I propose, a Cheann Comhairle, to make a statement on the European Council which I attended in Athens on 4, 5 and 6 December, accompanied by the Minister for Foreign Affairs, Deputy Peter Barry. The Minister for Agriculture, Deputy Austin Deasy, also attended in Athens to assist in the deliberations at the meeting. Deputies know by now the outcome of the meeting. There are no Presidency conclusions. I propose to deal only in outline with the subjects we covered.
At the outset these were summarised by the Presidency under the headings:
(1) rationalisation of agriculture, including milk, cereals, MCAs and other problems;
(2) structural funds, including questions of efficiency, increasing resources, enlargement of the Community with special reference to Mediterranean problems; and
(3) new actions including action in relation to research, technological innovation, esprit, fiscal discipline and other questions.
Political questions were also mentioned, but again, no conclusions were adopted by the Council.
The issues the Heads of State and Government faced in Athens were without precedent in their range, complexity and the depth of concern — even passion — which one aspect or another evoked among the different member states. Many of these problems were also closely inter-linked, with the result that a solution in one area automatically required a balancing solution or change in another area. For example, an increase in resources for the Community as a whole is of paramount importance, but this increase was held by some to be contingent on enlargement to include Spain and Portugal by an early date which was to be agreed, and by others on significant savings being achieved in the agriculture sector.
The present balance between Community expenditure and receipts was a matter of concern for many countries, including in particular, the United Kingdom. There was widespread consensus on the need to achieve a better degree of budgetary discipline. This in turn involved attitudes to budgetary procedure and to agriculture on which a great part of the Community budget is spent. In fact, in view of the budgetary constraints, Commission proposals before the Community were designed to achieve savings on agriculture of some £1,800 million in 1984-85. These are all issues which obviously are of great importance to Ireland as to the other member states.
The Community consumption of milk and milk products is estimated at the equivalent of something over 80 million tonnes and production at about 103 million tonnes. Management and disposal of this surplus will cost the Community over £3,000 million this year and if trends of recent years continue, the surplus and cost will continue to grow. We have always recognised the stresses and distortions which this imbalance is causing — in fact Ireland agreed two years ago to the concept of production thresholds — but equally we have emphasised the importance of a solution which takes into account the legitimate interests of the various member states.
Milk in Ireland is responsible uniquely for some nine per cent of GNP. The direct importance of milk output to our economy is three times greater than in any other member state. For historical reasons — the effective limitation of access for Irish milk to the British market in which prices were at a level half or less than those in other European markets — our milk sector was prevented in the years before 1973 from realising its potential and achieving levels of development comparable to those attained in other regions of the Community with similar climate and soil conditions.
The opportunity to get away from these deadening constraints was one of the strongest reasons that the Irish people opted so overwhelmingly to join the Community. To deal with the obvious and growing problems of surpluses, we suggested in the current negotiations action in areas which contribute to milk surpluses in an artificial way, such as the use of cereal substitutes by large-scale intensive units, MCAs, competition from oils and fats, national measures distorting competition and concessionary imports, as well as an approach that would achieve a better balance in the market and finance the disposal of remaining surpluses.
What Ireland did not want, indeed would find unacceptable, was and is the proposal for a super-levy on production above a fixed quota, which as enunciated and developed, would have taxed punitively here and in other countries increases in production over 1981 levels. In our view, this proposal contradicts a basic Community principle of free trade within a common market. It would institutionalise a form of protectionism as between member states and would have placed an unjust and totally disproportionate burden on Ireland in a way that would have prejudiced a most vital national interest. The proposal was, therefore, clearly unacceptable to the Irish Government.
The scale of the challenge was such that it was imperative that special measures be taken to apprise the other member states of the crisis being created for us. I, therefore, undertook, accompanied on many occasions by the Minister for Foreign Affairs, a programme of meetings and visits, unparalleled in their range and intensity since Ireland joined the Community over ten years ago.
First, at the beginning of November, I met Mr. Papandreou in Athens, in his capacity both as President in office of the Council and as Greek Prime Minister. On 6 November, I met the British Prime Minister, Mrs. Thatcher, at Chequers for discussions not only on Anglo-Irish relations but also on the Athens Council and on Irish views on the agricultural proposals. Last Saturday week, in Brussels, I had meetings with the Dutch Prime Minister, Mr. Lubbers, the Prime Minister of Luxembourg, Mr. Werner, six of the Commissioners who are members of the Christian Democratic Party and the Commission President, M. Thorn.
On the following Monday, in Copenhagen, I met the Danish Prime Minister, Mr. Schluter. The following Thursday I had a prolonged discussion in Bonn with Chancellor Kohl, following which I travelled to Paris for a meeting with President Mitterand. After this, the Minister and I went to Rome where we had discussions with Mr. Craxi who is President of the Italian Council of Ministers.
During these meetings, each of us had the opportunity to discuss our major concerns and preoccupations. I explained the disastrous effects the super-levy would have not only on Irish agriculture but on the whole Irish economy, and I made no secret of the depth and intensity of Irish feelings about the proposal.
In the event it was found impossible at Athens to reach agreement on a whole range of important issues which involved many conflicting interests among the different countries.
In so far as the super-levy was concerned, various proposals were made at different stages that would have provided for exemption in Ireland's case up to levels of production which eventually attained a figure of 10 per cent above the current year's output. We made clear our opposition to the limitations contained in each of those proposals. I have to add that against the background of the large surpluses overhanging the market even these limited, and for us unacceptable, proposals were vigorously opposed by a number of countries as not being capable of being explained to their farmers, whose output would be cut. This and the exhaustion of the Community's revenues, to which I will be turning shortly, emphasises just how critical are the problems for Ireland created by the present milk surplus situation and the current paralysis in the Community arising from both financial and institutional constraints.
At the Council, I expressed recognition of the effort made by the Presidency to meet our position and my gratitude for the understanding shown by a number of member states for our special difficulties. But I pointed out that even the final proposal put forward in Athens, assuming it was intended to be cumulative, would have done no more than reduce the impact of the proposed market distortion on our national economy at the end of the period from five times the impact of the budgetary imbalance on the British economy to two-and-a-half times that impact.
I said that I hoped my colleagues would understand why this remained unacceptable to us, though some seemed still to have difficulty in understanding the reality of the impact on our economy. I also emphasised at the Council that we have no intention of abusing the exemption and would not seek to increase milk output by more than the normal increase that would move us gradually towards the share of the total market which under normal competitive conditions we would have attained long since but for the external constraints imposed on us until 1973.
A problem at least equal in importance to the proposals for changes in the Common Agricultural Policy arises from the exhaustion of the revenues of the Community. Expenditure from the budget is financed by contributions collected in member countries under the "own resources system". This provides that member states should pay over to the Community the proceeds of:
(1) customs duties on imports subject to the common external tariff,
(2) agricultural import levies, and
(3) up to 1 per cent of VAT on a standardised tax base.
Community policies and expenditures have developed to a point where these sources of revenue no longer suffice. This has given rise to concern on the part of many member states with the linked problems of ensuring that the Community is so financed that it can survive and develop; ensuring that this financing is provided in a way which is disciplined and controlled; and ensuring also that the burdens are shared fairly by the different member states.
We discussed various proposals for increasing the VAT limit but no agreement was reached. The earliest year on which the new limit could have come into effect is 1986.
On budgetary discipline, the Presidency put forward a proposal whereby the Council would set out at the start of each budget exercise its position on the maximum amount of expenditure which it would intend to adopt. It was made clear, however, and this was a point which I stressed, that the budgetary powers of the European Parliament should not be diminished or interfered with and that the Commission's right of initiative in budgetary matters should be respected. There was also greater emphasis on the multi-annual programming of budgetary expenditure and on closer monitoring of the execution of the budget.
However, all of these individual issues pale into insignificance in comparison with the implications of a continuing failure to reach accord on the whole range of issues which came before the Athens Council. This failure can only damage the place of the Community in the world. Its impact on the ordinary working of the Community, in its planning, and its sense of purpose and confidence and even in its ordinary day-to-day working must be extremely serious. It is evident, however, from the difficulties which virtually every member state had with the several proposals before us — difficulties expressed formally at the Council — that the problems now facing us are numerous and are likely to be very hard to resolve.
I want to stress now my deep regret at the failure of this European Council. So far as our own problem is concerned, no one could have been under any illusion about the inherent unacceptability for Ireland of a proposal which, within the relatively short period envisaged for the new milk régime, would have hit Ireland five times as hard as the UK would be affected by the budgetary imbalance. I cannot help feeling that the fundamental error has been in failing to tackle a market problem by market mechanisms in good time — and then attempting, belatedly, to stop the resultant rot by an essentially arbitrary mechanism, incompatible with the most fundamental market principles of the Community, namely, quantitative restrictions under the guise of a super-levy. Losses which all — ourselves included — have been willing to accept in different areas of their national markets for goods and services as a result of the operation of the competitive system within the Community become much more difficult when countries are asked to decide upon them by edict.
We seek no more — but will certainly accept no less — than the share of the Community market for milk that would be produced by normal market processes through the operation of comparative advantage, within a total volume of production that is contained within reasonable limits by the operation of the price mechanism. We have accepted all the industrial losses that membership of the Community by a small newly-industrialised economy has imposed — and the other member states have already secured the benefits of this process, with a large increase in their share of our domestic market for industrial goods. It is now proposed to deprive us, by an arbitrary anti-market mechanism, of the benefits upon which virtually the entire economic balance of Community membership for Ireland was based. Nothing could be more profoundly alien to the basic concept of a market-based European Community, to which we wholeheartedly adhered in 1973.
As someone who demonstrated his profound commitment to the Community as far back as the fifties, long before we joined, and who gave full expression to this commitment in the campaign for membership in our 1972 referendum, I could not defend, nor would I attempt to do so, a deformation of the Community. Such a deformation would be involved if there were to be an arbitrary distortion of the market system which would prevent Ireland from securing its natural share of the market for milk which it could today enjoy but for the artificially distorting effects on us of policies followed in other countries in the years before 1973.
The contrast with the Stuttgart Council could not have been sharper. In the declaration on that Council the Heads of State and of Government spoke of taking — and I quote —"broad action to ensure the relaunch of the European Community". We decided, in pursuit of this relaunching, to put in train a major negotiation designed — and again I quote —"to provide a solid basis for the further dynamic development of the Community over the remainder of the present decade".
Given these hopes and intentions the lack of success in Athens was a major disappointment; but the futility of retrospection is only too obvious. We could spend hours here in talking about what was or what might have been: that would do neither the country nor anyone else any good. The best that can be said is that Athens has clarified the issues the Community must solve if it is to survive.
While in Athens the British Prime Minister and I had the opportunity for a brief exchange of views on matters of mutual concern. In accordance with the practice which has developed in relation to these meetings — which are short and informal — I do not propose to go into the detail of what was discussed.
Before I conclude I would like to pay tribute to the preparations for the Council by the Greek Presidency and in particular Mr. Varfis who chaired both the Special Council and the special preparatory group. I would also like to commend the handling of the European Council in Athens by the Greek Prime Minister, Mr. Papandreou, to whose graciousness and hospitality I would like to pay a particular tribute.
Finally, let me wish the French Presidency every goodwill and every hope for success in the most difficult task which lies ahead of them. It is in the interests of not just Ireland and France — but also of every member state — that they should succeed, so that the Community can emerge from this most debilitating crisis.
