last night? England hopes to emulate them this evening. [end p3]
Question (Charles Reiss, Evening Standard)
Could I ask whether you are pleased with Prime Minister Haughey 's assurances on the bombing incidents that if the offenders seek refuge in Ireland they will be, in his words, totally extraditable and do you have confidence that is the way that it would indeed turn out?
As I understood what Mr Haughey said, and I did see it on the screen, in his view those offences were within the capacity of the courts to extradite, whether or not the courts extradite is a matter for them. And as you will know, there are Brooke-Gerry CollinsCollins arrangements to have a look at the cases to see if they and the extradition procedures are fit and I think that review should go ahead.
How unhappy are you that South African sanctions are being preserved?
Well in fact, as you know, many South African sanctions are being eased, particularly the voluntary ones, and there are far more contacts with South Africa than there used to be. You know that Italy has lifted her investment ban, you know that Spain has started cargo flights again to South Africa and there are various other very considerable improvements being made by several members of the [end p4] European Community. What we have to keep in obviously are the United Nations sanctions, the arms embargo and the refusal to give any nuclear material. And then we also have to keep in the Community sanctions which are agreed between us and therefore are statutory, that is the ones against importing iron and steel and against importing Krugerrands.
Those I think are the main ones. Others, like as Denmark has done, like returning her Ambassador, are not necessarily agreed with the Community and she has returned her Ambassador. So in practice, trade is increasing, investment is increasing, but we retain the sanctions that are statutory between us.
I hope, and we did tackle this in debate, that Sr. Andreotti will have a look at any further measures which the South African Government are taking and he agreed to do this in full session to see whether those further measures would justify the reduction of the sanctions we already have.
And the timescale?
The timescale, well Sr. Andreotti 's Presidency will be six months, it is thought that we may have two meetings although I myself think it will be not wise if we go from one meeting per Presidency to two meetings per Presidency. But it is thought that we may have two meetings, possibly one in October and the other in December. But at any rate we are talking within a six months timescale. [end p5]
Question (Philip Stephens, Financial Times)
A lot of your colleagues seem to think that a single European currency is now inevitable and in a much shorter time frame than the fifteen or twenty years that you were said to have mentioned at the Council. If they go ahead with a single currency, can Britain afford not to be left out, not to be a part of it?
I do not think a single currency is inevitable, indeed I think that if they go ahead as at present foreseen under the Delors proposals to get locked currencies, I think a number of them would find very considerable difficulty with even that proposal long before they got to Stage 3. I remember locked currencies in the Bretton Woods, I remember being called down as a young member to the House of Commons when devaluation came up, or before that, when we found it very difficult to maintain the value of our locked currency. Your reserves went, dwindled very fast, you then had to slash public expenditure, wages had to come down and you had to prevent many things from going forward that you would otherwise have had and unemployment went up rapidly.
The economies of the Community are very different indeed, they are different in the production per person, they are different in the way they run them and they are difficult in the external assessment of those countries. And I think long before a single currency ever came to be considered they would have very considerable difficulties with the previous proposals, one of which is locked currencies. [end p6]
Could I go back to your earlier comments and in view of those comments on both the bombing and on extradition, how much confidence do you have in the process begun by Mr Brooke to get negotiations going about the problems in Northern Ireland?
I believe that they have taken the right step in getting those negotiations going, there clearly is a good deal of concern about some recent cases that were not extradited and that caused great concern in Britain. The purpose of the law is to see that people against whom there is a prima facie case are borough before the courts, it is far better for them to be brought before the courts in the land where that offence was committed. One has to remember the purpose of the law may be to see that no innocent person is convicted, it is also to see for the protection of the public that guilty people are convicted and for that purpose you have to have a mechanism which gets them before the courts because it is the court's decision and not the decision of politicians.
… devolution talks.
Mr Brooke is a man of very great patience and he needs to be. [end p7]
Question (Globe and Mail)
You have given us a fairly clear idea of your continuing views on a single currency, we have heard it described that political union in Europe has also made substantial progress over the last day and a half, are you any more enamoured of the notion of a federal or even confederal Europe than before you came to Dublin?
No, I am not at all enamoured of the nation of a federal Europe. And what has been very evident from both Dublin 1 and Dublin 2, is that our views put at Dublin 1 are prevailing and they are prevailing because they are in tune with what most people feel, namely it is quite clear that they feel they are twelve independent sovereign states steadily prepared to work more closely together on political matters and therefore to increase their cooperation. They recognised that there are many things which will continue to be dealt with separately. But we are very much aware in the debate this time, possibly following on the discussion we had on the previous occasion of their national identity and there was no question that should be eliminated or severely diminished. So I think we won on that the whole time.
Could I return to the question of sanctions against South Africa? When I asked Mr Haughey what exactly the Community was looking for from President de Klerk he was unable or he refused to spell it out. I wonder if you could help our thinking on this, because if I were President de Klerk and just got a nice pat on [end p8] the back I would be asking perhaps for a little bit more or at least why I am not getting any more. And do you think that Mr Mandela 's visit to Ireland next weekend has anything to do with the position the Irish have adopted on this issue?
I do not know about that latter point. But the text as you know pointed out originally that the European Council affirms its willingness to consider a gradual relaxation of this pressure—that is sanctions—when there is clear evidence that the process of change already initiated continues in the direction called for at Strasbourg. But if you look at what has happened since Strasbourg you find that almost all the significant things have already taken place since Strasbourg, indeed some of them are enumerated in paragraph 3: for example the release of Mr Mandela and other political prisoners; the unbanning of the ANC and related political organisations; the substantial lifting of the state of emergency; and many other points of substantial irritation on apartheid, you know that the Separate Amenities Act is being repealed.
So when you see that these have already taken place and in the direction we indicated at Strasbourg, it was clear to me that we ought in practice to have made a start on lifting sanctions. Now one pointed this out and they quite clearly are not prepared to do what I would call the joint ones, although they are doing them severally, as I have said previously. And so it is altered now—where there is further evidence that the process of change—and I think that they will be mainly things which deal with apartheid itself. The Group Areas Act, for example, has not yet gone although [end p9] as you know there are many areas where there is no distinction between colour as far as housing is concerned and those have particularly happened where foreign companies, foreign to South Africa, have set up new housing schemes.
But I think it is particularly, Mr Haughey referred to it as the dismantling of apartheid, I think it is that kind of measure which they particularly have in mind as being that which would warrant a start on dismantling the remainder of the sanctions which are agreed between us.
Are you unhappy with this statement?
I thought on the face of the statement what has happened has justified a start on reducing sanctions. They were not necessarily prepared to do that but what they have done is something I am very pleased about, they have condemned pretty clearly anyone who advocates violence as a means of pursuing political objectives and that goes straight for armed struggle, in no uncertain terms, that ought to be abandoned. I would say also that other things like nationalisation and so on also ought to be abandoned.
But if I might just put this point in my own defence, which I am sure you would expect me to: If other people had their way on sanctions, that is to say they had gone comprehensive, South Africa would not now still have the strong economy she has, which now and always has been the strongest economy in South Africa and she would not now be facing such a good future for black South [end p10] Africans as it is, and that is because some of us stood out the entire time against comprehensive sanctions and won. And really what is left now is comparatively small except the United Nations sanctions which are an arms embargo which for obvious reasons are of very considerable moment and will remain.
Can I ask two questions about ERM? You spoke eloquently about the dangers of locking currencies together, why in that case is Britain preparing to join the ERM, the main objective of which is precisely to lock currencies together? Secondly, could I ask you to give us a flavour of the exchanges I understood you had with President Mitterrand yesterday on the question of monetary union?
With regard to the Exchange Rate Mechanism, as you know, there is very considerable latitude and in my view most people would not be within it unless there were very considerable latitude. And should you come up against the upper limit it is also possible, or a lower limit for that matter, to have one of those weekend sessions when you alter the valuation of your currency. So there is no locking at all in the Exchange Rate Mechanism and it would not work if there were.
What exchanges did I have with President Mitterrand? Teasing exchanges—ah yes, I had forgotten. Well, we usually have a little banter. I did my little talk about our views of the Michael Butler scheme with the hard ECU and why we were putting it forward, and we were not putting it forward as a Stage 2 or a Stage 3, we were [end p11] putting it forward as a reasonable next stage which in my view was quite a big stage and really took us as far as the eye can see at the moment and I do not think we should attempt to go beyond that at a time when we could not foresee what the circumstances or the size of the new Europe would be. And I think they could not find fault with it because it is a very good scheme and we have worked on it actually for a long time, we did not just want to put one up that was a matter of words, we wanted it to be technically sound which is why it has been worked on for a long time.
And I was pointing out that this was quite different from the other scheme, that this really is a yardstick for seeing that you maintain the value of your currency in price terms with the hard ECU. Because the way in which people have used the Deutschmark is really as a kind of gold standard. If I might it this way, the Deutschmark never needed any gold standard because it has from its history the will to keep inflation down and to take the right steps the whole time.
Other people have often joined with the Deutschmark to use it as a kind of gold standard to keep their inflation down, which is a way to use it and is the way in which I am proposing the hard ECU should be used. And I was for example saying that people had put inflation first and unemployment second. I am afraid our history, as you know, has been a fear of unemployment and you know that since 1987 we perhaps got growth going too f* and that whereas France had kept her inflation down, alas we have not, we got it I am afraid by shadowing the Deutschmark at 3DM and therefore bringing our interest rate down too far. But we in fact had one of the lowest rates of unemployment in the Community. [end p12]
Mr Mitterrand said he thought I had a great ulterior motive in putting forward my proposals for the hard ECU and the next stage. Now I have never been accused of having an ulterior motive before. As I told him, I am usually the person who is there who is most direct and open about every single motive and the reason for it and I do not have ulterior motives, I have very open purposes. And then he took me to task for concentrating on unemployment and gave their record on inflation and I said: “Look, I think France has in fact used the ERM and used the Deutschmark as a kind of gold standard and used it absolutely well in that way and because she has used it in that way, yes she has had to hold down her wages, yes she has had to limit her growth, but she has been prepared to do that because inflation came first” . And as he pointed out, and I would agree with him, when you get inflation down your longer-term chances of growth and therefore reducing unemployment, as Germany has done on both, are better.
I am sorry that is so long but that was what it was all about, but it was very good natured!
Question (John Palmer)
I have a very clear recollection at Madrid last year, in answer to a direct question about EMU, you said you would never put your signature to the calling of an inter-governmental conference until you were satisfied that full and adequate preparation had been made. It is difficult hearing the very many intellectual and methodological differences you have with the EMU project to believe that you really think full and adequate preparation has yet been made and if so why did you agree to the IGC? [end p13]
I think if you look at some of the discussions which have been taking place, quite apart from our own proposals for which full and adequate preparation has been made technically as well as politically, if you look, and I am sure you have been in touch with them, at some of the discussions for example that they have had in the several Councils of Europe, you will find that they are already disagreeing, because they have come to the point, about the purpose in their view of setting up a central bank with twelve governors.
Now to me there would only be one purpose and that is to maintain the value of your currency, in other words to keep prices down. That is not the view which is taken between the other eleven nations. Some of them are saying: “But keeping inflation down is not an object in itself, or keeping price stability is not an object in itself, there are other objects.” Others make it quite clear that they think growth should take more precedence and obviously the creation of jobs which would come with growth.
So already they are into the political arena. Now it is quite permissible and nothing unusual about it to use that board as a currency board, to give it one instruction to maintain the value of the currency, that is what I call the gold standard yardstick. That does not give very much latitude.
When you go into the other economic objectives, which anyone would get convergence [sic], would be one way in Eurospeak of describing it, then you are coming into the political decisions. Those political decisions should not be the preserve of a board of twelve bank governors answerable to no-one. Those political decisions are for the several national parliaments. [end p14]
Now already they have come up against this in their preparation, as I pointed out because I had all the telegrams and so on in front of me. So they have got a long way with their preparation and they know some of the problems they are going to come up against. You can go on almost forever in preparation but I think the wiser ones know the problems that they will be facing if they are to go ahead and I hope that therefore they will look on what I think is a much better next stage, which is our own proposal.
I know Karl Otto Pöhl would not like it, he never liked the increased use of the ECU, he did not like it when we denominated security issues in London in ECU, and he does not like its extended use now. But that is Karl Otto Pöhl and we all know him and admire him for the way in which he has managed to keep the value of the currency, the Deutschmark.
Question (Adam Boulton, Sky News)
What do you say to the suggestions that your hesitations on European, political and monetary union run the risk that in fact that will mean that Germany will simply have to break from the European pact and will emerge as the de facto super power of Europe?
No, no. My hesitations on political union, not merely hesitations but expressed in one point after another which they have agreed with, are ones which have been upheld. And if I might say so, no-one is a greater example of national identity than Chancellor Kohl and President Mitterrand, no-one are better examples of the knowledge of their own national identity than both France and [end p15] Germany.
So I think that we have in fact managed to express things which struck a chord in the minds of most people and therefore you will find that political union proposals are comparatively small but they are further proposals for a step-by-step increase in cooperation. They have also proposed cooperation on security. Now France of course is the one person who is not in NATO militarily and of course Ireland is neutral.
And on the European economic and monetary union, I have already indicated that they are coming up against difficulties with their own proposals, difficulties which we could foresee, but I think we have got a stage, as far as we are concerned, which would involve steadier and better cooperation and the next stage.
So I do not think we are out of step, I think steadily others are coming in step with us.