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.