With your permission, a Cheann Comhairle, I propose to make a statement on the European Council which I attended, with the Minister for Foreign Affairs, in Maastricht on 23 and 24 March.
The Council agreed to take for its agenda—(1) The economic and social situation and medium-term perspectives; (2) Relations with industrialised countries; (3) The North-South dialogue; (4) The seat of the institutions; and (5) Political co-operation items including, in particular, Afghanistan, Middle East, the Lebanon and Poland.
At the end of the meeting the Dutch Presidency issued a summary of the conclusions, in accordance with the normal practice. I have arranged to have copies of this summary placed in the Library, for the information of Deputies.
The Council convened in the face of a sombre outlook for the Community economy. The paper submitted by the Commission brought out that the current recession is much deeper, wider and more persistent than had been anticipated. For the Community as a whole the most recent Commission forecasts suggest that the upturn in activity may be delayed until the third quarter of this year, much later than previously expected. The year-on-year change in GDP for the Community for 1981 has been revised down from an increase of 0.6 per cent to a decline of the same dimension. While some slowdown in consumer prices is foreseen, the current balance of payments outturn could be slightly worse than the high deficit recorded in 1980. One feature that was highlighted in the Commission document was the need for a concerted reaction to the very high and volatile interest rates prevailing in the United States and to the appreciation of the exchange rates of the dollar and yen.
The major Irish concerns at the Council related to employment and agriculture.
As Deputies will be aware, the number of unemployed in the Community now exceeds 8,500,000 and is still rising. This is not a phenomenon confined to any one country or even to the Community. The current recession affects every country in the industrialised world.
My approach to the Council was that, with unemployment at its current level and with the further deterioration projected for the Community as a whole, it was inconceivable that Europe's leaders should adopt a passive and even fatalistic attitude. It was unacceptable that an Economic Community should make no attempt to conduct a policy of economic management. I stressed that, if constant references to Community solidarity had any real meaning, it should manifest itself in relation to current economic difficulties. Recessionary tendencies in one country spill over into the others with a cumulative effect and only a combination of effort can counteract this process.
It must also be remembered that national governments have by treaty conferred on the Community institutions certain powers which, in consequence, they themselves cannot exercise.
This division could have the effect, unless action is taken, of restricting the power of governments and the Community to react to economic circumstances. It is imperative to ensure that this does not happen and that measures taken at national level to counteract unemployment or other economic evils are matched by compatible and parallel action at Community level. Just as recession in one country affects others, so the consequences of recovery and growth in one economy help others. The essential aim of economic policy now is to get back on to the path of real growth and to increase employment.
I wish to direct the attention of the House to the important declaration in the Presidency conclusions that the Council in Maastricht was agreed that the fight against the evil of unemployment should be conducted not only by the member states but also at Community level and that the Community must be involved in limiting the effects of recession and bringing about the return of sustained economic growth and satisfactory levels of employment. There is also the important decision to the effect that a contribution to recovery can be made by ensuring that the existing funds and financial mechanisms contribute as much as possible to the reduction of unemployment.
The problems facing the European economies in achieving growth are clearly identifiable.
The first is the high and fluctuating level of interest rates, which makes decisions on productive investment difficult. This is not a problem for any one country but requires international attention at the highest level.
The second obstacle is the level of energy prices. The cost of imported fuel is now a major factor in the western recession. For us the cost of oil has risen from just over £70 million in the early seventies to a figure estimated this year to be of the order of £1 billion. This represents a real and irrecoverable transfer of resources. There is no way we can escape its consequences at present, but we can mollify them through vigorous and concerted policies for energy conservation and substitution. The Council in Maastricht recorded their view that a reduction in dependence on imported oil and the use of alternative fuels are vital to employment and the balance of payments.
The third structural obstacle to the improvement of employment lies in the area of incomes. We had before us advice from the Commission that the expected reduction of employment in 1981 could be corrected progressively with the recovery in the second half of the year. They say that the speed of this recovery will depend on the response of the social partners to the need for higher investment and structural change, and that defensive measures and subsidies would impede the progress of re-allocation as much as aggressive wage policies. With little productivity growth and further losses in 1981 on the terms of trade, they see almost no scope for significant real income gains in the Community.
In the course of my discussions with other Heads of Government I have urged that, apart from the general need to concert Community policies and instruments, there are a number of specific proposals which would need to be put into effect.
The first is to encourage increased investment to improve the structural capacity of our economies, both to give direct employment and to create the capacity for future growth. In our conditions, with 50 per cent of the Community average GDP per capita, the need for this strategy is particularly pressing. Our economy needs large investment, new productive capacity and essential infrastructure if it is to improve in the medium and long term its relative efficiency and the standard of living of our people within the Community. Deputies will note that the Presidency conclusions accept the need for structural reinforcement of the European economy through cost restraint and a rise in productive investment and productivity. This is an endorsement of the Government's policy, reflected in the Investment Plan for 1981, of improving our productive capacity and economic infrastructure so as to avail more fully of growth possibilities as international economic activity increases.
We have been making the case that there is a need to expand the activity of the Social Fund to meet the special needs of young people in the present restricted labour market. Increased education and training, particularly in technological skills, will reduce pressure on the labour market and provide young people with greater employment opportunities as economic activity expands. Deputies will note that the conclusions indicate that, in ensuring that the existing funds and financial mechanisms contribute to the reduction of unemployment, particular attention should be given to the possibilities of providing advanced technological training and education for youth.
We have also stressed the need to protect and preserve, in the present abnormal but temporary recession, jobs in industries whose viability in more normal market conditions is proven. The industrial and competition policies of the Community have an obvious and powerful role to play here.
I suggested also that it was for the Community to promote, in consultation with the social partners, the technological and innovative development of industry. The conclusions of the Council endorsed this approach and called for co-ordinated efforts to foster the development of high technology and innovative enterprises.
The conclusions refer to the proposed joint Council of Ministers of Economic Affairs, Finance and Social Affairs to consider general economic and social problems and, in particular, unemployment. The Council stressed its conviction that a thorough preparation of such a Council is of the highest importance.
An important overall conclusion was that in the present economic situation intensive consultation with the social partners is of vital importance. As I have stated here many times, continuing and intensive consultation with the social partners in dealing with the economic situation is a fundamental policy of the Government.
The discussion on a Common Fisheries Policy was disappointing in that no conclusions were reached. The outstanding problems seem to be disproportionate to the need to develop this policy, in the interests of fishermen generally and the cohesion of the Community. It was agreed in the end that there should be a further attempt to settle the outstanding matters and that a meeting of Fishery Ministers should be held tomorrow, Friday.
Our concern with agriculture and the effect of recession on farm incomes throughout the Community, and, in particular, in our own country, are well known. What is happening in agriculture is aggravating the Community's greatest failure to date — its continuing inability to reduce the serious regional imbalances within its borders. This failure has created doubt in some minds as to the political will of Europe to progress towards its fundamental aim of closer union.
Conscious of the serious fall in farm incomes in many of the member states the Council, in an important and positive conclusion, requested Ministers of Agriculture to continue and intensify their discussions on the proposals on agricultural prices and economies for 1981-82 with the will to reach agreement by 1 April. It is urgently necessary that they should comply with this directive.
Now that the Customs Union is complete and with good progress on the common commercial policy the basic defect manifesting itself is the limited resources of the budget. It is surely unrealistic to expect the budget, amounting as it does to less than 1 per cent of the GNP of the member states, to make any significant impression on our problems. Even less can it be expected that the budget, within its present limits, can meet the inevitable further demands on its resources which will follow enlargement.
We would view with the utmost concern any attempt to dismantle the achievements of the Community by undermining the Common Agricultural Policy. The CAP is enshrined in the Treaty itself, and currently protects the livelihood of eight million farmers and farm workers who are an important force for social, economic and, hence, political stability throughout the Community.
At the same time, we accept that there are certain products under the CAP which have run into a situation involving both cost and market difficulties. Solutions to these difficulties must be sought product by product and not by way of attempting to impose a single rigid formula which will inevitably not be appropriate for the very different problems that present themselves. In principle, we believe that a solution to the present problems of the CAP must meet a number of conditions:—
(1) it must be in conformity with Article 39 of the Treaty and with the established principles of market unity, financial solidarity and community preference;
(2) it must not be disproportionate, in scope or in duration, to the real problems of the individual product sectors; there should be no permanent, institutionalised co-responsibility system;
(3) it must not add to the problems of farmers who are already in difficulties; in operating the policy the Community must have due regard to the need to protect farm incomes and in particular to take account of the effect of rising costs of production on farmers;
(4) it must not carry risks of deterioration in the general economic situation of member states particularly as regards employment;
(5) it must not act against the overall objective of regional convergence in the Community, and in particular it must not prevent member states whose productivity in particular sectors is substantially below Community level from reaching that level; and
(6) it must, as regards exports, respect the Community's role as a major agricultural exporter, and, as regards imports, ensure that a fair share of the necessary burden is borne by third countries whose supplies to the Community also contribute to the difficulties.
We also support the reduction and ultimate elimination of MCAs which act against a fundamental principle of the Community in the distortions they cause in the system of free trade within its borders.
I mention these principles now because they are relevant to the examination being conducted by the Commission under the mandate of 30 May last of the problems arising from the settlement of the British budgetary difficulties.
The Council also decided that the location of the Community institutions should remain as they are.
Discussions in the political co-operation framework focussed mainly on East-West relations, in particular, the situation in Poland. We talked about Middle East questions, including difficulties facing UNIFIL in Southern Lebanon. In addition, the European Council provided a useful opportunity to review relations between the Community and the new US administration.
On Poland, we reaffirmed the position stated at the last meeting of the European Council in Luxembourg on 2 December 1980. We stressed that the Polish people should be free to face their internal problems in a peaceful manner and without outside interference. Any other attitude would have very serious consequences not only for Poland but for the world. We also indicated our readiness to continue to give economic support to Poland.
The Council underlined that the problem of Afghanistan remains a threat to the stability of relations in the region and worldwide. We once again stated the requirements for a political solution and welcomed the UN Resolution of 20 November 1980 and the proposal put forward by France as initiatives worthy of support.
The Council heard an interim report by the Netherlands Foreign Minister on the satisfactory results of his Middle East mission which is aimed at a comprehensive, just and durable settlement of the Arab-Israeli conflict. He will continue his contacts with the various parties concerned and we will consider the matter again at the next meeting of the Council at the end of June.
As regards the Lebanon, the Council gave strong support to the efforts of the UN Security Council to ensure that obstacles will not be placed in the way of UNIFIL in the full discharge of its mandate in Southern Lebanon. As Deputies will be aware, three soldiers of the Nigerian UNIFIL contingent were killed in a recent incident and it is important that effective action be taken to avoid a repetition of such attacks.
As regards the North/South dialogue, the European Council stressed and reconfirmed the advantage of opening concrete negotiations between the industrialised and the developing countries with regard to serious international economic problems. With an eye to the international conferences foreseen, we instructed the General Affairs Council to examine the Commission proposals and to report to us at our next meeting in June. That meeting will, of course, precede the meeting of the World or Western Economies Summit in Ottawa and accordingly will provide a timely opportunity for finalising the guidelines for the Community's participation in the Summit meeting.
The Ottawa gathering will in turn facilitate an exchange of views with the United States, Japan and Canada. As regards the reference in the Maastricht conclusions to forthcoming international conferences, there are a number of these but attention is principally focussed on the Summit Conference on the North/South dialogue which is to be held in Mexico next October. This will be an event of the highest importance in the context of this dialogue which the Government believe must be pursued on a consistent and equitable basis.
On political relations between the Community and the United States, there is satisfaction with the expressed intention of the new US administration to pursue a consistent policy and to consult closely with its friends in Europe.
In essence, I believe that in spite of all the difficulties and in particular the disappointment over fish, the Maastricht Council was a useful meeting. There were a number of important conclusions. The meeting was well ordered and, apart from the discussion on fish, dealt in a businesslike and positive way with all items before it. Our thanks are due to the Presidency for this. The decisions on the economic and social situation, particularly in the recognition of unemployment as a Community problem, are valuable in the specific nature of the recommendations they make for dealing with the fundamental economic issues and the recession facing the industrialised world today.