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By Root 2767 0

Athens — that a country’s prosperity should be taken into account in determining its net contribution. We were getting down to brass tacks. I was also glad that President Mitterrand, unlike his Greek predecessor, had chosen a more sensible order of discussion at the Council, beginning with the issues of budget discipline and budget imbalances. After initial discussion, officials went away to work on the text relating to the budget while we moved on to the issue of increasing the Community’s ‘own resources’. On this, the line-up was predictable. The President of the Commission wanted an increase in the current VAT ceiling, not just to 1.4 per cent but to a minimum of 1.6 per cent. Garret FitzGerald wanted a minimum of 1.8 per cent. President Mitterrand suggested 1.6 per cent. Chancellor Kohl and I would have none of this: 1.4 per cent was as far as we could possibly go — and that was only after other matters relating to the budget and agricultural spending had been satisfactorily resolved.

The Council was due to meet again at about 11 o’clock the next morning. President Mitterrand and Chancellor Kohl had a working breakfast — something which was to become a feature of European Councils because it was widely and probably accurately believed that these were the occasion of the Franco-German deals which heavily influenced or in some cases virtually determined the outcome of the Council. I met President Mitterrand after his meeting with Chancellor Kohl and gained the impression that we were heading for a successful outcome.

When the heads of government reconvened later that morning the session began with a gush of Euro-idealism. Chancellor Kohl and President Mitterrand became quite lyrical on the subject of getting rid of frontier controls, which they seemed to invest with a high symbolic significance. Then President Mitterrand urged that Europe should not be left behind by the USA in the space race. The Italian Foreign minister became still more enthusiastic, urging that Europe should be in the vanguard of moves against the ‘militarization of space’. It seemed to me that it would be more sensible to concentrate on sorting out the Community budget first and at last we got down to business.

Now the high-mindedness quickly disappeared. The Irish Prime Minister tried and failed to gain a special exemption from the measures to limit milk production that the rest of us wanted. He promptly invoked the Luxemburg compromise and walked out. At 4 p.m. there was a long adjournment in order to study a new text of the draft communiqué. On resuming, we discussed once again the budgetary problems. The Italians and the Greeks stood out against giving Britain any permanent agreement to reduce our net budget contributions; more serious for us, President Mitterrand seemed to side with them. I intervened to say that I had fought this battle for five years and that I intended to have a system which was fair and which would last. At this point — whether spontaneously or by previous agreement with President Mitterrand I do not know — Chancellor Kohl upped and offered Britain a 1,000 million ecus rebate for five years — much less than I wanted and still only a temporary arrangement. Almost immediately France and the others agreed with Germany. I found myself isolated. I refused to accept his proposal. Nothing more could be done. No agreed communiqué was issued. To rub salt into the wound, France and Italy at a Foreign Affairs Council immediately after the heads of government summit broke up blocked payment of our 1983 refund.

I had not expected such a totally negative outcome. So the question immediately arose as to whether we should withhold payments to the Community budget. This was partly a legal and partly a political question. We had always been advised that if we withheld contributions we would almost certainly lose any subsequent case before the European Court. In this instance, however, we were on somewhat stronger legal ground because the Community was withholding rebate payments to which we were entitled by previous agreement. Probably,