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Dáil Éireann debate -
Wednesday, 2 Dec 1981

Vol. 331 No. 5

European Council Meeting: Statement By Taoiseach.

With the permission of the Ceann Comhairle, I propose to make a statement on the European Council which I attended, with the Minister for Foreign Affairs, in London, on 26 and 27 November. The Minister for Agriculture also came to London with us to advise and assist.

The items for discussion by the Council were:— (1) the Mandate of 30th May, 1980; (2) the economic and social situation; (3) European Union, including the German/Italian proposals; (4) Enlargement of the Community; and (5) Political Co-operation items including an account of the discussions which the German Chancellor had with President Brezhnev, President Reagan's disarmament proposals, as enunciated in his speech of 18 November, the CSCE negotiations in Madrid and the situations in Poland and Afghanistan.

There are presidency notes or conclusions on these items which, in accordance with normal practice, I have had laid before both Houses, for the record, including a presidency revision on one point which came in at noon yesterday.

Before I go on to describe in detail the discussions at the Council, I would like to make two points in relation to it which have an immediate and vital bearing on this country. The first concerns the assessment by the Commission of the economic prospects for the coming year. In its report the Commission highlighted the fact that unemployment in the Community is still rising very fast with the average rate at Community level now above 8 per cent and that the only way out of our difficulties is to pursue a disciplined fiscal and monetary strategy while, at the same time, limiting increases in incomes and wage costs. This will, they say, lead to an improvement in employment prospects, a fall in interest rates and, therefore, a rise in investment on which economic growth and employment depend. I need not stress the importance to this country of following the Commission guidelines in relation to both budgetary and incomes policies if we are to achieve the levels of growth necessary to reduce, if not to solve, our basic economic problems.

A second major concern at the Council was the future of the CAP. Much of the work of the Community in recent years has been concerned with this policy which has come in for considerable criticism. The operation of the policy is vital to Ireland where about 20 per cent of employment depends directly on agriculture which is also responsible for about 14 per cent of gross national product — indeed out relative dependence on agriculture is one of the highest in the Community. Farmers' incomes in real terms here have fallen by about 50 per cent since 1978 and are now lower than at the time of our accession to the Community. These considerations are of overwhelming importance in determining Irish attitudes to proposals for changes in the CAP.

The debate on the mandate, which has profound implications for the future of the Community, centred around the three chapters in the Presidency's document dealing with: — (1) Development of policies other than the CAP; (2) The Common Agricultural Policy itself; and (3) Budgetary problems. In an attempt to establish the areas of agreement, our discussions were very lengthy and detailed to a point which I feel was probably unique for a European Council.

During these discussions I pointed to the fact that we were now engaged in a major review of Community policies, initiated on 30 May 1980, with the primary aim of dealing with what were conceived to be unacceptable situations for one or more member states. I emphasised that on the basis of certain proposals before the Council there was a danger that it might find itself seeking a solution of what was being called unacceptable budgetary situations — a concept which I believe to be fundamentally alien to the entire philosophy of the Community — at the risk, even the certainty, of creating situations which would be unacceptable to other member states through the distortion and emasculation of basic established Community policies, primarily the CAP.

I said that what was all the more regrettable was that there is now no objective reason to take any major new initiative to reform that policy. The Community's agricultural policy has gone a considerable distance towards achieving its basic objectives. It has provided the peoples of the Community with the essential security of food supplies at a cost no greater than that incurred by other major countries and almost certainly at less cost to member states than if they had to support their agricultural individually on a national basis. The policy has benefited producers and consumers alike. The prudence of Community pricing policies and the stringency of market management in recent years have had quite a remarkable effect on the percentage of the Community budget taken by agriculture which, as defined for budgetary purposes, has fallen from 74 per cent in 1977 to 63 per cent in 1981. But this figure of 63 per cent is, itself, unjustifiably inflated. Excluding concessionary trade items which, in my view, represent derogations from, rather than part of, the CAP, that percentage falls to approximately 55 per cent; and if food aid and MCAs, which are not in logic part of the CAP or properly chargeable to funds for agriculture are excluded, the figure is still lower. In this connection, I emphasised that the total cost of the CAP is about 0.5 per cent of Community GDP.

The management of the CAP over the last few years has gone so far towards attaining the objective of restraining expenditure that it is already creating an unacceptable situation for Ireland. Farming incomes have fallen so drastically, I pointed out to the Council, that Irish farmers are quite unable to see how the Treaty objective of guaranteeing a fair standard of living to farmers is currently being achieved.

I added that against the background of an increasing world population and the increased opportunities for agriculture exports which that will provide, as recently pointed out by, for example, the US Department of Agriculture and, indeed the UK Minister for Agriculture, Mr. Walker, it would not make good sense to weaken further and perhaps fatally the basis of the Community's continued capacity to contribute to an expanding world trade in agricultural products.

It is a long established part of the argumentation on the mandate that the benefits and costs of Community membership cannot be measured by reference to the budget alone. To speak only of Ireland, I remarked how on accession to the Community we agreed to pay a heavy price in the industrial sector on the basis of an assurance of equivalent benefits in agriculture on the same basis of comparative advantage. Ireland is in all sectors a developing economy. We have a particularly great dependence on agriculture, the output of which for historical reasons has been held down to an artificially low level for a century and more. The only way in which our farmers can move forward by their own efforts is through their being allowed the capacity to improve their productivity. It is for this central reason, I said, that we would be quite unable to accept any artificial limitation on agricultural production whether sought through limitations on agricultural expenditure or by the modulation of guarantees through production targets. I emphasised, in particular, our total opposition to the concept of a super-levy in the milk sector.

In short then, my fundamental approach in our discussions on the CAP was to oppose any measures which would work against the already dire income situation of our farmers and impede the undoubted development potential of our agriculture sector.

The debate on the other two chapters of the mandate was less detailed and less protracted than that on the CAP. In our discussions on chapter 1, we virtually reached agreement on the continuation and expansion of the new Community loan instrument and there was acceptance of the need to widen the criteria in relation to it in order to include infrastructure. I drew particular attention to the need for a reduction in the matching finance from national exchequers to attract such loans.

On the Regional Fund, I indicated our acceptance of the proposal that the quota section should be concentrated in the areas of greatest need of the less-prosperous member states but that we would have grave reservations on the effect on the Community's Regional Policy if any member state were completely excluded from benefiting from it. I urged that the question of the size and application of the non-quota section of the fund should be left over for consideration in the context of the forthcoming review of the fund. In any case, I indicated that the resources of this section should give preference to the less-prosperous member states particularly if it were decided to increase the relative size of this section of the fund.

Finally, I added that in a situation where disparities in economic performance between the regions of the Community are growing, the Community should lay particular emphasis on the need to take full account of the regional aspects in the development and implementation of Community policies and on the need for co-ordination of all policies towards this end.

On the Social Fund, I indicated our view that the areas of greatest need as currently designated should continue to have first priority in the allocation of the fund's resources. On the subjects of innovation, research and development, I emphasised the need to improve technological training and facilities which are essential to effective Community policies in these areas.

In relation to chapter 3, dealing with budgetary questions, we found it impossible to reach agreement, particularly in relation to the period and the principles of budgetary rebates in favour of the United Kingdom and limitation of budgetary contributions in the case of the German Federal Republic.

In view of the difficulties on the CAP and the budget, the broad area of agreement which we reached on chapter 1 is, as I have said, provisional, for we had agreed at the start of our discussions that any agreement on any one chapter would depend upon agreement on the other two chapters. Although we did reach a considerable measure of understanding after many hours discussions, areas of disagreement remained centred on the following four issues: — milk problem; guidelines on agricultural expenditure; Mediterranean agriculture and the budget problem.

We finally agreed that Foreign Ministers should meet informally, if possible, before Christmas, but if not, in January, to deal with these outstanding issues and to make recommendations to the heads of government, which it was hoped might be able to be approved without a further meeting. If a political solution is found, the Council of Ministers would then adopt the necessary formal decisions. Attendance at this special informal meeting will be restricted to Foreign Ministers plus two others.

The Council endorsed the conclusions of Vice-President Ortoli on the basis of a Commission report on the economic and social situation, save with one or two modifications, namely, the need to cut production and distribution costs, especially unit labour costs, and a need for special attention to be given to youth unemployment and the provision of more training for school leavers. During these discussions I pointed to the desirability of some easement of the restrictive stance in economic policy at present followed by some member states whose financial and economic situation is less constrained and to the importance of Community solidarity in assisting member states in their unemployment strategies.

For this purpose I urged the fuller, more concentrated and more flexible use of the Community's means of action. What I had in mind here was the fact that certain member states, such as Ireland, who have the most severe unemployment problems are, by and large, those with the most limited financial resources to resolve them. I therefore argued the case not only for an increase in but also for modification of certain operating rules of the Community's financial instruments so as to broaden their scope of operation and facilitate governments in using these instruments.

The level of international interest rates is clearly a critical factor for the Community's future prospects and I agreed with the Commission that the Community should commit itself to seeking organised monetary co-operation with its main partners and in this context suggested that member states might organise themselves more effectively and unitedly through the Community institutions.

The European Monetary System has been a helpful force towards stability since it came into operation. As the system is approaching its third anniversary I felt it essential that some further progress should be made in developing it. I, therefore, expressed our interest in discussing the matter in more depth at our next meeting, where the Commission will present a review of the system and an outline of its future prospects. I added that I felt we all looked forward to the time when the UK may be able to join the system.

Although the Council confined itself to a procedural decision on the recent German-Italian proposals on European union and did not discuss the substance of the proposals, it accepted the point, which we had emphasised, that stronger economic integration should proceed hand-in-hand with political development. The Foreign Minister were asked to examine and clarify the German-Italian proposals and to report back to a future meeting of the European Council.

The Council confirmed its political commitment to Community enlargement and emphasised the Community's determination to bring the accession negotiations with Portugal and Spain to a successful conclusion.

As is usual, the European Council also considered international political developments. Chancellor Schmidt of the Federal Republic of Germany gave the Heads of State and of Governments an account of his important meeting last week in Bonn with Soviet President Brezhnev. The Council emphasised the political significance of this meeting at a critical time in East-West relations and welcomed the presentation by Chancellor Schmidt on détente, co-operation and disarmament. Progress towards major arms control and disarmament will depend in large part on the climate in which the current arms limitation talks are conducted.

I am sure the House will join with me in recognising that over the years Chancellor Schmidt has made a major personal contribution towards securing a favourable climate for serious negotiaions between East and West. That contribution was obviously reflected most recently both by President Reagan's speech on 18 November and by President Brezhnev's statements in Bonn last week. The Chancellor's key role in promoting dialogue between the super-powers will be a continuing one in the months ahead and is widely appreciated on all sides. I fully share his view on the importance of dialogue and communication between East and West and on the urgent need for a result from the current disarmament negotiations that will lead to greater security for all parts of Europe through mutual reductions in nuclear and conventional forces.

The Council also considered the present state of negotiations at the CSCE follow-up meeting in Madrid. The Council emphasised its desire for a substantive and balanced result by the end of the year, including agreement on a precise mandate so that a Conference on Disarmament in Europe can negotiate stronger confidence-building measures in the whole of Europe. It is our hope that other participants will show the same positive spirit and seriousness in search of an agreement.

The Council took note of Poland's continuing need for assistance including debt rescheduling and provision of new credits, in support of the efforts of the Polish people to promote recovery of their national economy. The Community reaffirmed its willingness to help, within the means available, in co-operation with other countries.

The Council noted that the continuing Soviet intervention in Afghanistan was immensely damaging to international trust and confidence and pointed to its proposals of 30 June last as a reasonable and practical approach towards a solution.

The Council did not reach many concrete conclusions. This was due, in part, to the difficulty and technical detail of the subjects under discussion, where there were vital national interests at stake. Our discussions were very frank and open right through and this enabled all of us, I think, to obtain an understanding of the difficulties others face. This progress should, I hope, enable the remaining differences to be more easily settled. What is essential in the whole process — apart from the details of any policy — is that the Community should retain its solidarity and its capacity to grow and develop. That objective must take precedence over individual policies, whatever their importance.

Before concluding I would like to take this opportunity of paying tribute to the efficiency with which the arrangements for the Council were made and to the hospitality and chairmanship of the lady who was our host. The depth of understanding which was reached about our various positions and the situation of the Community is due in no small amount to the exceptional patience and capability she showed in presiding over our meeting.

The full extent of the failure of the European Council meeting in London on which the Taoiseach has just reported can be gauged from the fact that for the first time no agreed statement on conclusions was issued on the central issues discussed.

Let me make it clear that I do not propose to try to attach blame for the failure of this European Council meeting on the Taoiseach, though as the relevant Dáil Debates will show he would certainly have sought to do so were our positions reversed. At the same time I cannot share his complacency about the outcome of the meeting or regard it as an achievement that at least bad decisions were avoided.

It appears that the Council's discussions were allowed to be dominated entirely by the budgetary problems and by the attack on the common agricultural policy to the virtual exclusion of other vital issues and in particular the crisis level of unemployment throughout the Community. The unhealthy obsession with limited aspects of the Community's affairs over the last three years is worrying and a major cause of disillusionment with the EEC in the member countries.

The effect of this preoccupied bickering over what are relatively minor matters having regard to the size of the Community's total GDP is damaging, and is nothing to be complacent about. It is salutary to recall that had the founding partners of the Community approached their task with the same limited outlook there would never have been a Community.

I would like, first, to turn to matters that ought to have been discussed in depth at this European Council meeting. I see it as totally unreal that any European Council meeting at this time should have failed to devote at least a substantial amount of its time to the discussion of the unemployment crisis in the Community where the number out of work is eight million and is still rising. At every European Council I attended I sought to focus attention on this reality, but apparently this was not a major issue in London.

I draw the Taoiseach's attention to the conclusions of the European Council at Maastricht in March 1981. For the first time we succeeded in having it clearly acknowledged that unemployment was not just a matter which should be left to individual national Governments to deal with in their own way, but that it was a Community problem and as such Community resources and institutions should be mobilised to tackle it.

The following is the relevant quotation from the Maastricht Communiqué:

The high and rising rate of unemployment especially among youth is a cause of deep concern to the European Council. It was agreed that the fight against this evil should be conducted not only by the member states but also at the Community level.

The Community can further contribute to economic recovery by fully utilising existing mechanisms for policy co-ordination and by ensuring that the existing funds and financing mechanisms contribute as much as possible to agreed social and economic objectives and the reduction of unemployment. Particular attention should be given in this context to the possibilities of providing advanced technological training and education for youth.

That was the content of the Maastricht communiqué. I would like to draw the attention of the House to the contrast between that statement of that Summit and the position which emerged from the recent Summit in London.

The subjects which the Foreign Ministers have been asked to study and decide upon do not apparently include Community action to combat unemployment, despite the fact that the Commission in its report on the mandate produced a very useful paper on the subject which is relevant to our situation in Ireland. Perhaps the reason for this is that the European Council have already agreed in principle on an anaemic and perfunctory formula, which simply involves a mixture of pious aspirations and the continuation of existing Community instruments, without including any real steps, qualitative or quantitative, which would do justice to the Commission's proposals. We, of course, welcome the raising of the Ortoli Fund's borrowing capacity to 3 billion ECU's so as to increase the EIB's lending capacity, from which we have profited, but this constitutes no more than a necessary extension to an existing Community loan instrument.

The Commission in fact specifically proposed a strengthening of the Social Fund, "so as to provide at all levels, in member states the financial resources necessary to support the job creation process". They also recommend the development of "a regional perspective in job creation policy, which takes account of the need to concentrate resources and initiatives in disadvantaged regions". The Commission paper, which I have just quoted entitled "Job Creation: Priorities for Action" is a paper which is timely and constructive and which ought to have been made a major element in the Summit discussions. There has been no indication from the Taoiseach that he sought to focus attention on this crucial issue. Interestingly, among the Commission's recommendations to national governments were two which have been deliberately flouted by this Government. There is the recommendation "to develop counter-inflationary measures in a manner most likely to favour economic recovery and employment growth", which is completely contrary to this Coalition Government's pro-inflationary fiscal strategy. The other recommendation was to "establish a social consensus and the full participation of all partners concerned, in particular through dialogue with the social partners".

Moving in exactly the opposite direction this Government, when they came into office, made it clear they did not hold with national understandings but put their faith instead in the ridiculous proposal of "norms" to be prepared by a committee of economists. Thankfully, that proposal has been discarded, but as of now there is less social consensus than for a long time. The trade unions fundamentally disagree with Government economic policy and farmers and teachers, to mention some of the more obvious areas of disillusionment, are equally hostile.

The Commission paper concentrates on youth employment and the need to ensure that within five years those under the age of 18 are guaranteed education, training or work experience, and over the age of 18 are assisted to enter into the labour market. The Commission state that "increasing the possibility of intervention and the creation of a wide range of jobs for the 19 to 25 age group must be given greater emphasis". The paper from which I am quoting states:

There is a wide range of measures available to the Commission to assist the entry into the working life of this age group. The Commission would wish to consider inter alia: Selective recruitment subsidies; Forms of managing working hours; Training facilities leading to entrepreneurial activities; Assisting those schemes at present in operation in member states, whether public or private, designed to create employment.

All these suggestions by the Commission are of immense relevance to Ireland, and I cannot understand why the Taoiseach, presiding over an unemployment rate of 130,000, which is likely to rise as a direct result of Government economic policies, did not insist that real action in this field should also be carried forward for decision by the Foreign Ministers.

I turn now to a related subject, which was on the agenda of the European Council but which was also not adequately discussed, namely, the draft of the Fifth Medium-Term Economic Policy Programme. The Taoiseach has used this document very selectively to seek to demonstrate that the Commission endorses Government economic policy, notably the passage on page 3 which speaks of the need to reduce public deficits, especially those substantially larger than the average in the Community. This, of course, begs an important question: whether Government economic policy, despite its stated aims, is going to lead to any reduction in the current budget deficit. The tax package is likely, I understand, on the Government's own calculations to contribute to a current budget deficit of 9½ per cent of GNP next year, over 1½ per cent above this year's level, in the absence of severely deflationary measures.

In fact, if the Taoiseach were to study the Commission's document more closely, he would see that its criticisms of budget deficiting were particularly directed at Belgium and Italy, which have automatic wage indexation and a much more costly and elaborate social security system than we have.

The Taoiseach might profitably take to heart, and direct the attention of his Cabinet colleagues to, what was said in other parts of the Draft Economic Policy Programme. Paragraph 5.3.2. states unequivocally the following: "Increases in indirect taxation directly feed the inflationary process". If that sentence is taken in conjunction with remarks about the effects of inflation, "that inflation has taken deep roots and is a threat to our prosperity" and that "improved price stability in all Member States, and particularly in those where inflation is above average, is an essential precondition for achieving other objectives", then it must be clear to the Taoiseach how utterly irresponsible Fine Gael's election promises were and how their implementation now would put our chances of returning to growth seriously at risk.

It will be of interest to the House that the Draft Economic Policy Programme not merely endorses but preaches the high investment policies pursued by the Fianna Fáil Government both this year and last. Last year Ireland alone was able to match Japan's share of investment in GNP amounting to 32 per cent, which the Commission declares as "a significant illustration of the relative dynamism" of the Japanese and EEC economies. We put what were by our standards massive resources into energy investment so as to increase our energy independence. I would mention the coal-fired power station at Moneypoint, the gas pipeline and peat development. The Commission states that such investment must be given a particular priority. We gave it such priority.

The Commission also states that public investment in areas such as telecommunications and transport "encourages structural change and leads or complements private investment, and that such spending must be favoured". We did so, but strong evidence is now emerging which would indicate that the telecommunications investment we initiated is now being cut back. It appears that the Government and their monetarist economic advisers are poised to cut public investment, despite its spin-off effect of encouraging the private investment of which the Commission speaks. The Government should take to heart the following piece of Commission advice: "It is essential to be selective in exercising discipline, to avoid perverse effects that some spending cuts may make, such as, reductions in those investment programmes which contribute to improving economic structures and which provided jobs."

The Community makes a limited contribution to the development of infrastructure through the Regional Fund. Last year we obtained £52 million from this source, about one-sixth of what we are spending this year on energy investment alone. The Commission in its Report on the Mandate states unequivocally:

The Commission believes that major changes should be made to enhance the effectiveness of its interventions and increase its impact. There is a strong case for greater concentration of the fund's budgetary resources, which are likely to remain inadequate to cope with the development problems that will increasingly face the Community as it continues to enlarge. The section of the Regional Fund at present divided into national quotas, should be adjusted to focus even more on regions suffering severely from structural underdevelopment.

The Commission is recommending a substantial expansion of the non quota section. What has happened to all this and what has the Government done to give vigorous support to the Commission's views on this subject? It appears that the Taoiseach and Minister for Foreign Affairs are happy to be fobbed off with ritual and meaningless verbal assurances about convergence, when in fact what is taking place is increasing divergence, as the recent NESC report clearly shows. Our income per capita has dropped from about 65 per cent of the EEC average in 1973 to 61 per cent in 1981.

It would appear from a report in the British newspaper, The Guardian, of 28 November that attempts to reform the regional fund have already been abandoned. I quote from that newspaper:

The British Government conceded that regional spending in the future could be extended to the richer as well as the poorest EEC states and this cleared out of the way one of the problems in the section dealing with alternative EEC policies to agriculture.

If that represents the outcome, then it is a particularly negative and detrimental one from our point of view. Given the total inadequacy of the funding of the regional fund since its creation, it is outregeous that its funds should be allocated to rich and poor countries alike. No worthwhile convergence or even compensation for the effects of free trade can be achieved in this way. The discussions on the mandate offered a major opportunity to have this situation revised, and I am at a loss why the Taoiseach, who has always pleaded strongly for the regional fund, should have conceded our position, instead of insisting that it be carried forward for further examination by the Foreign Ministers.

I now turn to the question of the budget which was placed at the centre of the European Council's deliberations. It seems that all sense of proportion has been lost in these discussions. An obsession with net exchequer flows has crowded out appreciation of the benefits of economic integration. There is no doubt in my mind that the Community should have stuck to its position with regard to the British budgetary contribution reached in Dublin in December 1979. The blocking tactics exercised thereafter and acceded to set a very unhealthy precedent. The Taoiseach, by way of a petty comment recently, criticised me for agreeing to the solution of the British budgetary problems. But as I explained at the time, it was hardly appropriate for a substantial beneficiary country like Ireland to object when richer countries decided to end the very real and serious interruption of Community business then existing by agreeing to take on the burden.

Britain as an industrialised country with a tiny agricultural sector entered the Community on the understanding that it would be a net contributor. Its industry is in a position to benefit greatly from Community membership, and if it has failed to do so to the extent expected, that is not the fault of other member states. The Community was and is based on a trade-off between free trade and the common agricultural policy and the rules should not be permanently altered to suit the purely budgetary demands of any state. The Government must make it clear that a solution to the British problem, which consisted of repayments via abatements of this country's FEOGA receipts, would under no circumstances be acceptable to us.

There appears to have been little discussion of the desirability of raising the 1 per cent VAT limit and it is another topic in which we have a deep interest, which has not been included in the discussion for the Foreign Ministers. This limit, besides depressing agricultural incomes, makes it impossible for the Community to develop or to bring forward a more balanced range of Community policies. The opposition of the larger member states, arising completely from self-interest, may lead to a situation where disillusionment with the Community becomes widespread. If the Community has little to offer towards the solution of the major problems we all face, it will increasingly be regarded as peripheral and irrelevant.

I now turn to the subject of the most vital interest to Ireland, the common agricultural policy. Great play has been made by the Taoiseach of an entirely empty achievement with regard to the super-levy on milk. This super-levy was a non-starter, and farmers will not be taken in by hailing the outcome as a victory when, in fact, there was no contest. To my mind, there is a negative and a positive battle to be fought in the EEC over agriculture. The negative battle is to fight off potentially disastrous changes in the agricultural policy. Now that the matter is being turned over to the Foreign Ministers, with as few experts as possible, we shall be looking to our Foreign Minister to provide continued and resolute defence of our interests and of the basic principles of the common agricultural policy. There is a great onus on his shoulders now, and he can be assured of whatever political backing he may need in this respect from this side of the House.

The cost of the CAP, as a result of persistent and highly publicised British and German propaganda, has been exaggerated out of all proportion. The truth is that it forms a large part of a minimal budget. Community support for agriculture has declined to 0.4 per cent of its GDP. I notice the Taoiseach uses 0.5 per cent but it does not matter. A sizeable proportion of the agricultural budget is spent on food aid. The surpluses have largely disappeared in the last couple of years. We must oppose artificial production limits or the penalisation of production. Agricultural output, including milk output, has actually dropped in Ireland over the last two years and there is a good case for demanding the suspension of the co-responsibility levy altogether, at least until milk production in Ireland has been restored to the levels it reached two or three years ago.

The Community should recognise that it is partly responsible for the crisis in agriculture not only in Ireland but in some other countries notably Denmark, by depressing farm incomes. The Community must ensure a fair standard of living for the agricultural community and this is simply not compatible with reducing support prices towards world prices.

An Irish Government has a positive as well as a negative battle to fight in Brussels. There needs to be greater appreciation of the role agriculture plays in the economy of the Community, particularly in providing down the line employment. It does not make sense in any part of the Community to drive people off the land at a time of high unemployment. It must also be made clear that farmers are not prepared to go on producing food for the rest of the Community at prices that require that the farmers live at or below subsistence level.

I must remind the House and farmers that it was a Fianna Fáil Government that made a successful case in Brussels for special treatment for Irish farmers. This Government's case for special treatment would be greatly assisted if they were not themselves greatly contributing to inflation through their shift to indirect taxation. However, given our fixed exchange rate in the EMS and the fact that a significant differential in rates of inflation will exist for some time to come, I believe we must press specifically for a study by the Commission of the particular problems for farm incomes arising from differential rates of inflation, so that appropriate action can be taken in time for next year's farm price fixing.

There was also at this Summit, I believe, some discussion on the problems of enlargement and of the position of Greece. To my mind, the Community has not handled the second enlargement situation well. All member states are agreed on the political desirability of extending the Community, but there is a lack of generosity in the welcome being extended. The whole future of the Community is clouded, unless the wealthier member states are prepared to show more flexibility. I accept that it is not in Ireland's power greatly to influence the decisions on these matters. But what influence we have we should use to urge recognition of the special claims of the poorer states of the Community.

On the political front, there appears to have been very little time for discussion with the British Prime Minister on the situation in Northern Ireland. This was a great pity, because we might have expected the Taoiseach to use the opportunity to impress on the British Prime Minister the dangers created by current developments which pose a new direct threat to peace and stability. The overwhelming need at present is for impartial peace-keeping and the protection of the members of each section of the community from threats from whatever direction they may arise. It is somewhat discouraging that in the present tense situation, time was not found for a meeting between the Taoiseach and the British Prime Minister.

It is with a considerable sense of irony that I note that the Genscher-Colombo proposals for a European Act that would bring security and defence within the ambit of the Community were put on the agenda of the European Council. The House will recall the hysterical outburst by the Taoiseach a few weeks ago, when to everyone's surprise, he attacked Deputy Brian Lenihan in a personalised and quite immoderate fashion on the basis that Deputy Lenihan had agreed to the discussion of options other than those proposed by Ireland. This he claimed set Ireland "on a slippery slope of a highly dangerous kind", putting us under "immense pressure". The Taoiseach's position on that occasion was absurd and illogical, as I am sure he now realises.

The European Act contains proposals far more dangerous to Irish neutrality than anything contained in either of the options retained for consideration at Venlo, where Deputy Lenihan rejected the option that has now reappeared on the agenda of the European Council. In view of this, the Taoiseach owes a public apology to Deputy Lenihan for the entirely unjustified aspersions he cast on him in this House on 21 October.

Let me inform the House of some of the salient proposals in the proposed European Act. The heads of Government are asked in the preamble to express their conviction "that the security of Europe must also be guaranteed by joint action in the field of security policy which at the same time helps to maintain the common security of the partners in the Atlantic Alliance". This phraseology makes it clear that security is being used simply as a euphemism for defence. The member states are then asked to endorse as an aim "the co-ordination of security policy and the adoption of common European positions in this sphere in order to safeguard European independence, protect its vital interests and strengthen its security". The draft Act further states that for the purposes of co-ordination in matters of security, "The Council may convene in a different composition if there is a need to deal with matters of common interest in more detail". That is of course another euphemism, this time for a Council of Defence Ministers.

On this side of the House we have already expressed grave reservations about the decisions taken by the Foreign Ministers with the approval of the Irish Government in London in October, and the interpretations to which they have given rise. The Sinai peace force has been widely represented as the EEC's first military decision, but the Greek Government seems to have been the only one to oppose this Sinai force. It is significant to note that Agence Europe, the respected voice of Brussels opinion, on 2-3 November 1981, said that Mr. Papandreou's opposition could result and I quote “in a blockage of political co-operation in several important areas, and that the day after decisions had been taken to strengthen mechanisms of this co-operation, including an investigation of the problems of defence”.

I want to put on the record of this House our objection to the way in which the development of the Community is becoming increasingly unbalanced in this way, contrary to our best interests. Our Ministers and diplomats have no mandate to concede or abandon our neutrality, to which the vast majority of our population, and our young people particularly, are keenly attached.

We were all clear at the time of entry that, in the event of full political, economic and monetary union being achieved, we would not stand in the way of such a union being completed by a defence element to protect what would then be a full community of interests. This stage has nowhere near been reached. Commissioner O'Kennedy, in a speech two weeks ago in the European Parliament, referred to economic and monetary union as "a dim and distant aim". We are now witnessing increased security co-operation, while at the same time the CAP is being attacked at its foundations and there is an adamant refusal to consider an increase in the 1 per cent VAT ceiling, the only way whereby worth-while economic and social progress can be achieved. What is being sought is to reverse the entire timetable of European integration, to abandon the goal of full economic union, and to put political co-operation and defence in its place. That is not the basis on which we entered the Community, and it represents a serious reversal of thinking and approach entirely detrimental to our interests.

Both the Community and Ireland will be the losers, if the pace is forced in this manner. The Community has nothing to gain by striving to become a military bloc or a superpower, as, I am informed, former Commissioner Professor Dahrendorf argued last week in London. It already has considerable economic and political influence, much of which will be lost if it seeks to enter into power politics. Ireland's entry to the Community was of great significance, as it showed that a neutral country could be a member of the EEC. Will this no longer be the case?

It must be recognised that our standing in the world will be greatly changed if we are perceived to have become de facto members of the Atlantic Alliance and increasingly identified with NATO decisions, such as the Sinai force. Our ability to contribute to the UN will be prejudiced thereby, as also will be our dealings with the Third World and with Arab, African and Latin-American countries.

It is high time that the Taoiseach and the Minister for Foreign Affairs came out and stated, clearly and publicly, what is afoot. We want to know from them if they agree with us that we should not be committed to military entanglements by stealth and that we do not approve military decisions taken in the Community's name. When full economic and monetary union has been achieved, and when Ireland's per capita income is at least 80 per cent of the Community average and rising, instead of 61 per cent as it is today, then the question, as far as we are concerned, may be reopened. But this assumes steady progress to convergence which is conspicuously lacking today. At that stage any agreement of the type proposed would of course have to be submitted for ratification to the Irish Parliament.

Many of the ideas in the draft Act, apart from these I have mentioned, are worth serious examination, though it must be doubted after last week's experience whether attaching additional responsibilities to the European Council would improve the speed and quality of the Community's decision-making. We do not wish to enter into any military engagements so long as we are a divided country, as to do so could pose grave dangers to our internal stability. Also, as I said in March, as recorded in the Official Report, Volume 327, column 1396:

The security interests of other countries may be best served by membership of military alliances. Ours at present are best served by a policy of military neutrality.

Our political commitment is to Europe, but any military commitment by us can be only to the United Nations for peacekeeping purposes.

The vision we have of Europe is of a continent united is prosperity and peace, based on the recognition rather than the suppression of individual national identity and culture, with member states acting together for common purposes and subject to such bodies as they may choose freely to set up to arbitrate between them, in which due sensitivity will be shown to the vital interests and concerns of the smaller as well as the stronger nations. We would wish the European entity to exercise a moral, political, economic and cultural influence on the world, helping to bridge conflict and misunderstanding and using its economic strength to ease the problems caused by poverty, hunger and injustice. We seek a Europe dedicated to economic solidarity and equality between the member states and the regions, which will bring its full resources to bear on unemployment, and which will maintain the fabric of rural life by giving farmers adequate and fair incomes.

The London Summit achieved nothing in this direction but instead devoted itself to bargaining and bookkeeping. No one comes out of it with much credit. We now need decisions which will reforge the European spirit as we have known it, leading to genuine development and progress. The failures and omissions of the London European Council must be repaired, and we hope the Taoiseach and the Irish Government are determined to play their full part in that process of repair. If they are and refuse to have the Community entangled in military alignments and power blocks they can count on our support, but if they acquiesce either openly or in secret with what we see as a major subversion of the legitimate aims and purposes of the Community, they can expect our implacable opposition.

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