The Downing Street Years

by Margaret Thatcher

  I nominated Lord Cockfield as the new British European Commissioner. I was no longer able to find a place for him in the Cabinet and I thought that he would be effective in Brussels. He was. I always paid tribute to the contribution he made to the Single Market programme. Arthur Cockfield was a natural technocrat of great ability and problem-solving outlook. Unfortunately, he tended to disregard the larger questions of politics — constitutional sovereignty, national sentiment and the promptings of liberty. He was the prisoner as well as the master of his subject. It was all too easy for him, therefore, to go native and to move from deregulating the market to reregulating it under the rubric of harmonization. Alas, it was not long before my old friend and I were at odds.

  In retrospect, the Dublin and Brussels summits had been an interlude — even if a lively one — between the two great issues which dominated Community politics in these years — the budget and the Single Market. The Single Market — which Britain pioneered — was intended to give real substance to the Treaty of Rome and to revive its liberal, free trade, deregulatory purpose. I realized how important it was to lay the groundwork in advance for this new stage in the Community’s development.

  The pressure from most other Community countries, from the European Commission, from the European Assembly and from influential figures in the media for closer European co-operation and integration was so strong as to be almost irresistible. But what kind of integration? My aim had to be to ensure that we were not driven helter-skelter towards European federalism. The thrust of the Community should be towards achieving the genuine Common Market envisaged in the original treaty, a force for free trade not protectionism. To do this I would have to seek alliances with other governments, accept compromises and use language which I did not find attractive. I had to assert persuasively Britain’s European credentials while being prepared to stand out against the majority on issues of real significance to Britain. Such an approach was never going to be easy.

  THE MILAN EUROPEAN COUNCIL

  I hoped that a significant first step would be the paper which Geoffrey Howe and I worked up for the Milan Council, hosted and chaired by Italy, on Friday 28 and Saturday 29 June. The language and direction of this paper were ostentatiously communautaire. It covered four areas: the completion of the Common Market, strengthened political cooperation, improvements in decision-making and better exploitation of high technology. The most significant element was that dealing with ‘political co-operation’, which in normal English means foreign policy. The aim was closer co-operation between Community member states, which would nonetheless reserve the right of states to go their own way.

  At that time there seemed a number of good reasons for this approach. The Falklands War had demonstrated to me how valuable it would be if all Community members were prepared to commit themselves to supporting a single member in difficulties. President Mitterrand had been a staunch ally: but some of the other members of the Community had wavered and the instincts of one or two were downright hostile. Even more important perhaps was the need for western solidarity in dealing with the eastern bloc. Foreign policy co-operation within the European Community would help strengthen the West, as long as good relations with the United States remained paramount. What I did not want to do, however, was to have a new treaty grafted on to the Treaty of Rome. I believed that we could achieve both closer political co-operation — as well as make progress towards a Single Market — without such a treaty; and all my instincts warned me of what federalist fantasies might appear if we opened this Pandora’s box.

  I was keen to secure agreement for our approach well before the Milan Council. So when Chancellor Kohl came to see me for an afternoon’s talks at Chequers on Saturday 18 May I showed him the paper on political co-operation and said that we were thinking of tabling it for Milan. I said that what I wanted was something quite separate from the Treaty of Rome, basing co-operation on an intergovernmental agreement. Chancellor Kohl seemed pleased with our approach and in due course I also sent a copy to France. Imagine my surprise, then, when just before I was to go to Milan I learnt that Germany and France had tabled their own paper, almost identical to ours. Such were the consequences of prior consultation.

  The ill-feeling this created was, in its way, an extraordinary achievement, given the fact that nearly all of us had come there with a view to proceeding in roughly the same direction. Matters were not helped by the chairmanship of the Italian Prime Minister, Bettino Craxi. Sig. Craxi, a socialist, and his Foreign minister, the Christian Democrat Sig. Andreotti, were political rivals but they shared a joint determination to call an Inter-Governmental Conference (IGC). Such a conference, which could be called by a simple majority vote, would be necessary if there were to be changes in the Treaty of Rome, which themselves, however, would have to be agreed by unanimity. An IGC seemed to me unnecessary (as I said) and dangerous (as I thought). Quite what the French and Germans wanted was unclear — beyond their desire for a separate treaty on political co-operation. They certainly wanted more moves towards European ‘integration’ in general and it had to be likely that they would want an IGC if one were attainable as — for reasons I shall explain shortly — it was. It is also possible that some kind of secret agreement had been reached on this before the Council began. Certainly when I had a bilateral meeting with Sig. Craxi early on Friday morning he could not have been more sweetly reasonable; an IGC was indeed mentioned as a possibility, but I made it very clear that I thought that the relevant decisions could largely be taken at the present Council without the postponement inevitable if a full IGC were to be called. I came away thinking how easy it had been to get my points across.

  It is worth recalling just how the pressure for an IGC had built up in the first place. A year earlier, in one of those gestures which seem to be of minor significance at the time but adopt a far greater one in the light of events, we had agreed (at Fontainebleau) to set up an ad hoc committee under the chairmanship of the Irish Senator James Dooge to suggest improvements in European co-operation. Some of the committee’s proposals were sensible, such as its stress on more effective political co-operation and a Single Market; some were objectionable like the ‘achievement of a European social area’, which prefigured the approach of the later Social Charter; and some were plainly dotty, such as the promotion of ‘common cultural values’. But above all the Dooge Committee proposed an IGC to ratify all its proposed treaty amendments with a view to the creation of a ‘European Union’. So such a proposal was inevitably on the table at Milan. And once this happened the proposed IGC seemed the perfect vehicle for almost everyone else’s particular ideas about European development. This made it difficult to resist.

  It was, in fact, Sig. Craxi himself as President who suggested at the Council that we should have an IGC. Battle lines were quickly drawn. I argued that the Community had demonstrated that it did have the capacity to take decisions under the present arrangements and that we should now at the Milan Council agree upon the measures needed to make progress on the completion of the Common Market internally and political co-operation externally. There would, I granted, be a need for improved methods of decision-taking if these ends were to be met. I proposed that we agree now to greater use of the existing majority voting articles of the Rome Treaty, while requiring any member state which asked for a vote to be deferred to justify its decision publicly. I called for a reduction in the size of the Commission to twelve members. I also circulated a paper suggesting some modest ways in which the European Assembly might be made more effective. I suggested that the Luxemburg European Council, due to meet in December, should as necessary constitute itself as an IGC. There agreements could be signed and conclusions endorsed. But I did not see any case for a special IGC working away at treaty changes in the meantime.

  But it was to no avail. Having come to Milan in order to argue for closer co-operation I found myself being bulldozed by a majority which included a highly partisan chairman. I was not alone: Greece and Denmark joined m
e in opposing an IGC. Geoffrey Howe would have agreed to it. His willingness to compromise reflected partly his temperament, partly the Foreign Office’s déformation professionelle. But it may also have reflected the fact that Britain’s membership of the European Community gave the Foreign Office a voice in every aspect of policy that came under the Community. And the more the Community moved in a centralized direction the more influential the Foreign Office became in Whitehall. Inevitably, perhaps, Geoffrey had a slightly more accommodating view of federalism than I did.

  In any case, to my astonishment and anger Sig. Craxi suddenly now called a vote and by a majority the Council resolved to establish an IGC. My time — not just at the Council but all of those days of work which preceded it — had been wasted. I would have to return to the House of Commons and explain why all of the high hopes which had been held of Milan had been dashed. And I had not even had an opportunity while there to go to the opera.

  SINGLE MARKET-MINDEDNESS

  Annoyed as I was with what had happened, I realized that we must make the best of it. I made it clear that we would take part in the IGC: I saw no merit in the alternative policy — practised for a time in earlier years by France — of the so-called ‘empty chair’. There has to be a major matter of principle at stake to justify any nation’s refusing to take part in Community discussions. That was not the case here: we agreed with the aims of enhanced political co-operation and the Single Market; we disagreed only with the means (i.e., the IGC) to effect them. In general, too, I believed that it was better to argue our case at the earlier stage, either in the Council or in the IGC, rather than in the last ditch, when the proposal had become an amendment to the Treaty of Rome. My calculations here, however, depended upon fair dealing and good faith in discussions between heads of government and with the Commission. As time went on, I had reason to question both.

  There now followed an apparently endless stream of meetings and texts in preparation for the European Council which would meet at Luxemburg in December. The reports of some of these discussions, which I read, illustrated how widely differing were the objectives of different participants. M. Delors urged fulfilment of what he had described as the ‘two great dreams’ for Europe — an area without frontiers and monetary union. Every exemption or derogation which other countries, like Britain, sought seemed to be regarded as a kind of betrayal. I was told that at one time or another he had denounced almost every member state except Italy, Belgium and the Netherlands.

  The second prize for overambition had to go to the Italians. Sig. Craxi and Sig. Andreotti had come to regard the expansion of the powers of the European Assembly as the touchstone of their federalist principles. They wanted to give the assembly a power of ‘co-decision’ with the Council, something which would have effectively paralysed the Community by subjecting heads of government to perpetual interference by this incohate, inexperienced and frequently irresponsible body.

  The smallest European countries were really aiming at the fastest and — for them — cheapest route to European economic and political union and so were likely to go along with any moves in that direction which did not alienate the Germans and the French. It was all summed up in a letter to me from M. Jacques Santer, the Prime Minister of tiny Luxemburg, which would host the Council. He urged that we should ‘recall our great objective of monetary and economic union’, and added: ‘a resolutely ambitious attitude will without doubt allow us to achieve stimulating results and provide a starting point for the economic and psychological changes which are essential as Europe assumes its new role.’ We in the British delegation were inclined to dismiss such rhetoric as cloudy and unrealistic aspirations which had no prospect of being implemented. We were correct in believing them to be lacking in realism; where we were mistaken was in underestimating the determination of some European politicians to put them into effect.

  More important to British calculations at the time was what the French and Germans wanted out of it all. By now, the Franco-German axis was again as strong as it had been under President Giscard and Chancellor Schmidt. President Mitterrand and Chancellor Kohl, in contrast to their predecessors, had little in common personally. Chancellor Kohl has the sure touch of a German provincial politician, which has always stood him well politically. Only recently — since German reunification in fact — has he struck out with a distinctive German foreign policy. For most of the 1980s, he seemed willing to subordinate German interests to French guidance, since this reassured Germany’s neighbours. Furthermore as a Christian Democrat, he is more of the social than of the economic Right and so sees the world from a perspective far closer to that of the Socialist President of France than would any British Conservative. President Mitterrand is cultivated and cosmopolitan, but somewhat aloof in French domestic politics. Like so many Frenchmen of his generation, he is driven by a fear of the consequences of German domination. But, whatever he said to me in private, his public line and his actions would for this very reason always be directed towards keeping the Germans bound into the European Community, where the French might be able to exercise greater influence over them. Consequently, I knew that the French attitude at the forthcoming Council would be to press hard for closer ‘European Union’, since this is the phrase which allows both nations to pursue their own national interests with respectability. These trends were, as I shall describe, to become still more important as time went by.

  I had one overriding positive goal. This was to create a single Common Market. The Community’s internal tariffs on goods had been abolished by July 1968. At the same time it had become a customs union, which Britain had fully accepted in July 1977. What remained were the so-called ‘non-tariff’ barriers. These came in a great variety of more or less subtle forms. Different national standards on matters ranging from safety to health, regulations discriminating against foreign products, public procurement policies, delays and overelaborate procedures at customs posts — all these and many others served to frustrate the existence of a real Common Market. British businesses would be among those most likely to benefit from an opening-up of other countries’ markets. For example, we were more or less effectively excluded from the important German insurance and financial services markets where I knew — as I suspect did the Germans — that our people would excel. Transport was another important area where we were stopped from making the inroads we wanted. The price which we would have to pay to achieve a Single Market with all its economic benefits, though, was more majority voting in the Community. There was no escape from that, because otherwise particular countries would succumb to domestic pressures and prevent the opening-up of their markets. It also required more power for the European Commission: but that power must be used in order to create and maintain a Single Market, rather than to advance other objectives.

  I knew that I would have to fight a strong rear-guard action against attempts to weaken Britain’s own control over areas of vital national interest to us. I was not going to have majority voting applying, for example, to taxation which the Commission would have liked us to ‘harmonize’. Competition between tax regimes is far more healthy than the imposition of a single system. It forces governments to hold down government spending and taxation, and to limit the burden of regulations; and when they fail to do these things, it allows companies and taxpayers to move elsewhere. In any event, the ability to set one’s own levels of taxation is a crucial element of national sovereignty. I was not prepared to give up our powers to control immigration (from non-EC countries), to combat terrorism, crime, and drug trafficking and to take measures on human, animal and plant health, keeping out carriers of dangerous diseases — all of which required proper frontier controls. There was, I felt, a perfectly practical argument for this: as an island — and one quite unused to the more authoritarian continental systems of identity cards and policing — it was natural that we should apply the necessary controls at our ports and airports rather than internally. Again, this was an essential matter of national sovereignty, for
which a government must answer to its own Parliament and people. I was prepared to go along with some modest increase in the powers of the European Assembly, which would shortly and somewhat inaccurately be described as a Parliament: but the Council of Ministers, representing governments answerable to national Parliaments, must always have the final say. Finally, I was going to resist any attempt to make treaty changes which would allow the Commission — and by majority vote the Council — to pile extra burdens on British businesses.

  Right up to the beginning of the Luxemburg Council I thought that we could rely on the Germans to support us in opposing any mention of the EMS and economic and monetary union in the revisions of the treaty. Then, as now, however, there was an inherent tension between, on the one hand, the German desire to retain control over their own monetary policy to keep down inflation and, on the other, to demonstrate their European credentials by pressing further towards economic and monetary union.

  I had discussed this with the Chancellor of the Exchequer and he and I were at one. A few days before the Council began Nigel Lawson set out his views with admirable clarity in a note urging me to stand firm. He recalled that Chancellor Kohl had told me the previous day that the Germans, like us, were totally opposed to any amendment to the monetary provisions of the Treaty of Rome. But he added that if the position deteriorated I would have to have some possible form of words up my sleeve. Nigel stressed that it would be essential that the language used should contain no obligation on us to join the ERM, make it clear that exchange rate policy is the responsibility of national authorities, minimize any extension of Community competence and avoid any treaty reference to EMU. He concluded that having reviewed the options he was bound to say that the better course by far looked to be not to get caught up in this whole exercise. I agreed.