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Catalogue Reference:PREM/19/87

Image Reference:0001

SERIES P R E M 19 VOLUME 87

START

Referred to

Date

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Date

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Date

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Date

Fit-*.

16 J u l y 1979

Many thnnkB f o r your l e t t e r o f 9 J u l y about t h e d e l i v e r y o f M o r r i s " V e s t ' s two books t o S l p n o r A n d r e o t t i , and f o r f o r w a r d i n p Slpnor A n d r e o t t l ' s l e t t e r of thanks. The Prime M i n i s t e r was VPTV .

The Prime Minister might begin by asking Signor A n d r e o t t i f o r h i s She might:

comments on the outcome of the I t a l i a n domestic elections (see B r i e f No 8 on I t a l i a n i n t e r n a l scene). a}

say that tho C h r i s t i a n Democrat vote seems to have held up wcJLl (down only O.'t'J i n terms of tho popular vote for tho Chnmbor of

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b)

express g r a t i f i c n t i o n that the Communist vote has declined f o r the f i r s t time I n recent year;; (down from jh.h to JO.^J);

c)

t e l l Signor A n d r e o t t i o f the very great importance that she attaches t o r e l a t i o n s with I t a l y ; and

d)

express the hope that our r e l a t i o n s w i l l continue t o be as warm and f r i e n d l y , both b i l a t e r a l l y and i n the Community context, as they are a t present. She nay then wish t o proceed s t r a i g h t to a discussion o f the Community budget, on which B r i t i s h and I t a l i a n views are s i m i l a r , w i t h a view t o securing a j o i n t approach t o the problem a t Strasbourg.

RESUME OF BRIEFS ITEMS DEFINITELY FOR DISCUSSION EUROPEAN COMMUNITY AFFAIRS'(BRIEF HO 2) Community Budget 6. the This w i l l be an important opportunity to work f o r common ground with I t a l i a n s on the budget problem.. The s i m i l a r i t i e s between the Behind t h i s there are

I t a l i a n and B r i t i s h p o s i t i o n s are that we both s u f f e r net budgetary costs and have p a r t i c u l a r l y low r e c e i p t s from the CAP. major differences. spending. I n p a r t i c u l a r the I t a l i a n s have s p e c i a l i n t e r e s t s i n

Mediterranean a g r i c u l t u r e and favour massive increases i n Community These differences must be handled c a r e f u l l y i n seeking I t a l i a n support f o r our own s t r a t e g y .

y.

Accordingly,the Prime M i n i s t e r might t r y to focus Signor Andreotti's Our aim a t the Strasbourg

a t t e n t i o n on what i s most l i k e l y to be negotiable w i t h our partners a t the June and November European Councils. European Council should be t o get agreement on a mandate to the Commission to propose s o l u t i o n s to the Budgetary imbalance i n time f o r decisions to be taken a t the November Council (our d r a f t text could be given to Signor Andreotti i f t h i s has not been done i n advance). 1UK and I t a l i a n

1i inr; i.n 'i'iiiiiiin which

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would s u i t no both.

Each o f us could then use our influence with theB>X. B \ A V \ ^

Commission to get them to put forward 6omething l i k e Other EEC Pointa

8.

On other EEC issues, we have less s p e c i f i c objectives with the But the Prime Minister could encourage then

I t a l i a n s a t t h i s stage.

to stand f i r m on a CAP price freeze a t least f o r products i n surplus and to work f o r a compromise on the Common Fisheries Policy on which we have no serious c o n f l i c t o f i n t e r e s t with them. Signor A n d r e o t t i may wish to hear about our p o s i t i o n on EMS, I t a l y ' s membership of which has been a c o n t r o v e r s i a l issue domestically, and or. i n d u s t r i a l p o l i c i e s . PROSPECTS FOR THE TOKYO SUMMIT (BRIEF N 3) O 9. A meeting o f the European Council immediately before the economic

summit t r a d i t i o n a l l y provides an opportunity f o r those members o f the Community who are not summit p a r t i c i p a n t s to express a view on the world economic s i t u a t i o n so that the representatives o f the Community (the President o f the European Council and the President o f the Commission) can express an agreed Community p o s i t i o n . There w i l l be general agree ment that the energy s i t u a t i o n i s complicating an already uncertain i n t e r n a t i o n a l economic s i t u a t i o n and that t h i s should be the main subject f o r discussion and decision a t Tokyo. UNCTAD V having reached only a l i m i t e d measure o f agreement - and w i t h the developing countries facing growing balance o f payments problems because o f the o i l price r i s e s - the Japanese may w e l l want the Tokyo Summit to address i t s e l f to the North/ South dialogue.

INTERNATIONAL ENERGY QUESTIONS (BRIEF NO 4) 10.

I n the present d i f f i c u l t o i l market s i t u a t i o n , energy w i l l be a

p r i o r i t y subject f o r both the European Council and the Tokyo Summit. The Community and the Summit p a r t i c i p a n t s w i l l need to f i n d a common approach t o the problems imposed by shortage o f supplies and high spot market price:;. We should welcome I t a l i a n views on the possible content For our:;clvea we believe Continuod nnd effective of such an approach*

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demand r e s t r a i n t w i l l i n any Case be an essential element. REFUGEES FROM DIDO-CHINA (BRIEF N 5) O 11. The Indo-Chinese refugee/ problem requires i n t e r n a t i o n a l action Lo The Prime

mobilise p r a c t i c a l support and maximum pressure on Vietnam.

Minister w i l l wish to ask Sgr Andreotti to support her c a l l f o r a special i n t e r n a t i o n a l conference under Dr Waldheim's auspices and t o consider what other p r a c t i c a l assistance I t a l y can give. i n Hong Kong i s extremely serious. ITEMS WHICH MAY C M UP OE AFRICAN QUESTIONS (BRIEF NO 6) 12. W would not, ourselves, propose to r a i s e t h i s subject. e Italian However, officials The s i t u a t i o n

o f f i c i a l t a l k s were held w i t h the I t a l i a n s l a s t week.

then expressed anxiety about the Rhodesia s i t u a t i o n , and b r i e f i n g has been provided i n case Sgr A n d r e o t t i should r a i s e the matter. b r i e f i n g also covers recent developments i n Namibia. BILATERAL QUESTIONS (BRIEF N 7) O 13B i l a t e r a l r e l a t i o n s are close and have been further strengthened i n This

recent years by the assistance we have been able to give I t a l y i n dealing with terrorism (short^n^te^jTrovLded). points f o r the Prime M i n i s t e r t o r a i s e . There are no s p e c i f i c b i l a t e r a l The I t a l i a n s may, however, r e f e r

to the d i f f i c u l t i e s presently being experienced by the I t a l i a n charter f l i g h t company, I t a v i a , i n o b t a i n i n g s u f f i c i e n t f u e l supplies from Mobil at Catwick. This i s not a matter f o r HMG. A defensive b r i e f i s

included on t h i s p o i n t . BACKGROUND BRIEFING ITALIAN INTERNAL SCENE (BRIEF N 8) O A short assessment o f the current I t a l i a n p o l i t i c a l and economic /cituat

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situation has been provided. Personality 15.

This incorporates the results of the

recent General Election and of the Elections to the European Parliament. Motes on Sgr Andreotti and Sgr Forlani are included.

Essential factual s t a t i s t i c s on I t a l y are set out at Annex C to this

Brief.

Foreign and Commonwealth Office 13 June 1979

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ANNEX A

TilE ITALIAN DELEGATION

Sgr G i u l i o Andreotti Sgr Arnaldo F o r l a n i Sgr Catalano

Prime Minister Foreign Minister Deputy Diplomatic Adviser Chief of Protocol, M i n i s t r y of I n t e r i o r Chef de Cabinet to Foreign Minister Foreign M i n i s t r y Press Spokesman Interpreter

Sgr B o t t i g l i e r i

Sgr B i a n c h i e r i

Sgr Berlinguer

Sgra C i v e l l i

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ANNEX B

WORKING LUNCH I t a l i a n Side

1. 2. 3. k.

Sgr Andreotti Sgr F o r l a n i Sgr Catalano Sgr Ducci

Prime Minister Foreign Minister Deputy Diplomatic Adviser I t a l i a n Ambassador

B r i t i s h Side 1. 2. 3.h.

The Prime Minister The Chancellor o f the Exchequer The Lord Privy Seal The Minister of A g r i c u l t u r e Fisheries and Food S i r Alan Campbell ( B r i t i s h Ambassador, Rome) Mr Franklin (Cabinet O f f i c e ) Mr Butler (FCO) Mr Cartledge

56. 7. 8.

I n t e r p r e t e r s w i l l be present but w i l l not be seated at t a b l e .

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Annex C ITALY - BASIC STATISTICS (1978 and EEC Commission Forecasts f o r 1979)

Italy Population (millions) 1978 1979 56.7 57.0 21.7 21.8 7-0 6.5 186.9 208.6 3296 3659 + 2.2 + 4.6

UK 55-9 55-8 26.4 26.6 5-7 5.7240.0 264.9

Labour Force ( m i l l i o n s ) 1978 1979 Unemployed (percent o f c i v i l i a n labour force) 1978 1979

Gross Domestic Product 1978 ( b i l l i o n European Units 1979 of Account) Gross Domestic Product per head (EUA) Annual Rate of Growth of Volume o f GDP (Percent) Annual Rate o f Growth of I n d u s t r i a l Production 1978 1979 1978 1979 1978 1979

4293 4747 4 3-4 + 2.3 + 3-1 + 2.1 + 8.4 + 9-7 + 127

+ 483

+ 1-9 + 7-1 + 13.0 + 12.5 +5323 +3333

Consumer p r i c e s (changes 1978 over year e a r l i e r ) per 1979 cent Balance of Payments on Current Account ( m i l l i o n EUA) Trade B r i t i s h exports to I t a l y B r i t i s h imports from I t a l y Defence Spending T o t a l armed forces

= 2.8?J GNP

1978 1979

1977 1978 1977 1978

981 m i l l i o n 112*4 m i l l i o n 153'* m i l l i o n 1935 m i l l i o n

= 342,000 plus 80,000 C a r a b i n i e r i

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T H I S DOCUMENT I S T H E 1'ROPERTY O F HER B R I T A N N I C

MAJESTY'S

GOVERNMENT

13 JUNE, 1 9 7 9bdiEF NO. 2

COFFERS*,

AA

:

VISITS

BY T H E P R I M E

M I N I S T E R OF I T A L Y :

1 5 JUNE, 1 9 7 9

EUROPEAN COMMUNITY AFFAIRS B r i e f b y t h e F o r e i g n , a n d Commonwealth POINT3 TO MAEE ) 1. (a) COM "U'TTY ?UDg?L'/COir-/?,RC-2:TCE UK and I t a l i a n Budget problems the problem t h a t t h e EEC B u d g e t , a n d EEC V e have w o r k e d t o g e t h e r / may n o t Our v i e w s on s o l u t i o n sr

Office

I t a l y a n d t h e UK s h a r e resource to g e t the problem

transfers, are inequitable. acknowledged.

always f u l l y c o i n c i d e .

B u t l e t u s go o n s u p p o r t i n g each o t h e r and f o r q u i c k f o r remedies.

a t t h e June C o u n c i l , i n p r e s s i n g f o r r e c o g n i t i o n , a c t i o n b y t h e Commission on p r o p o s a l s (b) O b s t a c l e s JO be overcomej

I f we p a y l e s s o t h e r s w i l l have t o p a y more. I f r o m t h e CAP: (380 m i l l i o n ) . i n 197" I r i s h total

The I r i s h w i l l n o t were 570.2 mEUA

w a n t t o see a n y d i m i n u t i o n o f t h e b e n e f i t t h e y r e c e i v e , m a i n l y FEOGA r e c e i p t s The Germans a n d t h e F r e n c h do n o t w a n t t o i n c r e a s e t h e 1?S VAT c e i l i n g .

expenditure which would breach(c) Tr-'-rentation

o f oui^ a r g u m e n t s

W e

do n o t sec m a s s i v e i n c r e a s e s i n ndn-CAP e x p e n d i t u r e a s a t o the problem. T h i s Government w a n t s t o be p r u d e n t i n c l u d i n g Community e x p e n d i t u r e . about There

solution

a l l Government e x p e n d i t u r e s h o u l d be s a v i n g s products.

i n expenditure

on s u r p l u s e s i n n o r t h e r n a g r i c u l t u . t o b e t t e r purposes. The UK

Those c a n t h e n be d i v e r t e d

(urban renewal,

i n d u s t r i a l obsolescence,

p h y s i c a l b a r r i e r s t o

t r a n s p o r t ) and I t a l y

( M e d i t e r r a n e a n a g r i c u l t u r e , m e z z o g i o r n o ) have

.

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(d) This

Corrective

hanir.m

i s t h e o n l y Way we c a n hope t o g e t q u i c k a c t i o n o n t h e Y e have h a d some i n d i c a t i o n s t h a t t h e F r e n c h / this i s required.

Budget imbalances. and

Germans may t h e m s e l v e s t h i n k s o m e t h i n g l i k e considering various ideas. Proposals

V/e a r e s t i l l point from (e) The us

We s h a l l n o t r a i s e t h e better

a t Strasbourg. t h e Commission.

w o u l d i n a n y case come

F i n a n c i a1 Mechanism f i n a n c i a l mechanism a s a t p r e s e n t ( o r t h e I t a l i a n s ) any r e a l good. c o n s t r u c t e d does n o t do I t might be p o s s i b l e t o

amend i t t o g i v e t h e UK a s u b s t a n t i a l r e t u r n a n d d e a l w i t h a p a r t of our problem. to But proposals t o r e c t i f y the i n e q u i t i e s w i l l have

d e a l w i t h t h e l o w l e v e l o f UK a n d I t a l i a n r e c e i p t s gross contribution. Council

a s w e l l as

t h e UK i n e q u i t a b l e (f) Our

T a c t i c s a t trie E u r o p e a n aim a t the Strasbourg

Council should day,

be t o e n s u r e t h a t t h e r e i s

a d e q u a t e d i s c u s s i o n on t h e f i r s t

and t o g e t agreement on i n time f o r

i n s t r u c t i o n s t o t h e Commission t o propose s o l u t i o n s d e c i s i o n s t o be t a k e n a t t h e November C o u n c i l . must be c l e a r l y s t a t e d i n the Council's

These i n s t r u c t i o n s on t h e l i n e s o f

conclusions

t h e a t t a c h e d d r a f t (Annex A ) . willingness t o discuss this

[ T h e P r i m e M i n i s t e r w i l l n e e d t o shov; Commentary a t

text with Andreotti:

Annex B . ] V e s h o u l d g i v e t h i s / a f e w days b e f o r e in (g) favour o f i t . F o i l ow-ua t o t h e E u r o p e a n

t e x t t o t h e o t h e r member Governments

t h e E u r o p e a n C o u n c i l a n d l o b b y them i n t e n s i v e l y

Council o u r s e l v e s , b u t s h o u l d use ideas

V/e s h o u l d n o t p r o p o s e s p e c i f i c s o l u t i o n s our i n f l u e n c e with

t h e C o m m i s s i o n t o g e t them t o p u t f o r w a r d

on t h e l i n e s we f a v o u r . 2. OTHER COMMUNITY ISSUES CAP. . . .

(a)

surplus products continue

t h i s year.

Trust I t a l i a n

Government a l s o

will should

t o support

Coinmis^^^^^^or.als.

Ultimate target

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be

CAP based on common p r i c e s

c u t a t a l e v e l where t h e r e i s no f o r consumption,

incentive Italians

t o p r o d u c e more t h a n i s r e q u i r e d

unsu.bsidised e x p o r t s , f o o d a i d and n o r m a l s t o c k s . have s u p p o r t e d c o s t - e f f e c t i v e of mediterranean a g r i c u l t u r e . s u r p l u s e s o f I.Iediterranean (b) CFP

Agree

with 'Y .e

t o o much money s p e n t on N o r t h E u r o p e a n a g r i c u l t u r e .

measures t o i m p r o v e t h e s t r u c t u r e B u t must a v o i d measures w h i c h l e a d t o those o f n o r t h e r n goods.

products l i k e

Hope d i s c u s s i o n s i n Community c a n now be u n d e r t a k e n i n b e t t e r L e g i t i m a t e UK i n t e r e s t s . B u t we w a n t s e t t l e m e n t . 25 June C o u n c i l s h o u l d be l o w - k e y a n d a v o i d a c r i m o n y . l e a d i n p u r s u i n g s e t t l e m e n t d u r i n g summer. direct conflict of interest with for the any (c) a c c e p t a b l e a n d f a i r CFP. UK r e s e r v e on I t a l i a n Italy.

spirit.

Fisheries

Commission s h o u l d No

Then s u b s t a n t i v e

d i s c u s s i o n o f p r o b l e m s , p e r h a p s i n autumn F i s h e r i e s C o u n c i l . As s p e c i a l

Hope I t a l i a n s w i l l w o r k c o n c e s s i o n we have l i f t e d

f i s h i n g o f f A f r i c a d e s p i t e absence o f

p r o g r e s s on CFP i n t e r n a l r e g i m e . EMS W i l l decide whether t o p a r t i c i p a t e i n o f the

W w i s h t h e EL1S w e l l * e

exchange r a t e mechanism when a s p e c t s o f t h e f u n c t i o n i n g s y s t e m a r e r e v i e w e d i n September. o p e r a t i o n o f system? (d) What i s I t a l i a n

experience o f

We w i l l t h i n k a b o u t s w a p p i n g r e s e r v e f o r ECUs. Policy competition

I n d u s t r i a l and R e g i o n a l

Government's a p p r o a c h t o Community r o l e i n r e g i o n a l , and t o c u t down on f i n a n c i a l a i d t o i n d u s t r i e s viable but future. A c c e p t Co.'.omission's r o l e t h a t some i n d u s t r i e s inevitable

i n d u s t r i a l p o l i c i e s d i f f e r e n t f r o m Labour Government's. w h i c h have no i nmonitoring state

Intend aids steel

long-tern

v / i l l need t e m p o r a r y f i n a n c i a l EEC f u n d s o u r a p p r o a c h But s h a l l adopt

support. etc). to public positive

I t a l y a n d UK have s i m i l a r p r o b l e m s ( s h i p b u i l d i n g , and o t h e r n o n - a g r i c u l t u r a l s p e n d i n g r i g o r o u s i n EEC a s a t homo.

On r e g i o n a l

a t t i t u d e t o EEC p r o p o s a l s when l i k e l y t o be more e f f e c t i v e

.

I bilaterally of with I t a l i a n s c o n t r i b u t i o n ' t h e a c m i g h t make t o s o l u t i o n i n JoGONFlDEAJTIAL t h e Budget

problem

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FACTUAL BACKGROUND For Vrr.r. Use

1.

Community Hut! "-ot/"onver^onc c

( a ) UK Budget P o s i t i o n

The P r i m e M i n i s t e r i s aware o f t h e d e t a i l s o f t h e UK b u d g e t a r y (agreed l i n e t o t a k e and t a b l e o f n e t b u d g e t a r y

position

t r a n s f e r s f o r 1978 a t t a c h e d a t Annex C). (b) S i m i l a r i t i e s a n d d i s s i m i l a r i t i e s b e t w e e n UK a n d I t a l i a n Budget The problems similarity i n our Italian

f i g u r e s f o r 1978 show a c o n s i d e r a b l e

positions.

We b o t h do b a d l y o u t o f t h e CAP (UK t o t a l r e c e i p t s FEOGA e x p e n d i t u r e , I n the overall c o n t e x t o f t h e Budget o u r D e v e l o p m e n t Fund (59 mEUA small. Both t h e ofItaly at

e q u i v a l e n t t o a b o u t 5$ o f t o t a l r e c e i p t s about 9$). to are (c)

r e s p e c t i v e r e c e i p t s from t h e Regional

t h e UK, 79 mEUA t o I t a l y ) a r e e x t r e m e l y

UK n e t c o n t r i b u t i o n o f 942.5 mEUA a n d t h a t

752.3 mEUA

e q u i v a l e n t t o a b o u t 0.4;' o f o u r r e s p e c t i v e n a t i o n a l GDP. However t h e I t a l i a n b u d g e t a r y side. The UK's g r o s s problem i s e n t i r e l y on t h e

expenditure

c o n t r i b u t i o n t o t h e Community

B u d g e t i n 1979 i s 17.4;' ( c . 19.5# i n 1930) w h e r e a s o u r GNP s h a r e w o u l d be 15.4/S a n d o u r r e c e i p t s f r o m t h e Community B u d g e t a r e o n y 7.5/'.1

The c o r r e s p o n d i n g

f i g u r e s f o r I t a l y a r e 11.58$,

12.2$ a n d

8%

Not (d)

f o r Use The Commission t e n d t o p r o p a g a t e t h e v i e w t h a t t h e I t a l i a n separate f r o m o u r own a n d t h a t i t s h o u l d bo extent

problem i s e n t i r e l y1

dea" 1 w i t h s e p a r a t e l y . this

I t i s u n c e r t a i n h o w e v e r t o what

i s b e c a u s e o f t h e v/ish o f v a r i o u s o f o u r p a r t n e r s ( r e f e c t e d

i n t h e C o m m i s s i o n ) t o i s o l a t e t h e UK p r o b l e m .

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(e)

I ti nn o t possible t o estimate t h e size o f other States' p o s i t i o n c o u l d improve over t h e n e x t two y e a r s . greas c o n t r i b u t i o n w i l l drop from

r e c e i p t s , b u t i t seems f r o m o t h e r f i g u r e s t h a t t h e I t a l i a n budgetary First, of t h e i r percentages

13756 i n 1978 t o 11.58# i n 1979 b e c a u s e o f t h e r e p l a c e m e n t t h e f o r m e r GNP e l e m e n t o f c o n t r i b u t i o n s b y one b a s e d o n VAT S e c o n d l y , new CAP r e g i m e s c o v e r i n g and v e g e t a b l e s a s w e l l , as a. new efficient olive as f r o m J a n u a r y 1979. o i l and processed f r u i t Mediterranean

s t r u c t u r a l package c o u l d b r i n g I t a l y a n a n n u a l advantage o f t h i s .

400 mEUA n e t , p r o v i d e d t h e i r a d m i n i s t r a t i o n p r o v e s enough t o t a k e f u l l

2.

CAP

For Free Use (a) The of for in The e s t i m a t e d c o s t o f t h e CAP i n 1979 i s some 6,500 m i l l i o n . bulk o f t h i s w i l l t h etotal.. 1980 w i l l be s p e n t on t h r e e commodities - m i l k , rapidly. Preliminary figures expenditure estimated 14,500 mEUA w h i c h a c c o u n t r e s p e c t i v e l y f o r 37^, 199" and 1 Q6 9 even w i t h a farm p r i c e f r e e z e , reach

c e r e a l s and s u g a r ,

The c o s t i s g r o w i n g be some 12.57^ h i g h e r .

1980 i n d i c a t e t h a t

The Commission have

t h a t on present

t r e n d s t h e c o s t o f t h e CAP w i l l

( 9 , 3 0 0 m) b y 1 9 8 2 . (b) Italy i s e i g h t h i n o r d e r o f p r o s p e r i t y o n GDP p e r head i n She i s a n e t c o n t r i b u t o r t o t h e CAP; i n 1978 she s e c o n d o n l y t o t h e UK (590 m i l l i o n ) and ahead A l s o l i k e t h e UK, she i s a n e t f o o d

t h e Community. of

p a i d 327 m i l l i o n ,

t h e PRG (140 m i l l i o n ) .

importer, p a r t i c u l a r l y o f "northern" products. ( c ) Statistics

Net c o n t r i b u t i o n t o FKOGA, 1978 I t a l y 327m UK 590m o f GDP, 1977

A g r i c u ' t u r e / F o r est ry/l-'inhin,r as Italy 9.0?6 UK 2.896

Italy

1 5 . 9 * cONFIDENrflAi: '' " 5

7

Community (9)

8.296

/A/.'.ri c u l t u r c

CONFIDENTIAL

-6~ Agricu tural Italy1

s o l f - s u f f i c i oncy 1Q76 89/o UK 62?6 Community 91 $>

Not f o r Use (d) Italy has so f a r s t o o d b y t h e UK i n s u p p o r t i n g t h e

Commission's p r o p o s a l f o r a p r i c e f r e e z e f o r 1979/80, b u t h e r i n x c r e s t i s l e s s i n a p r i c e f r e e z e n e r se t h a n i n a c h i e v i n g a b e t t e r balance sugar, products (fruit, between those " n o r t h e r n " p r o d u c t s (milk, c e r e a l s e t c ) which a r e i n m a j o r s u r p l u s and " s o u t h e r n " T h e r e i s a s t r o n g r i s k o t h e r Member

vegetables, o l i v e o i l , e t c ) , i n order t o increase

h e r r e t u r n s f r o m t h e CAP. States w i l l the price-fixing.

t r y t o b u y h e r o f f i n o r d e r t o i s o l a t e t h e UK i n

3. (a)

CFP

Italy

I t a l y n o t much c o n c e r n e d b y m a i n CFP n e g o t i a t i o n s .

c l a i m s 12 m i l e f i s h e r y l i m i t s .

Most I t a l i a n f i s h i n g i s l o c a l ,

b u t d i s t a n t w a t e r f l e e t has i n t e r e s t s o f f A f r i c a and A m e r i c a . I n UK i n t e r e s t t o k e e p I t a l i a n s f r o m s e e k i n g a c c e s s t o N o r t h A t l a n t i c waters. useful For t h i s reason (and t o a v o i d a n t a g o n i s i n g l a s t week, cost t h e This w i l l a l l y o n o t h e r Community i s s u e s ) we l i f t e d ,

o u r r e s e r v e o n EEC/Senegal A g r e e m e n t . 50 I t a l i a n t u n a (b) of boats.

Community $12 m i l l i o n o v e r 2 y e a r s t o p r o v i d e a c c e s s f o r a b o u t

UK n a t i o n a l c o n s e r v a t i o n m e a s u r e s p l a n n e d Community a c t i o n .

1 J u l y i n absence

C o n s e r v a t i o n t o be d i s c u s s e d a t 25 June

Council.

I t a l i a n s n o t a f f e c t e d by UK c o n s e r v a t i o n m e a s u r e s .

4.(a)

EMS S i g n o r A n d r e o t t i u n l i k e l y t o want t o d i s c u s s t h e a c t u a l , I t a l i a n experience I t a l y opted. has b e e n g e n e r a l l y

f u n c t i o n i n g o f t h e EMS. the

s a t i s f a c t o r y : t h e l i r a has b e e n b u o y a n t and t a k e n a d v a n t a g e o f w i d e r 6fo band f o r w h i c h The l i r a has i n f a c t Andreotti not r e m a i n e d c o n s i s t e n t l y above t h e 2.!^ m a r g i n .

l i k e l y t o wtuit t o d i s c u s s c u r r e n t D a n i s h and B e l g i a n probTemn

CONFIDENTIAL

/ ( t h e two

CONFIDENTIAL

( t h e two c u r r e n c i o o f o r w h i c h t h e r e minimum l e v e l p e r m i t t e d (b)

has been grid).

consistent

i n t e r v e n t i o n i n o r d e r t o p r e v e n t thorn f a l Ling b e l o w t h e by t h e p a r i t y

He may h o w e v e r r a i s e t h e q u e s t i o n o f t h e i n t e r e s t

rate

s u b s i d i e s w h i c h a r e c u r r e n t l y b l o c k e d by us p e n d i n g j o i n e d t h e exchange r a t e mechanism (thereby

recognition

t h a t t h e UK w o u l d be e l i g i b l e f o r such s u b s i d i e s i f i t c o n f i r m i n g "our p o s i t i o n as

one o f t h e l e a s t p r o s p e r o u s members o f t h e Community, a p o s i t i o n which others e s p e c i a l l y t h e F r e n c h a r e i n c l i n e d t o c o n t e s t on o f N o r t h Sea o i l ) . The t h e g r o u n d s t h a t we have t h e b e n e f i t f a r have opposed any f o r m u l a t i o n p r o s p e r o u s Member S t a t e . per b e c a u s e o f t h e amounts i n v o l v e d

I t a l i a n s have g i v e n us some s u p p o r t on t h i s b u t t h e F r e n c h so implying t h a t we a r e a l e s s T h i s issue i s important t o us l e s s ( u n l i k e l y t o be more t h a n 50 m t h e case we make o n t h e Exclusion from against

annum) t h a n b e c a u s e i t r e i n f o r c e s

n e e d f o r a c t i o n t o remedy o u r b u d g e t a r y p r o b l e m . eligibility us i n o t h e r (c) the contexts.

f o r i n t e r e s t r a t e s u b s i d i e s w o u l d be i n v o k e d

We have a r g u e d t h a t i f we j o i n e d t h e exchange r a t e

mechanism

we a g r e e t h a t new money s h o u l d be made a v a i l a b l e a proportional loss.

o v e r and above

200 mEUA a g r e e d so t h a t I t a l y and I r e l a n d w o u l d n o t s u f f e r

5.

I n d u s t r i a l and R e g i o n a l

Policy

c o m p a n i e s I B X , ENI e t c a n d have resisted that Some I t a l i a n w o r r y great

I t a l i a n s through state holding have l a r g e they w i l l eg. regional and Commission c o n t r o l s on s t e e l fund aids. on s t a t e a i d s .

scale i n t e r v e n t i o n i n the industry,

be on t h e i r own i f UK a c c e p t s Commission m o n i t o r i n g I t a l i a n s also attach importance t o ( t h e y g e t 3 9 . 4 ^ o f p r e s e n t f u n d o f 610 m i l l i o n The n e t payments f r o m EEC B u d g e t t o OK and o t h e r n o n - a g r i c u l t u r a l1

compared w i t h UK 2'/^). I t a l y f r o m regional

funds can

make a p o s i t i v e c o n t r i b u t i o n t o overa" ' Bud/ret s i t u a t i o n o f both countries. UK M i n i s t e r s s t u d y i n g p o s s i b i l i t i e s f o r i i h p m v i n We w i l l have

some e x p e n d i t u r e from UK E x c h e q u e r to EEC Budget. CONFIDENTIAL

/interest 7

CONFIDENTIAL

interest

i n s e e i n g w h e t h e r we have common g r o u n d w i t h patterns.

Italians

i n p r e s s i n g f o r changes i n EEC s p e n d i n g

FOREIGN AND COMMONWEAIffH OFFICE 13 June 1979

CONFIDENTIAL

CONFIDENTIAL COMMUNITY BUDGET

ANNEX A

The financial

European C o u n c i l recognised that at p r e s e n t the c o n s e q u e n c e s o f t h e Community budget c r e a t e f o r two o f t h e t h r e e member S t a t e s w i t h I n time, these difficulties

difficulties

b e l o w - a v e r a g e GNP p e r h e a d . s h o u l d become l e s s surpluses should itself will to serious.

Reductions

in agricultural That i n

reduce

t h e c o s t o f t h e c.a.p.

l i g h t e n t h e budgetary to policies

b u r d e n and s h o u l d make i t e a s i e r designed t o reduce regional

switch expenditure

disparities. that

Meanwhile s o l u t i o n s a r e u r g e n t l y r e q u i r e d t o ensure

t h e Community b u d g e t p r o d u c e s a f a i r b a l a n c e o f c o s t s and, i n p a r t i c u l a r ,

and b e n e f i t s f o r a l l member s t a t e s does n o t c o n t i n u e

t o h i n d e r member S t a t e s , w i t h b e l o w - a v e r a g e economic

GNP p e r h e a d i n t h e i r e f f o r t s t o improve t h e i r performance. to

T h e Euror-eas C o u n c i l i n v i t e d t h e C o m m i s s i o n

make p r o p o s a l s b e f o r e "the end o f September t o d e a l w i t h d e c i s i o n s t o be t a k e n at the

t h i p problem i n o r d e r t o permit

.next E u r o p e a n C o u n c i l i n D u b l i n .

CONFIDENTIAL

CONFIDENTIAL

ANNEX B

TALKS WITH SI:MQR

Mummm.

COMMENTARY OH THE DRAFT CONCLUSIONS ON THE COMMUNITY BUDGET 1. The f i r s t s e n t e n c e i s i m p o r t a n t b e c a u s e i t w o u l d s e c u r e r e c o g n i t i o n b y o t h e r member Governments o f t h e UK and I t a l i a n Budget p r o b l e m . The s e c o n d , t h i r d a n d f o u r t h s e n t e n c e s go a s f a r as we c a n 2. t o meet t h e I t a l i a n t h e s i s t h a t t h e p r o b l e m c a n b e c u r e d b y more e x p e n d i t u r e o f v a l u e t o them and t o u s . B u t t h e y w o u l d want t h e Budget t o i n c r e a s e beyond t h e e x i s t i n g 1 % VAT t r a n c h e t o p e r m i t much higher expenditure. Even i f we w a n t e d t h i s , t h e Germans a n d F r e n c h would n o t agree. These s e n t e n c e s ' a l s o l e a d i n t o t h e t h o u g h t t h a t t h e c o r r e c t i n g mechanism now r e q u i r e d may become r e d u n d a n t i n t i m e . This w i l l make i t e a s i e r f o r o t h e r member S t a t e s t o a c c e p t a n d s e l l t h e i d e a . "Meanwhile" i n t h e n e x t sentence i s t h e k e y word. 3. The i d e a o f "a f a i r .balance o f c o s t s and b e n e f i t s " t o a l l member S t a t e s i n t h e n e x t s e n t e n c e i s one w h i c h i s d i f f i c u l t t o a r g u e a g a i n s t b u t w h i c h t h e Danes, D u t c h , B e l g i a n s and F r e n c h a t least w i l l probably not l i k e . I t i s n o t e s s e n t i a l t o u s and c o u l d be g i v e n up a t t h e C o u n c i l i f t h e r e s t o f t h e s e n t e n c e i s r e t a i n e d . T h i s ( t h e i d e a t h a t t h e b u d g e t s h o u l d no l o n g e r h i n d e r member S t a t e s w i t h b e l o w - a v e r a g e GDP per- h e a d i n t h e i r e f f o r t s t o i m p r o v e t h e i r economic p e r f o r m a n c e ) i s t h e e s s e n t i a l i n g r e d i e n t s i n c e i t p o i n t s t h e Commission t o w a r d s e l i m i n a t i n g o u r n e t c o n t r i b u t i o n .

CONFIDENTIAL

CONFIDENTIALANNEX C

VCONFIDENTIAL L I N E T O T A K E ON OUR B U D G E T A R Y 1. POSITION The

T h e a t t a c h e d t a b l e c o n t a i n s t h e C o m m i s s i o n ' a o w n f i g u r e s f o r 1978.

U n i t e d K i n g d o m i s s e v e n t h i n the l i s t o f m e m b e r s t a t e s i n t e r m s of G r o s s D o m e s t i c P r o d u c t p e r h e a d b u t t h e s e f i g u r e s s h o w ( c o l u m n 1) t h a t i n 1978 w e w e r e a l r e a d y t h e l a r g e s t n e t c o n t r i b u t o r to the C o m m u n i t y b u d g e t a t 943m E U A , or 625 m i l l i o n . 2. T h e f i g u r e s i n c o l u m n 3 h a v e been a d j u s t e d t o a t t r i b u t e M C A s t o t h e

i m p o r t i n g c o u n t r y and on t h i s b a s i s we b e c o m e f o u r t h l a r g e s t c o n t r i b u t o r . B u t M C A s c a n n o t be t r e a t e d a s b u d g e t r e c e i p t s b y i m p o r t i n g c o u n t r i e s l i k e the U K a n d I t a l y . They are not consumer subsidies because they serve only

as a p a r t i a l o f f s e t to the c o s t t o u s o f b u y i n g f o o d a t C A P p r i c e s a n d n o t world prices. T h e y a l l o w p r o d u c e r s i n h i g h c o s t c o u n t r i e s to s e l l to l o w

cost c o u n t r i e s w h i l e g e t t i n g the s a m e h i g h r e t u r n as i n t h e i r d o m e s t i c m a r k e t . 3. A s the t a b l e s h o w s , w e b e n e f i t e d i n 1978 f r o m the t r a n s i t i o n a l ( A r t i c l e 131). W i t h o u t t h e m w e s h o u l d h a v e b e e n the l a r g e s t

arrangements net 4.

c o n t r i b u t o r however M C A s are treated (column 6). In 1 9 8 0 , w h e n t h e t r a n s i t i o n a l p e r i o d h a s e n d e d , o u r n e t c o n t r i b u t i o n

w i l l be w e l l o v e r 1 0 0 0 ( 1 5 0 0 m E U A s ) a n d w e s h a l l be f a r a n d a w a y t h e biggest net c o n t r i b u t o r . 5. The p r o b l e m is t w o - f o l d . First, w e p r o v i d e 17^ p e r c e n t o f the wherea. we

Community's income this year,

a n d e x p e c t to p r o v i d e 2 0 p e r c e n t n e x t , Second,

o u r s h a r e o f the C o m m u n i t y ' s G N P i s o n l y a b o u t 15j: p e r c e n t . g e t b a c k i n r e c e i p t s o n l y a b o u t 7j p e r c e n t o f the B u d g e t . 6. T h e m a i n r e a s o n f o r o u r l o w r e c e i p t s is t h e C A P .

It persistently takes

m o r e than 7 0 p e r cent of a g r o w i n g B u d g e t . s m a l l and efficient, the U n i t e d K i n g d o m . Funds, 7.

Because our a g r i c u l t u r e is

less than 5 p e r cent of this e x p e n d i t u r e takes place i n W e do r a t h e r b e t t e r o u t o f the R e g i o n a l a n d S o c i a l

but t o g e t h e r t h e y a c c o u n t f o r o n l y l O p e r c e n t o f the B u d g e t . We and I t a l y

A s a r e s u l t t h e b u d g e t b e a r s n o r e l a t i o n to a b i l i t y t o p a y .

are large c o n t r i b u t o r s , whereas r i c h e r countries like D e n m a r k and B e l g i u m are substantial beneficiaries.

1 CONFIDENTIAL

CqNflDEIMTIALc A CONFIDENTIAL 8. The U n i t e d K i n g d o m accepts that g r e a t e r convergence in e c o n o m i c The new But At

p e r f o r m a n c e i s p r i m a r i l y a m a t t e r of the r i g h t n a t i o n a l p o l i c i e s . G o v e r n m e n t i s d e t e r m i n e d to r e s t o r e t h e U n i t e d K i n g d o m e c o n o m y .

C o m m u n i t y p o l i c i e s should help those e f f o r t s r a t h e r than h i n d e r t h e m . p r e s e n t they d o n o t . 9. for T h e s e i n e q u i t i e s a r e a p r o b l e m f o r the w h o l e C o m m u n i t y , a s w e l l a s the U n i t e d K i n g d o m ; u n t i l they a r e r e m o v e d , the C o m m u n i t y w i l l

r e m a i n unbalanced,

a n d the c o m m i t m e n t s o f G o v e r n m e n t s to E u r o p e w i l l be

h a m p e r e d b y the e f f e c t s on p u b l i c o p i n i o n i n the c o u n t r i e s m o s t a d v e r s e l y affected. I n 1971 the o r i g i n a l S i x r e c o g n i s e d t h a t i f u n a c c e p t a b l e situations

o v e r the B u d g e t / * s h o u l d a r i s e ,

'the v e r y s u r v i v a l o f t h e C o m m u n i t y

w o u l d d e m a n d t h a t the i n s t i t u t i o n s f i n d e q u i t a b l e s o l u t i o n s ' ( C m n d 4 7 1 5 ) . 10. W e a r e n o t a r g u i n g f o r a j u s t e r e t o u r : EEC or p r e c i s e l y w h a t we put i n . ie t h a t w e s h o u l d g e t o u t o f the

N o r that m e m b e r s t a t e s ' net c o n t r i b u t i o n s

r e c e i p t s should p r e c i s e l y r e f l e c t t h e i r p o s i t i o n i n r e l a t i o n to a v e r a g e B u t w e do n o t c o n s i d e r t h a t i t i s r i g h t f o r

C o m m u n i t y G D P per head.

c o u n t r i e s v / i t h b e l o w a v e r a g e G D P p e r h e a d to be n e t c o n t r i b u t o r s to the Budget. 11. We w a n t a n e a r l y s o l u t i o n . I t i s f o r the C o m m i s s i o n to s u g g e s t w a y s The impetus w i l l h a v e to c o m e

i n w h i c h the i m b a l a n c e c a n be* c o r r e c t e d .

f r o m the E u r o p e a n C o u n c i l i n S t r a s b o u r g on 2 1 / 2 2 J u n e .

2

CONFIDENTIAL

NTT TRANSFHPBY

( T O ) MEMBER S T A T E S

IK 1 9 7 8 million cua

1978 Recorded transf ers

-

Ac t u a l2

position MCAs Adjusted transfers

1978

-

Without A r t i c l c 5

151

adjustments Adjusted transfers

1 hRecorded transfers .

MCAs

BELGJ UM/ L u x e m b o u r g

+ + -

380.4 620.4 423.8

-

43.1

+

337.3

+ +

415.4 620.4

1

_

43.1239.1 173-0

+ + -

372.3 381.3 336.6

DN AK EMRF t d c : . . l R e p u b l i c of GENIIANY >>

- 239.1 - 173.0

+ 381.3 596.8

- 213.6

France I r c l ;-.:id Italy Netherlands U n i t e d Kingdom Di r c c T a i d t o Third Countries CHANGE i n C o m m i s s ion's balances v i t h national treasuries

+ + +

82.9 536.2 752.3 220.5 942.5 39.0

-

287.7

- 370. 6 + + + 325.8 333.8 40.7 227.9 39.0

+

47.4

_ 287.7210.4

+ -

240.3 307.4 254.4

- 210.4 + 418.5

+ 517.8 + 672.9 265.4

O O Z 2 |

1i i

+ 418.5179.8

- 179.8 + 714.6

+ 85-6 + 709.3 39.0

-1425.9 + 39.0

+ 714.6

+

393-9

+

393.9

+

393-9

+

393-9

(2 ) (2)D i f f e r e n c e s on *_ exchange r a t e s * ' + 11.1 + 11.1 + 11.1 + 11.1

0

0

0

0

1

0

0

I(1) (2) A t the average exchange rates f o r the y e a r s i n question

1

'

THE n a t i o n a l t r e a s u r i e s m a i n t a i n a c c o u n t s i n t h e name o f t h e C o m m i s s i o n . A l t h o u g h t h e 1 9 7 6 and 1 9 7 7 b u d g e t s w e r e I N BALANCE and e x e c u t e d , t h e b a l a n c e s on t h e s e a c c o u u t s c h a n g e d d u r i n g t h e y e a r . T h e s e b a l a n c e s do n o t e a r n i n t e r e s t and t a n be u s e d by t h e C o m m i s s i o n o n l y to m e e t u p p r o v e d b u d g e t a r y e x p e n d i t u r e . These a r e accounting d i f f e r e n c e s which a r i s e because of the use of average exchange rates.

(3)

C T r I - . - 1(..' ~

i'^LLT-

RCnEi JUNE 14J REUTEE - ITALIAN PREMIER GIULIO RNvREOTTl TODAY CALLED FOR REFORMS Or 7rF. EUROPEAN COMMON HARKtT 5 AGRiC'-4^-'' ^ POLICY AND A FOOST IN FFV^F-.TS F T ' C- -F- E e l rv;.,:-;, < TO HELP BR ITfi1H F N D h:i> 0 ** C 0 u r - R v. MF. RNDREOTTI* WHO W I L L DISCUSS TnESc MATTERS In LONuOK TOMORROW WITH RRir-F MINISTER MARGARE1 fHATCHER* R L S O m i O he BELIEVED THE ELECTION OF TFE NEU PRO-rEUROPEAN BRITISH LEADER WOULD FIVE BRITAIN R_F-F7TFR f;EG0TIfiTI_P0SIT IGf I N HEJEC. TFE OB-VEAR-GLD VETERAN I T A L I A N FfiLITICIAN WILL HAVE iriLKS WITH MRS 7KRTCKER I LONDON TOHORR.ON. fL7 T

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iTfiuV ft'wo BRITAIN WERE R L S O THE ONLV NET IMPORTERS O F FOOD/ Like NEAT* CEREALS R N D HIL-K PRODUGTSi I N THE EEC AND FOUND T H A T P R I C C J MCRC MUCH hIGncR F K A N HOSE OUTSIDE THE E E C . ' H E F D D E D . 50 BRj FA] H n pi j r RKC 3 R i - ' * - j L V Fcft'ALISED** H E DE CLAR ED ' ' - GOVERNMENTS H O P E - H A i r E ^ c PROBLEMS F V F F T n E E E C ' ' 5 CONiROVERSIfiL RGRICULTURRL POLICV (CAP) WOULD F E DEALT WITH IK F fCONCRETE RND CONSTRUCTIVE '^m^ A l Tr.E FORTHCOMING EUROPEAN I SUMMIT IN STRASBOURG. ASKED I F nc THOUGHT THE CFF SHOULD BE CHANGED OR_I.E.ITRLV RND BRITAIN SHOULD INSTEAD BE 'COMPENSATED BV BIGGER JtAVKENTS FROM EE-J SGCInL RND K'cGIOftriL FUNDS* M ANDREGTTI CALLED FOR R c u m DfcYcLOrflENJS. APART FROM REFORM OF THE CAP* +OTHER EEC POLICIES SHOULD Be' STRENGTHENED* FIRSTLY"THE REGIDNAR'fi'NlTSOCIAL"-POLICIES BUT ALSO OTHERS^INDiJSJRIAL AND EKERGV POLICIES FOR EXRHPLE. fT

THESE OTHER POLICIES N W EXIST IN EMBRYONIC F.GRH T B U T THEY O ARE JUST AS IMPORTANT I F WE W ' T TO BUILD iiilRUE iCOHMUNITV* + nN THE PRIME MINISTER SHl!>. (THE ONLV MAJOR DIFFERENCE I N ITALIAN AND BRITISH EEC ROLICV IS THAT ITALY FfiVOURS AN INCREASE I N THE EEC BUDGET WHICH WOULD REDUCE THE PROPORTION SPENT ON THE CAP WHILE BRITAIN WANTS TO CUT CAR EXPENDITURE* RELIABLE SOURCES SAID). M RNDREOTTI RLSO SAID THAT MRS THATCHER''5 NEW CONSERVATIVE R GOVERNMENT MOULD GIVE BRITAIN A MORE AUTHORITATIVE VOICE INl

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fine ct'f'OPcnN COKMITMEN1 OF THE NEW BRITISH GOVERNMENT I S BcVGND D."jDi AND FOR THIS I CAN ONLV REJOICE* + HE SAID. I < lb POSSIBLE infti tnlS SINCERE EUROPEAN COMMITMENT WILL OiVc 6REATER RUTHORITV AND'CREDIBILITY* AND ALSO NEGOTIATING STRENGTH* rO oRITISr REPRESENTATIVES. *T

REU c

CONFIDENTIAL

THIS BRIEF 12

DOCUMENT NO 3 1979

IS

THE

PROPERTY

OF

HER

BRITANNIC

MAJESTY'S

GOVERNMENT

JUNE

COPY

NO

VISIT

BY

THE

PRIME

MINISTER

OF

ITALY,

15

JUNE

1979

PROSPECTS

FOR

THE

TOKYO

SUMMIT

Brief

by

the

Foreign

and

Commonwealth

Office

and

Treasury

The

brief in

prepared

for

discussion on 21/22

of

this is Mr

subject

at

the

European total to at

Council

Strasbourg on imported energy

June

attached. Andreotti point of

With is the

I t a l y ' s

dependence disagree Tokyo.

oil

supplies, be the

unlikely

that

should

focal

discussion

FOREIGN

AND

COMMONWEALTH

OFFICE

AND

TREASURY

12

JUNE

1979

CONFIDENTIAL

^,

CONFIDENTIAL

THIS

DOCUMENT

IS

THE

PROPERTY

OF

HER

BRITANNIC

MAJESTY'S

GOVERNMENT COPY NO

EGH(S)(79)10 12 June 1979 EUROPEAN COUNCIL, JUNE THE STRASBOURG

21/22 PROSPECTS Brief by Foreign

1979 TOKYO SUMMIT Office and Treasury

FOR and

Commonwealth

LINE

TO

TAKE APPROACH economic background. this are Inflation year. accelerating. should Specific focus on

GENERAL 1.

D i f f i c u l t targets

growth energy. ENERGY 2.

inappropriate

Discussion

Practical

conclusions

needed.

Energy

the

key by

area. to

Need f u l f i l

for

effective

oil

demand And

restraint in the longer

(particularly term

US) of

IEA/EEC to

commitments.

development

alternatives

o i l .

NORTH/SOUTH 3. After only modest progress at UNCTAD, developing countries will be

ilooking price and for something. The new Their British we problems will be exacerbated will an be by on the oil

rises.

Government's of course

emphasis maintain

trade Aid

investment,

though

shall

effective

Programme. TRADE A. With the for a bulk of the trade be MTNs our of are the the way and to the Trade Pledge prominently. change.

renewed But

year, well

issues on

unlikely need for

feature

there

may

emphasis

structural

MONETARY 5.

QUESTIONS monetary OPEC become situation and relatively funding of calm. their No i n i t i a t i v e s

International for. But will

called

surpluses a problem

counterpart

d e f i c i t s

again.

CONFIDENTIAL/BACKGROUND

CONFIDENTIAL

BACKGROUND Reference COMMUNITY 6. only A: Main Economic Variables

ANGLE Summits are a are sensitive invited. was issue They in the Community much because rancour, allowing Commissioi

Economic some

member

states

have in the to

caused on a

particularly the to President attend for

before of the

agreement European of

reached and

1977

formula of the

Council

President Community their aware

discussion to

matters

related

competence. so that of all

Important Community member GENERAL 7. The

therefore

let

non-participants can claim to be

have

say of

representatives

fully

position

states. APPROACH orientations ie of demand growth p r i o r i t y of management in Germany to agreed and on at than Bonn in On s t i l l US appear

appropriate, needs to give

faster

Japan

which

greatest

reducing seems

i n f l a t i o n . to the at be

present for mos

forecasts of of 1979 at

desired least with -

pattern so

growth is

likely for seen

achieved of

there

l i t t l e

scope

kind Bonn.

realignment for US wi

policies, are less very in

specific 2.6% US

growth (WEP) as

targets, oil

Prospects and with

1980

good. weak. 1979 in In

prices to

work

through as

economy 2.7% 8.

growth

could

f a l l

1.2%

(WEP)

compared

(WEP)

(OECD main 12 to are:

3.1%). industrialised to countries 1978, The France US has begun to was 8.2%

Inflation

the the

accelerate. and for Vo in the 12

months April FRG

September 10.4%. 3.5%,

i n f l a t i o n

months

1978, 2.2 to

corresponding 9.2 to 10%,

figures Italy 12.2

other 14.3%,

countries UK 8.2 to

10.1%.

ENERGY 9. See Brief no 5. Without in any demand restraint to be by consumers 1.5-2 free

world

oil

supply Iranian

shortfall production in 1978

1979

likely

around to be

mbpd It EEC was

(3-4%). around

currently to the

believed

3.5-4 if

mbpd. IEA and

5.6

mbpd fully

prior

revolution.

Even to

countries

implement

demand

restraint

measures

reduce/ u/ _

CONFIDENTIAL

,. J i n 11 i i o n

CONFIDENTIAL

onsumption NORTH/SOUTH 10. UNCTAD by 5% the a useful consensus even if on some gap issues, such as world oil market will remain tight. DIALOGUE V reached and

protectionism fundamental demanded and we by

commodities, of the

the

remains and

wide.on monetary

the syst

reforms the

international countries. inconclusive and will

economic

developing take the

However result be

there too

was

no

acrimony But the

should of The

not

t r a g i c a l l y . by the the to be oil

problems rises. tional at a

the next

LDCs

remain

exacerbated will be

price

major

North/South for UN the

argument 1980s

over (due

Interna adopted LDCs w i l l in and

Development

Strategy of the

and

beyond in

Special specific of

Session targets NIEO.

General

Assembly from the

1980).

The

want

for We

concessions shall of

developed for

countries

pursuit the

the

emphasise both LDCs

the and

need

f l e x i b i l i t y countries.

shared

responsibilities

developed

TRADE 11. Current account but d e f i c i t may of US will in f a l l 1980 owing (216 to slower growth 29.7 decline rise 1980 and

increased b i l l i o n owing again WEP). the to in

exports

rise

again -

b i l l i o n surplus but

1978, w i l l to

1979, oil 1980

210.9 price

b i l l i o n increases b i l l i o n a

1980 and

WEP).

Japanese imports

emergency 23.4 of

likely 28.5

(216.7 will be

1978,

b i l l i o n

1979, and

b i l l i o n

There

better But

balance the and net

surpluses on

d e f i c i t s

among

major

0ECD

countries.

d e f i c i t will

non-Summit from 29.9

0ECD b i l l i o n countries from to

countries 215.3 w i l l (0ECD

(including (WEP), 225.6 231

Protugal and the

Turkey) for

rise

b i l l i o n rise from

d e f i c i t to 240 232.5

non-oil

developing 0ECD

b i l l i o n to

b i l l i o n

(WEP)

figures

figures

b i l l i o n

b i l l i o n ) .

MONETARY 12. IMF No on

QUESTIONS specific i n i t i a t i v e s are contemplated. and among an Bank Work is in on hand in the o

the

Substitution UNCTAD the V

Account forced

Governors

monitoring on

Euro-Markets. the reform of

through

unacceptable system. The

resolution UK voted

international

monetary

against.

FOREIGN 12 JUNE

AND 1979

COMMONWEALTH

OFFICE

AND

HM

TREASURY

CONFIDENTIAL

CONFIDENTIAL

TOKYO SUMMIT ANNEX A

TABLE 1 : GNP/GDP GROWTH 1977 United S t a t e s Canada Japan West Germany France Italy U n i t e d Kingdom Seven m a j o r s 1978 3.9 3.4 5.6 3.4 3.0 2.2 3.0 3.9

% change on p r e v i o u s yea> 1979 2.7 3.4 5.5 3.8 3.3 3.6 0.5 3.3

4.92.7 5.4 2.6 3.1 1.7 1.9

4.0

TABLE 2 : CONSUMER PRICES 1977 United Canada Japan West Germany France Italy U n i t e d Kingdom Seven majors States 1978 7-6 8.9 3.9 2.6 9.2 12.4 8.6 7.0

% change on p r e v i o u s y e a r 1979 9.6 9.4

6.58.0 8.0 3.9 9.3 19.3 16.0

4.23.4 9.8 13.7 12.6 8.4

8.1

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CONFIDENTIAL

TABLE 3 : BALANCES ON CURRENT ACCOUNT 1977 United S t a t e s Canada Japan West Germany France Italy U n i t e d Kingdom Seven m a j o r s Other OECD T o t a l OECD OPEC Non-oil LDCs -15.3 3.9 10.9 3.6 3.? 2.3 0.8 - 4.8 -20.1 -24.9 26.3 -14.8 1978 -16.0 4-5 16.7 8.8

(3 1979 9.7 5.3 5.4 6.0 3.1 5.1 1.3 1.3 -15.3 -14.0 19.8 -32.5

4.15-7 0.5 15.3 - 9.9 5.4 2.2

-25.6

TABLE 4 : UNEMPLOYMENT RATES* 1977 United S t a t e s Canada Japan '..'est Germany France Italy U n i t e d Kingdom 5.7 7.2 5.8 7.1 8.1 2.0 1978 6.0 8.4 2.2 4.3 6.2 7.2 5.7

% of l a b o u r f o r c e 1979 ( L a t e s t 5.8 ( A p r ) 7.9 ( M a r ) 2.1 ( M a r ) 3.8 ( A p r ) 7.1 ( A p r ) 7-8 (Mar-, n s a ) 5.5 ( A p r ) month)

Rates a r e not comparable between c o u n t r i e s owing t o d i f f e r e n c e s of coverage and d e f i n i t i o n . Seasonally adjusted (except Italy).

CONFIDENTIAL

CONFIDENTIAL

THIS DOCUnENT I S T H E PROPERTY OF HER BRITANNIC MAJESTY'S GOVERNMENTB R I E F NO. 4 COPY N O . 1

13

JUNE

1979

V I S I T BY PRIME MINISTER OF ITALY 15 JUNE 1979 INTERNATIONAL ENERGY QUESTIONS B r i e f by the F o r e i g n and Commonwealth O f f i c e

P o i n t s t o make OIL 1. and oil ( a ) We must make t h e most o f t h e f o r t h c o m i n g European C o u n c i l Economic Summit t o f i n d a common a p p r o a c h Uo t h e p r e s e n t market s i t u a t i o n ( w h i c h t h e 26 June OP/iC meeting w i l l Italian views; full

;

difficult

probably

make v;or:;o). (b) and

We w o u l d welcome step,

as a f i r s t

t h e European C o u n c i l must e n s u r e t h i s i n t o 1980.

rapid

i m p l e m e n t a t i o n Of t h e March C o u n c i l ' s d e c i s i o n on 5/ i n 1979 and e x t e n d We a r e

demand r e s t r a i n t

l o o k i n g a t ways c f making the March d e c i s i o n more e f f e c t i v e , b u t have not y e r r e a c h e d f i r m conclusions:

/(c)

CONFIDENTIAL

CONFIDENTIAL

(c) ^

s o m e t h i n g must a l s o be done t o ease s p o t m a r k e t t h i s might simply drive

prices. '

We a r e s t u d y i n g t h e F r e n c h p r o p o s a l ' R o t t e r d a m m a r k e t b u t t h i n k i elsewhere. e f f o r t by a l l

f o r p r i c e c o n t r o l s on t h e t h e market concerted

a l t e r n a t i v e would be a s h o r t t e r m

Western consumers t o p e r s u a d e o i l companies t o keep

But h i g h p r i c e s o n l y r e f l e c t supply/ and v;e must t a c k l e t h e r o o t of t h e p r o b l e m ;

o u t of t h e s p o t m a r k e t . demand i m b a l a n c e s , (d) . wish and at

t h e Summit i s t h e r i g h t p l a c e t o i n d i c a t e o u r c o n t i n u e d be a f u l l discussion of this planned question

f o r a more g e n e r a l d i a l o g u e on e n e r g y w i t h t h e p r o d u c e r s , I hope t h e r e w i l l The G i r a u d / Y a m a n i m e e t i n g f o r 28 June may

Tokyo.

result

i n u s e f u l and c o n t i n u i n g t e c h n i c a l c o n t a c t s B u t an E'^C/OPEC d i a l o g u e b y i t s e l f

between OPEC ana

w o u l d n o t be

EEC members. sufficient. some s t a g e ; (e) to

The A m e r i c a n s and Japanese must be i n v o l v e d a t

i n Community e n e r g y p o l i c y t h e UK i n t e n d s t o p l a y a on t h e i r m e r i t s and s e e k i n g policies. c o o r d i n a t i o n o f members'

p o s i t i v e r o l e , d e a l i n g with proposals promote t h e e f f e c t i v e

NUCLEAR MATTERS ? . ( a )Nuclear . power w i l l have a grov/ing r o l e t o p l a y i n meeting

our energy r e q u i r e m e n t s . reactors 5 (b) responsibility

But t h e development o f n u c l e a r ~"

power

c o u l d be hampered by f u r t h e r a n x i e t y a b o u t t h e s a f e t y of n u c l e a r

f o r nuclear safety rests p r i m a r i l y problem, However we s h o u l d

within building

member s t a t e s b u t an i n t e r n a t i o n a l s t u d y o f t h i s on t h e IAEA w o u l d b e u s e f u l . that a i t does n o t e n a b l e moratorium; (c) Nuclear m

take care t o ensure

o p p o n e n t s o f n u c l e a r power t o p r e s s f o r

we welcome t h e i d e a p u t f o r w a r d at t h e March European

Council

t h a t t h e r e s h o u l d be g r e a t e r c o n s u l t a t i o n on n o n - p r o l i f e r a t i o n

developments

i n the

Indian Sub-continent and t h ei n r.he f r a m e w o r k o f

issue n a t u r e of

t o p i c s which

m i g h t be d i s c u s s e d

political

cooperation*

/Background

CONFIDENTIAL

CONFIDENTIAL

Background5. of

[ I n f o r m a t i o n w h i c h c a n f r e e l y be u s e d ] IEA assessment

The l a t e s t

suggests

that, with a

gradual b u i l d

up o f demand r e s t r a i n t b y c o n s u m e r s , t h e r e w i l l be a s h o r t f a l l 0.7 m i l l i o n b a r r e l s p e r day (mbd) ( o r 1%) i n f r e e - w o r l d o i lA

s u p p l i e s i n 1979*

5$ demand r e d u c t i o n t h r o u g h o u t 1980 w o u l d o f stock r e b u i l d i n g next year. The p r e s e n t

a l l o w a modest d e g r e e

p r i c e p o s i t i o n i s u n s t a b l e , w i t h a l l OPEC p r o d u c e r s o t h e r t h a n S a u d i A r a b i a c h a r g i n g p r e m i a above t h e " o f f i c i a l " light Arabian crude. These p r e m i a a r e l i k e l y into theo f f i c i a l price for t o be i n c o r p o r a t e d

p r i c e a t t h e OPEC m e e t i n g i n June, a n d f u r t h e r Contract prices are I n t h e spot market (whic

increases l a t e r i n the year are probable. a l r e a d y o v e r 50$ above l a s t y e a r ' s l e v e l . twice the equivalent o f f i c i a l prices.

a c c o u n t s f o r o n l y 3-5% o f s a l e s ) p r i c e s have r i s e n t o a b o u t

4.

The March E u r o p e a n C o u n c i l a d o p t e d an o i l demand

restraint The

t a r g e t f o r 1979 a m o u n t i n g t o 5 o f e x p e c t e d c o n s u m p t i o n . % UK s h o u l d be a b l e t o meet t h i s t a r g e t . energy savings i n t h e p u b l i c 5. sector.

The measures we have

t a k e n i n c l u d e b u r n i n g c o a l i n p l a c e o f o i l i n power s t a t i o n s , and

The F r e n c h P r e s i d e n c y have p u t f o r w a r d p r o p o s a l s f o r g r e a t e r -High s p o t p r i c e s certainly f o r OPEC p r i c e hawks, but we and o t h e r s ,

c o n t r o l over t h e spot market p r o p o s a l s . p r o v i d e a u s e f u l argument the but (a)

e s p e c i a l l y t h e Germans, a r e s c e p t i c a l a b o u t t h e p o s s i b i l i t y ( o r v a l u e ) o f t r y i n g t o c o n t r o l t h e Rotterdam s p o t market i n O t h e r p o s s i b i l i t i e s w h i c h we a r e . s t u d y i n g t e r m e f f o r t by a l l Western urgently, on w h i c h we have n o t y e t r e c e i v e d c o n c l u s i o n s , i n c l u d e a concerted short consumers t o ave each country fully o i l companies t o s t a y o u t o r t h e s p o t m a r k e t and ( b ) isolation.

persuade the

some k i n d o f v o l u n t a r y a l l o c a t i o n s y s t e m w h i c h implemented t h e a g r e e d 5/>' c u t s .

l e v e l o f o i l i m p o r t s which would a p p l y i f c o u n t r i e s

G.

Recent

i n t e r e s t i n oYP'indod consumer/produceri n order.to s t a b i l i s e CONFIDENTIAL

c o n t a c t s stems called The

initially for

f r o m a o . i u d i communique o f 28 F e b r u a r y , w h i c h the o i l market.

such c o n t a c t s

/European

CONFIDENTIAL

European term and

C o u n c i l i n March welcomed t h e

'-audi s t a t e m e n t .

A

d i a l o g u e w i t h p r o d u c e r s on e n e r g y m a t t e r s w o u l d be t o o u r l o n g

advantage, and t h a t o f o t h e r consumers, b u t we c a n n o t be s u r e

be on o f f e r , o r w h e t h e r i t w o u l d be on terms w h i c h we The e x t e n t t o w h i c h o t h e r p r o d u c e r s ( a n d t h e r e have b e e n some s i g n s The p r o d u c e r s , that W e toinsist our p a r t n e r s c o u l d a c c e p t .

that i t w i l l

support the Saudi c a l l o f second

i s doubtful

t h o u g h t s by t h e S a u d i s t h e m s e l v e s ) .

and p r o b a b l y t h e T h i r d W o r l d t o o , a r e l i k e l y on t h e New I n t e r n a t i o n a l Economic O r d e r .

d i s c u s s i o n o f e n e r g y s h o u l d be o n l y p a r t o f a w i d e r n e g o t i a t i o n The A m e r i c a n s have c o n s i d e r a b l e r e s e r v a t i o n s about producer-consumer c o n t a c t s and

c o n t i n u e t o p i n t h e i r hopes on S a u d i i n f l u e n c e w i t h i n OPEC. chose it t o use i t f o l l o w i n g t h e I s r a e l - E g y p t peace t r e a t y .

b e l i e v e t h e y e x a g g e r a t e c u r r e n t S a u d i i n f l u e n c e even i f t h e S a u d i s Nonetheless, i s important that the i n d u s t r i a l i s e d c o u n t r i e s s h o u l d show

t h e m s e l v e s r e a d y t o r e s p o n d t o any move t o w a r d s a d i a l o g u e b y t h e producers. The F r e n c h P r e s i d e n c y have had c o n t a c t s w i t h t h e t o a m e e t i n g on 28 June between S a u d i s , w h i c h have l e d t o agreement

G i r a u d and B r u n n e r , r e p r e s e n t i n g t h e EEC, and Yamani f o r OPEC, t o pave t h e v/ay f o r l o w - k e y , t e c h n i c a l d i s c u s s i o n s , w i t h t h e minimum o f p u b l i c i t y , f o r energy. on f u t u r e w o r l d s u p p l y and demand f o r e c a s t s b u t any s e n s i b l e of o i l and J a p a n e s e . T h i s w o u l d be a ' u s e f u l b e g i n n i n g ;

d i s c u s s i o n o f w o r l d s u p p l y and demand ( a n d so i n d i r e c t l y , p r i c e s ) must a t some s t a g e i n v o l v e t h e A m e r i c a n s T h e i r v i e w s c a n be s o u g h t a t t h e Summit.

7-

The F r e n c h have a l s o g i v e n p u b l i c s u p p o r t t o M e x i c a n I t i s u s e f u l t h a t an o i l p r o d u c e r has

ideas f o r

a UN e n e r g y f o r u m .

proposed w i d e r d i s c u s s i o n s on e n e r g y p r o b l e m s , b u t we do n o t know what s p e c i f i c o b j e c t i v e s t h e M e x i c a n s OPEC members y e t r e a d y t o a c c e p t w o r l d have i n m i n d , n o r a r e energy d i s c u s s i o n s . initiative For f o r a meeting But i t

o u r p a r t we have e n c o u r a r e d t h e V e n e z u e l a n M e x i c o , Norway and

t h i s summer o f OPEC and non-OPEC o i l p r o d u c e r s i n c l u d i n g ourselver--.,

Canada, w i t h t h e UK a c t i n g as h o s t .materialise.

remains t o be s e e n w h e t h e r t h i s w i l l

/8.

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8. It

[ i n f o r m a t i o n which

should

n o t be d i s c l o s e d ] have had much t i m e , b e f o r e o r questions. They a r e most o f i t f r o m t h e M i d d l e East i n t e r e s t s i n mind, contacts they

i s d o u b t f u l whether t h e I t a l i a n s oil,

after their elections, East. will

t o consider these

h e a v i l y d e p e n d e n t on i m p o r t e d e f f e c t i v e as y e t . they a r e handled With

T h e i r demand r e s t r a i n t measures have n o t been v e r y t h e i r Middle p r o b a b l y be i n f a v o u r o f p r o r i u c e r - c o n s u m e r c a u t i o u s l y and d i s c r e e t l y . provided

NUCLEAR MATTERS 9. The I t a l i a n Government has embarked on a s u b s t a n t i a l a b o u t 1 0 % , t o a b o u t 55%. nuclear

programme

o f 12000 M c a p a c i t y d e s i g n e d W o i l by ^9S^hy

t o r e d u c e i t s dependence I t has a l s o for i t s delayed t o provide fuel

on i m p o r t e d reactors.

i n v e s t e d i n t h e F r e n c h E u r o d i ^ programme But i t s i m p l e m e n t a t i o n

has been s u b s t a n t i a l l y t h e Government

because o f p u b l i c o p i n i o n and t h e r e s i s t a n c e o f r e g i o n a l and l o c a l Government m a t t e r s . safety 10. aspects. Signor A n d r e o t t i may t h e r e f o r e s h a r e t h e view recently E a r l i e r t h i s year appointed a c o m m i t t e e t o l o o k i n t o t h e p r o b l e m s o f t h e programme, and a l s o

expressed

b y Mr S c h m i d t t h a t t h e d e v e l o p m e n t o f n u c l e a r f o r an i n t e r n a t i o n a l t h e concern initiative that

power

c o u l d be hampered b y p u b l i c d o u b t s a b o u t r e a c t o r s a f e t y , a n d welcome his recent proposal safety. on r e a c t o r n o t lead He may a l s o s h a r e t h i s should

t o demands f o r a m o r a t o r i u m 11.

while the study i s i n progress.

The D e p a r t m e n t o f Energy v / i l l be recommending t h a t t h e Prime i n general terms Chancellor Board. c f the non-proliferation o f the o t h e r Schmidt's pending f u r t h e r d i s c u s s i o n , p e r h a p s a t t h e Summit and a t

M i n i s t e r s h o u l d welcome initiative t h e June m e e t i n g

o f t h e IAEA G o v e r n i n g Discussion

12. ' ( N o n - p r o l i f e r a t i o n ) . arrangements i s complicated members t o a n y t h i n g w h i c h

because o f t h e s e n s i t i v i t y

seems to c o n f e r an i n d u s t r i a l o r

/commercial CONFIDENTIAL

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c o m m e r c i a l advantage on B r i t a i n states. who The most p r o m i s i n g

and France as n u c l e a r weapon The I t a l i a n s , understanding

way forward may l i e i n e s t a p l i s h i n g

f r o m d i s c u s s i o n s may be a better o f n o n - p r o l i f e r a t i o n we concerns.

a d i a l o g u e among t h e N i n e on n o n - p r o l i f e r a t i o n . are anxious n o t t o be e x c l u d e d approach. and s e c u r i t y a t t r a c t e d by t h i s of the p o l i t i c a l By o b t a i n i n g importance

w o u l d hope t o r e d u c e t h e chances t h a t t h e Euratom T r e a t y w i l l be used t o o v e r - r i d e o u r n o n - p r o l i f e r a t i o n

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THIS DOCUMENT I S THE PROPERTY OF HER BRITANNIC MAJESTY'S GOVERNMENT B R I E F NO 5 13 JUNE 1979 V I S I T BY THE PRIME MINISTER OF ITALY, 15 JUNE 1979 COPY NO 1

REFUGEES FROM INDO-CHINA B r i e f by t h e F o r e i g n and Commonwealth O f f i c e

POINTS TO MAKE | HONG KONG 1. Hong Kong i s a t s a t u r a t i o n p o i n t . Can I t a l y do more t o h e l p

Hong Kong, from where s h e i s so f a r t a k i n g no r e f u g e e s ? CONFERENCE 2. Dr Waldheim welcomes Mrs T h a t c h e r ' s c a l l for a special conference He may

but UNHCR's i d e a s o f p r e l i m i n a r y c o n s u l t a t i o n s l a c k v i s i o n . be c o n s t r a i n e d by h i s own mandate f o r r e f u g e e Dr Waldheim things moving.

r e l i e f and r e s e t t l e m e n t .

should be u s i n g t h e a u t h o r i t y o f h i s own p o s i t i o n t o g e t

3. I t a l y can h e l p by e m p h a s i s i n g t o Dr Waldheim ^ c o n f e r e n c e and by s a y i n g so p u b l i c l y . VIETNAMESE POLICY 4.

i t supports a

U n l e s s V i e t n a m e s e p o l i c y changes, t h e problem w i l l g e t worse. a S o v i e t Deputy

We have l e f t t h e Vietnamese i n no doubt o f what we t h i n k o f t h e i r b e h a v i o u r and have a l s o spoken t o the R u s s i a n s ; F o r e i g n M i n i s t e r h a s j u s t been i n London. d i r e c t l y t h r o u g h i t s Embassy i n H a n o i ? r e p r e s e n t a t i o n s a t a high l e v e l , both j o i n t l y Can I t a l y r e i n f o r c e t h e s e i n t h e Nine, and

5. rest

Vietnam w i l l u s e i t s l i m i t e d agreement w i t h UNHCR ( a c o n t r o l l e d f o r f a m i l y r e u n i f i c a t i o n ) a s a "con t r i c k " t o convince t h e this. o f the w o r l d t h a t i t i s now c o l l a b o r a t i n g f u l l y w i t h t h e We must n o t l e t them g e t away w i t h /ASEAN - 1 - CONFIDENTIAL

emigration

i n t e r n a t i o n a l community.

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ASEAN 6. The T h a i s and M a l a y s i a n s a r e a t t h e i r w i t s ' end t o cope w i t h The M a l a y s i a n s and I n d o n e s i a n s now r e f u s e t o to land. The R e f u g e e s P r o c e s s i n g C e n t r e , though the refugee f l o o d .

a l l o w more boat people

which may be s e t up on an I n d o n e s i a n i s l a n d i s o n l y a p a l l i a t i v e , every l i t t l e h e l p s . THAI POLICY 7. I am h o r r i f i e d a t t h e T h a i s ' d e c i s i o n t o push thousands o f death.

Cambodians back a c r o s s t h e f r o n t i e r t o m i s e r y and p r o b a b l y T h i s i s a s e p a r a t e problem but we cannot anything t o prevent i t ? BACKGROUND ITALIAN POLICY ignore i t .

Can we do

8.

The I t a l i a n r e s p o n s e

t o t h e Prime M i n i s t e r ' s c a l l f o r a c o n f e r e n c e they w i l l probably go a l o n g w i t h

has been g e n e r a l l y s y m p a t h e t i c ; the m a j o r i t y o f the Nine.

The m a t t e r i s on t h e agenda f o r t h e meeting i n P a r i s on 17-18 June.

M i n i s t e r i a l P o l i t i c a l Co-operation 9.

I t a l y ' s highest p r i o r i t y i n refugees i s as a reception centre

f o r J e w i s h r e f u g e e s from t h e S o v i e t Union, a t t h e r a t e o f 5,000 a month. They have agreed t o t a k e 100 r e f u g e e s from M a l a y s i a and T h a i l a n d

and have s a i d t h e y w i l l c o n s i d e r t a k i n g some from Hong Kong i n any f u r t h e r group. T h e i r c o n t r i b u t i o n s t o UNHCR funds a r e low, b u t

they a r e c o n s i d e r i n g a t o t a l o f about 0.4 m i l l i o n . NUMBER OF REFUGEES 10. About 350,000 a r e a w a i t i n g r e s e t t l e m e n t . The Americans and The

C h i n e s e have a l r e a d y t a k e n over 200,000 each f o r s e t t l e m e n t . F r e n c h have r e c e i v e d 50,000, t h e C a n a d i a n s 9,200. and

15,000 and Hong Kong

The UK had a l r e a d y a c c e p t e d 1,573 Vietnamese by 22 May, Over 51,000 r e f u g e e s a w a i t r e s e t t l e m e n t

350 o t h e r I n d o - C h i n e s e .

i n Hong Kong. CONFIDENTIAL /11.

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CONFIDENTIAL 11. We have a c c e p t e d o v e r 1,000 from t h e M Sibonga ( t o be o f f s e t , V

a s f a r a s p o s s i b l e , a g a i n s t t h e unused p a r t o f a quota o f 1,500 agreed by t h e p r e v i o u s Government). I t h a s been made c l e a r t h a t

f u t u r e s h i p s ' c a s e s w i l l be c o n s i d e r e d on t h e i r m e r i t s , b u t r e f u g e e s from t h e MV Roach Bank w i l l be a c c e p t e d , t a k e them. VIETNAMESE POLICY 12. R e l a t i o n s w i t h C h i n a a r e u n l i k e l y t o improve. Discrimination The i f t h e Taiwanese w i l l n o t

a g a i n s t Vietnam's C h i n e s e m i n o r i t y i s u n l i k e l y t o s t o p . Vietnamese a r e r e s e n t f u l o f f o r e i g n a d v i c e . THE 13. UNHCR-VIETNAM AGREEMENT

The Vietnamese a u t h o r i t i e s a r e c l a i m i n g t h a t arrangements under

an agreement o f 30 May w i t h t h e UN Deputy High Commissioner t o a l l o w " r e f u g e e s " t o l e a v e Vietnam d i r e c t l y t o c o u n t r i e s o f f i n a l s e t t l e m e n t show t h e i r w i l l i n g n e s s t o c o - o p e r a t e w i t h the world community

T h i s p r o p o s a l o n l y c o v e r s t h o s e who a l r e a d y have o f f e r s o f s e t t l e m e n t p l a c e s , b e c a u s e o f l i n k s w i t h r e l a t i v e s a l r e a d y i n t h e USA e t c ; a t p r e s e n t l e v e l s o f o u t f l o w t h e 20,000 t o 30,000 who q u a l i f y about two weeks' flow o f boat THE 14. PRIME MINISTER'S PROPOSAL Dr Waldheim h a s r e a c t e d p o s i t i v e l y , b u t the UNHCR who i s soundings w i t h i n t e r e s t e d governments, i s r e l u c t a n t t o without r e c e i v i n g advance p l e d g e s o f people. ^ equal

conducting

convene t h e c o n f e r e n c e

r e s e t t l e m e n t and f i n a n c i a l the UK.

c o n t r i b u t i o n s from major c o u n t r i e s l i k e

U n l e s s Dr Waldheim c a n be p e r s u a d e d t o t a k e t h e i n i t i a t i v e , w i l l be d e l a y e d , o r w i l l be o f i n s u f f i c i e n t scope.

a conference ASEAN

The Refugee P r o c e s s i n g C e n t r e , i f i t comes about, w i l l be f o r o n l y a maximum o f 10,000 people a l r e a d y a c c e p t e d T h a i l a n d i s h a r d put t o i t t o c o n t a i n t h e l a t e s t across i t s land f r o n t i e r . the Khmer Rouges may k i l l f o r settlement. f l o o d o f Cambodians although

The p o l i c y i s now t o t u r n them back, them. CONFIDENTIAL3

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BRIEF NO 6

13 JUNE 1979

COPY NO

A

1

THE PRIME MINISTER'S MEETING WITH SIGNOR ANDREOTTI : 15 JUNE 1979 (DEFENSIVE)

AFRICAN QUESTIONS

P o i n t s t o Make Rhodesia [Defensive]

Consultat ions/Timetable 1. to 2.

UK p o l i c y was e x p l a i n e d i n o f f i c i a l June. be e x p e c t e d

level bilateral [21/22

talks June].

on A f r i c a i n Rome o n 7 / 8

F u r t h e r s t e p s on R h o d e s i a n o t

by t i m e o f European C o u n c i l m e e t i n g

Government w i l l d e c i d e

on b e s t way f o r w a r d i n l i g h t o f Lord Harlech visiting Front Line t o meet P a t r i o t i c Front (returning

c o n s u l t a t i o n s now u n d e r way. S t a t e s and N i g e r i a a n d e x p e c t s 28 J u n e ) : may v i s i t Liberia Zaire. Importance

other countries l a t e r . o f Lusaka Commonwealth

Mr Luce t o v i s i t Coast, Meeting.

( h o s t t o OAU Summit i n J u l y ) ,

Senegal, I v o r y

U S Policy

3.

P r e s i d e n t i a l d e t e r m i n a t i o n showed d i f f e r e n c e o f emphasis But s i m i l a r

o v e r R h o d e s i a n e l e c t i o n s a n d Muzorewa Government. p r a c t i c a l a p p r o a c h t o common o b j e c t i v e . Sanctions 4.

E x p i r y o f UK l e g i s l a t i o n i n November. not t o follow

E a r l i e r l i f t i n g by

US w o u l d make i t d i f f i c u l t

suit. /Evacuation

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E v a c u a t i o n o f UK and I t a l i a n 5. Rhodesia

Nationals Each c o u n t r y s h o u l d plan

not about t o c o l l a p s e .

as n e c e s s a r y . Namibia 6. to 7. Mr Luce r e p o r t e d t h a t a l l t h e p a r t i e s a r e s t i l l the o r i g i n a l P r o p o s a l . The r e m a i n i n g We must b u i l d on t h i s . committed

d i f f e r e n c e s c a n be overcome by n e g o t i a t i o n c a n be r e s t o r e d . instance

i f t h e r i g h t atmosphere o f c o n f i d e n c e 8.

The F i v e w i l l resume n e g o t i a t i o n s , i n t h e f i r s t

w i t h t h e South A f r i c a n s , i n t h e n e a r f u t u r e . Background Rhodesia [1. [Not f o r u s e ] June, an British

I n t a l k s w i t h h i s I t a l i a n c o u n t e r p a r t s on 7 / 8 The I t a l i a n s Cooperation

FCO Under S e c r e t a r y gave a f u l l d e s c r i p t i o n o f p r e s e n t views on R h o d e s i a . through P o l i t i c a l m e e t i n g s o f t h e Nine.

a r e kept r e g u l a r l y up t o date There a r e

no s p e c i a l p o i n t s t o r a i s e w i t h S i g n o r A n d r e o t t i . 2. The I t a l i a n s have f a i r l y f r e q u e n t c o n t a c t w i t h Mr Mugabe. (perhaps They

They a r e i n c l i n e d t o sympathise

with the P a t r i o t i c Front

i n p a r t t o a v o i d c l a s h i n g w i t h Communist o p i n i o n a t home). w i l l w i s h t h e UK t o c o n s u l t w i d e l y over R h o d e s i a , an accommodation between i n t e r n a l and e x t e r n a l p a r t i e s .

and t o promote

US P o l i c y 3. I t a l i a n o f f i c i a l s have s a i d t h e y hope t h e US Government w i l l

c o n t i n u e t o be c l o s e l y i n v o l v e d i n e f f o r t s t o f i n d a R h o d e s i a n settlement. /Sanctions

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Sanctions 4. S p e c i a l laws were p a s s e d i n I t a l y t o e n f o r c e sanctions.

T h e i r r e p e a l might meet s t r o n g o p p o s i t i o n .

The I t a l i a n Govern

ment would need time t o p r e p a r e t h e ground.] [For use as necessary]

Evacuation 5. T h e r e a r e about 2000 I t a l i a n n a t i o n a l s i n R h o d e s i a . We

have t o l d t h e I t a l i a n Government t h a t we do n o t have c o n t i n g e n c y plans to a s s i s t with t h e i r evacuation. l i k e l y t o be needed i n t h e s h o r t term. the UK's a b i l i t y t o a s s i s t would be l i m i t e d . A mass e v a c u a t i o n i s not Should t h e need arise,

200,000 o r more p o t e n t i a l e v a c u e e s

Present 6. His for

Situation f e e l i n g h i s way, and h a s not y e t t a k e n

Muzorewa i s s t i l l

d e c i s i v e a c t i o n t o promote i n t e r n a l change, eg t o c o n s t i t u t i o n . o f f e r s o f r e c o n c i l i a t i o n w i t h F r o n t L i n e S t a t e s and amnesty g u e r i l l a s n o t t a k e n up. On t h e o t h e r hand ZANU and ZAPU a r e t h e i r Addis Ababa "agreement" does not p r o v i d e integration.

achieving l i t t l e ;

basis for effective

Namibia 7. the the The F o r e i g n M i n i s t e r s o f the F i v e d i s c u s s e d Namibia d u r i n g North A t l a n t i c new i n i t i a t i v e C o u n c i l i n The Hague l a s t month. is still I t was The l i k e The s u b s t a n c e o f

agreed t h a t n e g o t i a t i o n s s h o u l d be resumed.

(12 June) b e i n g d i s c u s s e d .

l i h o o d o f a S e c u r i t y C o u n c i l meeting on 18 June n e c e s s i t a t e s some e a r l y p u b l i c move t o demonstrate t h a t t h e UN p l a n c a n s t i l l be put into effect.

/8.

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-3

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8.

The

South A f r i c a n s and

the p o l i t i c a l groups i n Namibia i n h i s R e p o r t of 26 was

have r e j e c t e d Dr Waldheim's p r o p o s a l s February no o u t s i d e and i n s i d e Namibia. Mr and

on the q u e s t i o n of UN m o n i t o r i n g o f SWAPO t r o o p s Luce c o n c l u d e d t h a t t h e r e The F i v e should parties. find alternatives

j u s t i f i c a t i o n f o r g i v i n g up. to r e s t o r e c o n f i d e n c e for Mr Use

to Dr Waldheim's p r o p o s a l s igned [Not 9.

promote a s e r i e s of measures d e s

among the

Luce recommended i n h i s r e p o r t t o the S e c r e t a r y of S t a t e r e p r e French Led Apart from t h e

t h a t the n e g o t i a t i o n s be resumed by a s i n g l e n e g o t i a t o r s e n t i n g the F i v e w i t h a broad mandate. our p a r t n e r s i n the F i v e d i d not a g r e e to t h i s a p p r o a c h .

by the Americans, t h e y have argued f o r a c o n t i n u a t i o n of a They a r e r e l u c t a n t to extend d i s c u s s i o n beyond the two versial 10. i s s u e s i n Dr Waldheim's R e p o r t . of

joint

n e g o t i a t i n g team i n c l u d i n g r e p r e s e n t a t i v e s from a l l f i v e c o u n t r i e s . c o n t r o

I n view of the need to produce some evidence few days i f , t o g e t h e r w i t h the US and

progress we

i n the next

France,

a r e to be on good

ground i n opposing c a l l s f o r s a n c t i o n s i n have agreed to drop our i n s i s t e n c e on The substance f o r the moment.

the S e c u r i t y C o u n c i l we New York Contact

the appointment of a s i n g l e n e g o t i a t o r Group a r e now

(12 June) w o r k i n g on the

of the next round of n e g o t i a t i o n s . 11. South A f r i c a ' s d e s i r e to e s t a b l i s h c l o s e r r e l a t i o n s Conservative Lord a d m i n i s t r a t i o n , w i l l g i v e HMG with

the new

greater

i n f l u e n c e over the South A f r i c a n Government t h a n our i n the F i v e . Five i n launching the new

partners sees

C a r r i n g t o n w i l l p r o b a b l y speak f o r the round o f n e g o t i a t i o n s when he June.]

the South A f r i c a n F o r e i g n M i n i s t e r i n London on 20

F o r e i g n and

Commonwealth O f f i c e

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M I S DOCUMENT IS THE PROPERTY OF HER BRITANNIC MAJESTY'S GOVERNMENT

BRIEF N 7 O 13 JUNE 1979

COPY NO

VISIT BY THE PRIME MINISTER OF ITALY [ 1 |j JUNE 1979

BILATERAL QUESTIONS

B r i e f by the Foreign and Commonwealth O f f i c e

( )3

Fuel supplies by Mobil (UK) to I t a l i a n Charter Company, I t a v i a , a t G3twick A i r p o r t

(b)

Police Co-ooeration

(a) 1.

ITA"IA: POINTS TO MAKE (only i f raised) Glad that ITAVIA has managed t o f i n d f u e l so f a r f o r i t s g r e a t l y expanded

1979 charter programme, and hope t h a t the f i r m w i l l continue t o do so. 2. HHG are leaving i t t o the o i l companies t o decide on a l l o c a t i o n and pricir>.< officially.

of the f u e l a v a i l a b l e . The Government cannot therefore intervene

ESSENTIA PACTS (Parar. 3~5 can be used f r e e l y ) 3.. I n 1974 during the 3-day week the I t a l i a n s were the only ones to threaten retaliation against the B r i t i s h Government's r a t i o n i n g cystcm (which affected

rty congress, haa been that the party should e i t h e r a c t u a l l y p a r t i c i p a t e i n government or go i n t o opposition. A majority of C h r i s t i a n Democrats oppose any

/co'iit iion

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coalition with the PCI. J. The noct significant feature:; o f tho r e s u l t s o f the General E l e c t i o n or.

J-M June Were an follows: a) The Communists f e l l bad; a few point:; as had been p r e d i c t e d . This was the f i r s t time they have l o s t ground since the war. But they s t i l l remain above the psychologically important threshold o f J / * O" b) the C h r i s t i a n Democrats held up w e l l , though less w e l l than they expected. Their share o f the vote dropped h a l f a percent; they nevertheless gained 3 seats i n the Senate but l o s t one i n the Chamber of Deputies; c) the S o c i a l i s t s gained several seats but d i d not s u b s t a n t i a l l y improve t h e i r percentage o f the vote; d) s i g n i f i c a n t gains i n terms o f seats were registered only by the smaller p a r t i e s . The Social Democrats, Republicans and L i b e r a l s The Radical ( l e f t - w i n g a n t i - E s t n b l i s l

a l l improved t h e i r p o s i t i o n . ment Party

J won about y,o o f the vote and w i l l now have 18

representatives i n the Chamber against k i n 1976; e) the turnout, a t 89.9/ s the lowest ever recorded i n a postw

war I t a l i a n e l e c t i o n ( v o t i n g i s compulsory). h. These r e s u l t s arc inconclusive. On past form i t w i l l take k to 6

weeks f o r a new government to be formed and i t i s impossible to p r e d i c t i t s eventual form. A change i n the d i r e c t i o n o f I t a l i a n p o l i t i c s can The good showing o f the smaller only be produced i f e i t h e r the C h r i s t i a n Democrats or the Communists can be l e f t unambiguously i n opposition. centre parties, together with the decline i n the Communist vote, could make i t marginally easier t o form a stable c o a l i t i o n o f the centre ( i e i n c l u d i n g the C h r i s t i a n Democrats) l e a v i n g the Communists i n opposition. But such a government would lack a majority without S o c i a l i s t support. The S o c i a l i s t s have not yet declared t h e i r i n t e n t i o n s , but t h e i r leader C r i x i has implied t h i t a c o n d i t i o n o f hi:; support for such a c o a l i t i o n would be the replacement o f Aii'ir':otti as Primu Minister-. There are oth>

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candidates i n the C h r i s t i a n Democrat leadership who could f i l l Minister.

this

r o l e , including the Party President, P i c c o l i , and F o r l a n i , the Foreign

5.

Signor Andreotti i s expected

to bo the f i r s t to be i n v i t e d , i n duo For the time being he continues i n

course, to form a new government. power on a caretaker basis. 6.

The Elections to the European Parliament took place i n I t a l y on 10 The detailed r e s u l t s are a t Annex C. At 85.9?i the turnout was The

June.

lower than that f o r the general e l e c t i o n the previous week.

r e s u l t s o f the Euro-Elections confirm the trends apparent i n the General E l e c t i o n , p a r t i c u l a r l y the drop i n the Communist vote and the swing towards the smaller p a r t i e s . The f a c t that the C h r i s t i a n Democrats d i d less w e l l than i n the General E l e c t i o n suggests that voters are less a f r a i d than i n the past that f a i l u r e to vote Christian Democrat v / i l l l e t the Communists i n t o government.

THE ECONOMY 7.

The continuing p o l i t i c a l u n c e r t a i n t y means that no serious decisions The economy

on economic p o l i c y are l i k e l y to be taken before the autumn. i n d u s t r i a l production are encouraging.

continues to perform w e l l on the'external f r o n t , and recent figures on But there i s s t i l l considerable unease about the rate o f i n f l a t i o n (now at nearly 14JJ), and the i n d u s t r i a l scene i s g e t t i n g tenser as negotiations on new wage c o n t r a c t s , most o f which s t i l l have to be completed, reach a c r i t i c a l stage. The v i s i t o f an IMF team for routine consultations i n early A p r i l was the occasion f o r some severe warnings about i n f l a t i o n a r y prospects, and there have recently been rumours that I t a l y i s t o seel: a 5US1 b i l l i o n IMF c r e d i t so that the Government can blaiiethe conditions which would be attached t o such a loan for the implementation o f r e s t r i c t i v e p o l i c i e s which i t knows are necessary The Government w i l l o f but which i t would i t s e l f be unable to introduce. n a t i o n a l o i l price increases.

course be p a r t i c u l a r l y worried about the economic impact o f recent i n t e r

Foreign and Coatoonwealth Office < 13 June 1979 CONFIDENTIAL

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ANNEX A

PERSONALITY NOTES ON SIGNOR ANDREOTTI AND SIGNOR FORLANI

Signor Andreotti 1. Signer G i u l i o A n d r e o t t i i s 60 and i s married with several c h i l d r e n . today.

He i s perhaps the cleverest and coolest p o l i t i c a l loader i n I t a l y he has held o f f i c e i n most governments since 19^7.

A man o f government rather than o f the C h r i s t i a n Democrat Party machine, He has been President of the Council (Prime M i n i s t e r ) f o r 2 long stretches (5 governments) and has presided over c e n t r e - r i g h t and c e n t r e - l e f t c o a l i t i o n s as w e l l as single party C h r i s t i a n Democrat governments. His l a t e s t tenure o f the Premier ship (1976 to present) has been notable f o r h i s s k i l f u l management o f parliamentary a l l i a n c e s , i n v o l v i n g the support o f the I t a l i a n Communist Party, without making serious concessions to the l a t t e r . 2. I n 1978 Sgr A n d r e o t t i won j u s t i f i a b l e praise f o r h i s calm and I n the recent

courageous handling o f the Moro kidnapping and murder.

e l e c t i o n s , he won more preference votes (whereby e l e c t o r s may express a personal preference on p a r t y l i s t s ) than any other parliamentary candidate. But despite these impressive achievements, h i s c r i t i c s , p a r t i c u l a r l y the I t a l i a n S o c i a l i s t Party, are now t r y i n g to unseat him on the grounds that a fresh, more dynamic leader i s required. His changes o f s u r v i v i n g as Prime M i n i s t e r i n the end cannot a t present be regarded as highe