1. Brussels European Council
1.1.1. The European Council, attended by the Community's 12 Heads of State or Government, opened in Brussels at 3 p.m. on 29 June, and its proceedings were given over entirely to consideration of the Commission's communication ‘The Single Act: A new frontier for Europe’. [Footnote 1: Supplement 1/87 – Bull. EC; Bull. EC 2-1987, point 1.1.1 et seq.]
As the Commission President, Mr Jacques Delors, declared at his press conference before the meeting: ‘How are the 12 of us to live together in the medium and long term and how is our Community to make progress? This is an issue on which a decision must be taken, and that decision must come from the European Council. What do we really expect of a European Council? Not that it should do duty for the specialized Councils, but that it should appraise the Community's general economic, political, social and financial situation and lay down the broad guidelines for its development …’.
In the letter that the Council President customarily addresses to the other Heads of State or Government, Mr Wilfried Martens declared: ‘The meeting of the European Council to which I am pleased to invite you on 29 and 30 June will be taking place on the very eve of the entry into force of the Single European Act, which provides the framework within which our Community must develop if it is to meet the challenges of the end of this century. One of its implications, to my mind, is that it will force us, for the years ahead, to strike a balance in the development of Community activity. It is essential that this balance be maintained if we are to succeed in removing all obstacles to the internal market as we have undertaken to do by 1992. Our next obligation resulting from this commitment is that of placing our joint plan of action in a medium-term perspective. That is the message from the Commission in its communication before us today …’.
That was the agenda for this European Council. It had been prepared by the Finance Ministers and the Foreign Ministers, who had been meeting regularly since February [Footnote 2: Bull. EC 2-1987, point 2.4.6; Bull. EC 4-1987, point 2.4.9; Bull EC 5-1987, points 2.4.5 and 2.4.6.] right up to the eve of the European Council, having held a ‘conclave’ on the afternoon of 27 and the morning of 28 June.
Before the start of the European Council, Lord Plumb, President of the European Parliament, personally made a statement before the Heads of State or Government in which he welcomed the important precedent constituted by his presence at the opening of the European Council. He was convinced that this marked the beginning of a new and creative age of institutional cooperation.
Lord Plumb summarized Parliament's message as follows: to begin with, the internal market objective is ‘crucial to our future economic development as the motor of economic growth’; then all policies must be directed towards ‘creating and spreading prosperity to all regions of the Community’; as regards agriculture, ‘surplus production must be eliminated, and we must try to relate supply to demand’ while protecting the position of the small farmers; finally, for the future, the Community ‘will need to finance its existing commitments and the new obligations which it has taken on within the Single European Act’. Lord Plumb stressed that Parliament ‘strongly supports the Commission's general approach as a means of providing a global and durable solution to the problems facing the Community budget’.
The European Council's initial discussions on the Monday afternoon were devoted to the internal market and economic and social cohesion. Following the informal evening talks at Val Duchesse, the proceedings resumed on the Tuesday morning. While the discussions were going on between the Heads of State or Government, the Presidency and the Commission coordinated the discussions on the immediate agricultural problems. The debates between the Heads [end p1] of State or Government were based on a preliminary draft of ‘conclusions’ prepared by the Presidency in the light of the informal talks at Val Duchesse.
The European Council meeting ended at 10 p.m. on the Tuesday, on the basis of the Presidency's conclusions, with:
agreement on the part of 11 Member States (the United Kingdom refusing its endorsement) on the medium-term issues, namely general guidelines for acting on the Commission's communication, to be firmed up at the Copenhagen European Council at the end of the year;
unanimous agreement on the short-term issues: the agricultural problems (shelving of the plan for a tax on oils and fats and compromise on MCAs on the basis of a Franco-German agreement), thereby enabling the Ministers for Agriculture to adopt the new prices and related measures at a Council meeting that very same night (&arrow; points 1.3.1 and 1.3.2); supplementary budget No 1/87 (the guidelines to be given substance by the Budget Ministers); present research projects to continue during the current year, pending adoption of the new research programme (1987–91).
These guidelines are accompanied by a work programme and procedure. The Council, acting on proposals from the Commission, is to prepare various measures: the binding legal provisions to establish budgetary discipline both for agricultural expenditure and for non-compulsory expenditure; a decision on the reform of the structural Funds including the financial objective for the allocations to the Funds in 1992; the level of the new ceiling on own resources for 1992; detailed guidelines on the new system of own resources and on the correction of budgetary imbalances.
Conclusions of the European Council
1.1.2. The Presidency noted that 11 delegations were able to agree to the conclusions set out in Annex I regarding the guidelines and the work programme on the Commission communication entitled ‘Making a success of the Single Act’.
1.1.3. The European Council adopted the conclusions set out in Annex II on:
the system of monetary compensatory amounts,
the 1987 budget,
research.
Annex I
Making a success of the Single Act
1.1.4. At the opening of its meeting the European Council received the President of the European Parliament, Lord Plumb, who presented the conclusions reached by the Parliament on the future development of the Community.
The European Council then examined the various aspects of the Commission communication entitled ‘Making a success of the Single Act’.
The European Council is aware that the recent enlargement, the 1992 deadline for the achievement of the single market, the undertaking to strengthen cohesion and develop common policies and the signing of the Single Act open up new prospects for the Community. To make allowance for those changes and in order to address this new stage in the Community's development under the best conditions, the European Council feels that a number of concrete guidelines must now be set and a procedure laid down enabling the various decisions required for their attainment to be adopted swiftly.
Common economic area
1. One of the Community's essential tasks is the establishment of a common economic area comprising the attainment of the single market and economic and social cohesion.
The foundation for this area will be the attainment of an internal market in which goods, persons, services and capital circulate freely. Convergence of the economic and monetary policies of the Member States and in particular the strengthening of the EMS are essential features in this respect.
[end p2]The creation of the economic area will also require accompanying policies to be developed in order that greater Community cohesion may be achieved on the basis of the provisions of the Single Act.
The creation of the common economic area will bring benefits to all the Member States since it will generate stronger economic growth and create more jobs.
The European Council underlines the importance of the work which has been carried out since the submission of the Commission's White Paper on the internal market in June 1985. In order to ensure that the 1992 deadline is met, the European Council requests the relevant Councils to take full advantage of the improvement in the decision-making process now produced by virtue of the Single Act. It requests the institutions concerned to take the necessary decision with regard, in particular, to the opening of public contracts, the approximation of standards, the completion of the liberalization of capital movements, insurance matters and the mutual recognition of diplomas and to make swift progress with regard to the company law adjustments required for the creation of a European company.
The European Council would like these decisions to be taken with all possible speed and in any event before the end of 1988 so that the attainment of this objective is regarded as irreversible.
The European Council also emphasizes the importance of a common effort in the area of new technologies: in this connection the European Council invites the Council to approve as a matter of urgency the new framework programme for scientific research and development in accordance with the Presidency's compromise.
The structural Funds in connection with cohesion
2. In confirming the importance of the general objective of strengthening Community cohesion, the European Council is convinced that reform of the structural Funds must play a considerable part in achieving this objective. It endorses the Commission's approach to ensuring that these instruments are more effective as regards the rationalization of their objectives, the concentration of their action according to Community criteria giving due weight to the backwardness of certain regions or to regions in industrial decline and recourse to the programme method. There would also be a need to provide for a variation of intervention rates in accordance with objective criteria, in particular the degree of prosperity of the recipient State. The European Council requests the Council to examine these questions on the basis of the comprehensive proposal to be submitted by the Commission in accordance with Article 130D of the Single Act.
As regards funding, the European Council recalls the undertaking given in 1984 in favour of significant progression in real terms in the appropriations allocated to the structural Funds. The Commission considers that, in order to meet the specific requirements connected with the recent enlargment and to contribute to achieving the objectives of the Single Act, the appropriations allocated to the Funds must be doubled, in real terms, by 1992. Acting on a Commission proposal in the context of the Community's new financial system, the European Council intends to fix a financial objective for appropriations to the Funds, to be reached in 1992, and will adopt the multiannual reference framework accordingly, in order to strike a balance between achieving the internal market and strengthening cohesion.
The implementation of all the above measures will make it possible to give a real economic impact to Fund intervention.
Budgetary discipline and new resources
3. Like the Commission, the European Council considers it essential that a lasting response be sought to the question of the Community's financial equilibrium, on the one hand by providing it with appropriate resources and on the other hand by subjecting the use of these resources to effective and binding budgetary discipline.
Budgetary discipline
4. Parallel to the effort being made by the Member States in connection with their own budgets, the Community must submit the use of its resources to effective and binding discipline. The European Council considers that the arrangements decided upon at Fontainebleau must be strengthened in the light of experience. Budgetary discipline must be applied to all the Community's expenditure, both to payment appropriations and to commitment appropriations. It must be binding on all the institutions which will be associated with its implementation.
5. As regards non-compulsory expenditure, these rules involve, in particular, compliance with the provisions relating to the maximum rate. The achievement of the Community's financial objective for 1992 as regards the structural Funds will [end p3] be ensured in each budget year by applying Article 203(9) of the Treaty.
6. As regards the agricultural sector, the European Council confirms that EAGGF guarantee expenditure must not progress at a rate exceeding that of the own resources base.
The European Council notes that the Council has already adopted various production-stabilization arrangements within the market organizations.
The European Council requests the Council, acting on a Commission proposal, to adopt the additional regulations which will enable the Commission, in the context of the management of the market, to keep the level of expenditure within the budget framework.
The starting base of the agricultural norm must be redefined to take account of the current situation. The effect of exceptional circumstances will have to be better defined and in particular the monetary factor will have to be neutralized in both directions.
7. Generally speaking, the European Council emphasizes that the new budgetary discipline must be implemented in such a way that it does not conflict with the effort made by the Community to achieve a better balance as between the various categories of expenditure.
8. For expenditure as a whole, budget management rules must be strengthened, in particular through a reform of the Financial Regulation.
New resources
9. The European Council considers that the Community must have stable and guaranteed resources enabling it to cope with the consequences of decisions connected with the implementation of its main policies.
The European Council asks the Council, within the programme of work set out below, to adopt the level of the new ceiling of own resources based on a percentage of Community GNP.
The financing system should, as proposed by the Commission, take greater account of the proportionality of contributions in accordance with the relative prosperity of Member States.
The Council will also study the Commission's proposal fixing until 1992 the annual subceilings for own resources in order to consolidate the budgetary discipline rules.
Correction of budgetary imbalances
10. The European Council notes that a decision on the question of the correction will be taken at the same time as the decisions on future funding.
Agriculture
11. The European Council recalls the conclusions adopted by the OECD and the Venice Summit and notes that the direction taken in the proceedings of the Agriculture Council on the basis of the Commission proposals is in keeping with the commitments entered into in those forums. The European Council confirms the need for better adjustment of supply to demand through measures enabling the market to play a greater role. This approach could be supplemented by other measures such as, for example, encouragement of the set-aside of land or more extensive farming.
In view of the repercussions of these measures on incomes, the reforms could be accompanied, in accordance with the Commission proposals, by the grant of direct, selective income support which should be subsidiary in relation to prices policy, have no impact on the level of production and fall within a Community framework.
Implementation of an approach of this kind by the Community and by all the other main agricultural producers could only have beneficial effects in the long term, provided they are balanced, progressive and concerted.
The European Council considers that the completion of the modernization of the common agricultural policy must take into account its fundamental principles, the legitimate interests of farmers, and the Community's external interests, while avoiding any risk of movement towards renationalization.
Once the decisions on the 1987/88 prices have been adopted, the Commission and the Council will have to draw up an inventory of the various adjustments made to the common agricultural policy and, on that basis, the Council will adopt the requisite supplementary measures, including measures to ensure that the budgetary discipline is fully observed.
Work programme and procedure
1.1.5. The European Council requests the Council, on the basis of the Commission communication entitled ‘Making a success of the Single Act’, and in the light of the guidelines defined above, to:
prepare, on a proposal from the Commission, the binding legal provisions referred to in paragraphs 4 to 8 above to establish budgetary discipline for both agricultural and non-compulsory expenditure. These provisions will include the supplementary measures for inclusion in the [end p4] common agricultural policy judged necessary in the light of the inventory referred to in paragraph 11;
prepare a decision on the comprehensive Commission proposal for reform of the structural Funds including the financial objective for appropriations to the Funds to be reached in 1992 (see paragraph 2 above);
prepare, on a proposal from the Commission, in conjunction with the above decisions, the level of the new ceilings on own resources for 1992;
prepare, on a proposal from the Commission, detailed guidelines on the new system of own resources, following the indications in paragraph 9 above, and on the correction of budgetary imbalances.
All the decisions to be taken on the four points above form an indivisible whole.
The European Council will adopt its final position on all these matters at its meeting in Copenhagen in December 1987.
With regard to the new own resources, the legal decision to be submitted for ratification by the national parliaments will have to be definitively adopted by the Council (in accordance with guidelines confirmed by the European Council) before the end of the first quarter of 1988, so that it can be finally approved (after ratification by the national parliaments) before the end of 1988 with retroactive effect as from 1 January 1988.
Pending ratification, appropriate measures will be taken by the budgetary authority to cover the requirements of the 1988 budget in order to ensure the normal functioning of the Community.
Annex II
System of monetary compensatory amounts
1.1.6. The arrangements on monetary compensatory amounts agreed by the European Council are set out below.
(1) Existing positive MCAs
(a) Immediate reduction by:
1 switch-over point;
0.5 neutral margin point.
(b) Reduction by 1 point at the beginning of the 1988/89 marketing year by a reduction in prices in DM compensated for by a German national aid equivalent to 2 VAT points to cease to apply at the end of 1988, but without such aid being linked to production.
(c) Elimination of the balance at the beginning of the 1989/90 marketing year (this balance should be minimal and only apply to a few products).
(2) Future MCA system
Retention of the switch-over system:
(a) As regards ‘artificial’ MCAs:
25% elimination through reduction in ECU prices, at the beginning of the following marketing year, with the possibility of a compensatory national social aid not linked to production.
Elimination of 50% of the balance at the beginning of the second marketing year following realignment, with the 1979 gentlemen's agreement being maintained.
Elimination of the remainder at the beginning of the third marketing year following realignment, with the 1979 gentlemen's agreement being maintained.
(b) As regards ‘natural’ MCAs:
Maximum 30% elimination at the time of realignment.
Programme for dismantling the balance in two equal stages at the beginning of the two marketing years following realignment.
The system will be re-examined before 1 July 1988 in the light of a joint report by the Ministers for Finance and for Agriculture.
1987 budget
1.1.7. The Commission submitted a preliminary draft supplementary and amending budget to adapt the budget as adopted.
The Budget Council is requested to prepare a draft budget urgently on this basis.
This budget will be funded by using all available own resources up to the 1.4% VAT limit and by reductions in expenditure by means of measures which do not call into question the implementation of Community policies and safeguard the non-compulsory expenditure currently entered in the budget.
In addition, the EAGGF guarantee appropriation in 1987 will be honoured by means of an adjustment in the system of advance payments on the basis of a Commission proposal. The details of this adjustment will be laid down before the end of the year. It will be re-examined in connection [end p5] with the whole body of decisions to be taken with regard to the future financing of the Community.
Research
1.1.8. The European Council requests the Community institutions to ensure that the scientific research and development appropriations in the budget for the 1987 financial year can be used for current programmes pending the definitive adoption of the multiannual framework programme provided for in the Single Act.
Statements and comments
1.1.9. At the press conference after the European Council, Mr Wilfried Martens, who had chaired the meeting, welcomed the results obtained on the immediate issues and stressed that the ‘work programme’ accompanying the European Council's medium-term guidelines constituted an undertaking to implement those guidelines, in order to reach substantive decisions at the Copenhagen meeting.
Thanking the Belgian Presidency for its effective work and its close collaboration with the Commission throughout the first half of 1987, Mr Jacques Delors said: ‘An undertaking has been given and the European Council cannot put off its decisions any more. The Commission was well aware that the package it had presented in mid-February could be adopted all at once. But the European Council discussed it in detail and now the momentum cannot stop. If, as agreed, the decisions are taken at Copenhagen, the decision-making process will in the end have been relatively fast compared with the Community's usual experience.’
Chancellor Helmut Kohl said he was pleased with this European Council. He was very happy that the Franco-German agreement on agriculture had helped to produce a result that took account of the problems of German farmers. Mr François Mitterrand, who was accompanied by his Prime Minister, Mr Chirac, considered that the Heads of Government had secured a sound agreement. The British Prime Minister, Mrs Margaret Thatcher, declared that the assurances given concerning the imposition of real budgetary discipline were unconvincing. Once again she emphasized the need to reduce agricultural spending, saying that she was not prepared to subscribe to constantly swollen levels of expenditure, with the Community standing on the brink of bankruptcy. On the question of new own resources, she said she had refused to be inveigled into accepting decisions that should not be taken until Copenhagen.
Lord Plumb, President of the European Parliament, said in a statement issued during the night of 30 June that he was very disappointed by the outcome: the European Council had once again failed to take the necessary decisions to settle the main problems confronting the Community. The Chairman of Parliament's Socialist Group, Mr Arndt, also took a dim view of the results of the European Council, believing that they did nothing to overcome the Community crisis. The Chairman of the EPP Group, Mr Klepsch, found some cheer, especially in the agricultural agreement, which was a source of hope that France and Germany could together give new impetus to Europe in other spheres.
1.1.10. Addressing Parliament on 7 July during the debate on the European Council, Mr Wilfried Martens said that ‘the biggest, and at the same time the most daunting, task to fall to the Presidency in our six-month term has been the negotiations on the Commission's proposals to give effect to the Single Act’.
‘These proposals – the “Delors package” – form a balanced whole within a medium-term approach. But to have the smallest chance of succeeding we had to stick at all costs to that comprehensive approach and the medium-term view. This was the over-riding and constant concern of the Belgian Presidency throughout the preparatory work leading up to the European Council…
But at the same time we were having to grapple with another challenge. The Presidency knew that the Community was beset by two immediate problems: the [end p6] Agriculture Ministers had not yet managed to agree on the farm prices and related measures for the year, and the Budget Ministers had not found a solution for the 1987 supplementary budget. So we had to hit upon a way of working that would allow the European Council to make it easier to find solutions to those two problems without forfeiting the time we needed to consider the medium-term issues in depth.
I think I can safely say that this dual task was accomplished…’
Mr Delors identified a number of positive factors: the European Council had resisted the temptation to confine itself only to the short term; instead, as the Commission had hoped, discussion had concentrated on medium-term issues; the European Council had taken the Commission's proposals as a basis for discussion and had considered them in their entirety; there had been no clash between the Community's richer and poorer countries; instead, each country's concerns had been given a sympathetic hearing, and this had led to a reaffirmation of the importance of economic and social cohesion; a solution on own resources would be adopted by the end of March 1988 and applied from 1 January 1988; the agrimonetary solution might not be a ‘monument to rationality’ but it would only apply until 1 July 1988, when the problem would be reconsidered in the light of developments on the EMS; lastly, a precise work programme had been agreed, leading to final decisions in Copenhagen. In line with this programme the Commission would be laying three proposals on the Council's table before the end of July: the framework Regulation on the structural Funds; the arrangements for budgetary discipline; the formula for the structure and volume of own resources.