Part 27 (1/2)

I had two problems over the rebate, both significant for how our relations.h.i.+p with Europe under my leaders.h.i.+p could develop. The first was the near-hysterical sorry, correct that truly hysterical behaviour of the Eurosceptic media. Papers with a combined daily circulation of around eight million a situation unique in Europe in terms of pervasion were totally, wildly and irredeemably hostile to Europe, misrepresented what Europe was doing and generally regarded it as a zero-sum game: anything that pleased Brussels was bad for Britain. The Murdoch papers were especially virulent. Much of the media had become like that under Mrs Thatcher, and in time I came to see the sentiment she engendered as the single worst legacy that she bequeathed Britain (though on the whole she was undoubtedly a great prime minister).

The myth developed and abounds today that she was always like this. She wasn't. In 1979 and 1983 particularly, she had been the pro-Europe candidate for prime minister. At the time the Mail Mail was in favour, as was the was in favour, as was the Telegraph Telegraph. But when Mrs Thatcher turned sceptic, she infected her media supporters and by 2005 it had become a leitmotif of a large part of British journalism.

In general terms, for me, Europe was a simple issue. It was to do with the modern world. I supported the Europe ideal, but even if I hadn't, it was utterly straightforward: in a world of new emerging powers, Britain needed Europe in order to exert influence and advance its interests. It wasn't complicated. It wasn't a psychiatric issue. It was a practical question of realpolitik.

I regarded anti-European feeling as hopelessly, absurdly out of date and unrealistic. It was also the product of a dangerous insularity, a myopia about the world that I thought affected adversely the whole psychology of the country. It was a kind of post-empire delusion.

It was bolstered over a time when the American right who rather despised European feebleness on foreign policy (and the Brussels bureaucracy was of course a byword) got together with the British right and constructed an argument that was a plaything for the US but a dangerous cul-de-sac for the British. This was the idea that somehow we should remain close allies of the US in contradistinction to being key partners in the EU.

Of course, this was a delusion as well. The US was so much more powerful in terms of economics and politics than the UK that such a dependence suited them but not us. It was also absolutely apparent to me that if we had reach in Europe, we were treated more seriously in Was.h.i.+ngton.

Moreover, in the rest of the world a Britain semi-detached from Europe was regarded as odd, part of British eccentricity, something to be amused by, a 'good old Brits' type of thing which I really detested. I recall visiting Lee Kuan Yew the smartest leader I think I ever met in Singapore in 1995 when I was Leader of the Opposition. He was something of a bete noire for the left. Rather to his surprise, I didn't ask him about democracy in Singapore. Since I had heard tell of how clever he was and any fool could see what he had achieved in Singapore was one of the greatest creations of modern political imagination, I asked him simply: Tell me how to win and how to govern.

He grunted, paused for a moment and then basically laid it out for me. His advice on governing was: keep the Thatcher reforms but get rid of this madness on Europe. 'I've told Margaret she's crazy on this,' he said. 'Britain can't afford to be out of Europe in the world as it is today. It's just not realistic.' Much later, the wonderful Indian prime minister Manmohan Singh told me the same thing. The Chinese were too polite and formal to say it quite so plainly, but it was obvious that's what they thought too.

Quite why Britain had taken this Eurosceptic att.i.tude so much to heart was a curious question. My theory but this may be total nonsense is that our problem with Europe is that we didn't invent it; or at least weren't a founding member. Then when Harold Macmillan sensibly decided we should join, de Gaulle said, 'Non.' This, combined with the strong imperial feelings that still lurked beneath the surface of the British psyche part superiority complex, part insecurity complex gave us a national narrative about the EU that was deeply unhelpful.

Of course, Europe had its own delusion: that the way to make Europe stronger was simply to integrate its decision-making processes. In other words, 'pro-European' opinion was in favour of more qualified majority voting, more powers to the European Parliament, more areas for European legislation, etc. It was a focus that was essentially const.i.tutional, and this didn't help either. It became, in time, a way of avoiding the real issue affecting European strength: how to make strong policy decisions that took Europe in the right direction. People wanted endless debates about the technical framework, tending to shy away from the core political questions: to liberalise our economy or not; to be strong players in defence or not; what sort of foreign policy, and so on.

What all this meant was that the British delusion a prejudice was sustained by objective material it found in the European delusion. There were criticisms of Europe that were entirely valid, but none of them should have resulted in our separating ourselves from Europe. They gave the Eurosceptics solid and well-founded points to make about Europe's direction, and their negativity more or less dominated the British debate.

Also, by this time the British rebate had a.s.sumed a mythical, almost cult status in the 2005 budget negotiation. To challenge it was like introducing Darwin to an ardent creationist. In the early years, Britain had paid a disproportionate amount under the then basis for calculating contributions to the EU budget. In 1983, Mrs Thatcher secured a rebate on a complicated formula, but with a simple purpose: to reduce the UK contribution and make it more proportionate. She had dug in hard; and this had become part of hallowed mythology.

As Europe enlarged, the formula which at that time had barely compensated Britain for the unfairness worked in such a way that it then became unfair to the others. This was not hard to see. The figures were there. Agreed. Clear. In pounds, s.h.i.+llings and pence. Or euros.

But none of this mattered in the UK debate. The rebate was untouchable. To question it was to betray the nation. To a.n.a.lyse the figures was itself to push Britain down the slippery slope. The Spanish Inquisition would have afforded more leeway to an apostate.

I said there were two problems with the rebate issue. The other was Gordon. He was taking a very hard line and I knew he would have to be carefully managed. There were already numerous reports suggesting he was having to 'stop' me giving it all away. Needless to say, Rupert Murdoch's papers were in full flow. So I thought it was going to be a darn sight easier to navigate my way through if I were the pilot. The Luxembourg deal was not a bad one; it wasn't quite good enough; I could do better. And I could do it with much greater facility if I were in charge of the negotiations. It was a real gamble of course, and it raised the stakes of my own presidency hugely. If I failed it would be very d.a.m.ning, but if I succeeded it would be a big achievement.

On 22 June, just after the Luxembourg summit had ended without agreement, Jean-Claude addressed the European Parliament as the outgoing president. I was due to address them next day as the incoming president. Jean-Claude, who the MEPs thought had been very badly treated, got a rousing reception. He was a true European. He had been let down by Perfidious Albion. He had fought the good fight, and the European Parliament, a bit like the Labour Party, likes nothing more than a valiant loser. He got a standing ovation, gave a very federalist address and basically accused those who didn't agree of undermining Europe.

It wasn't a great scene-setter for my visit the following day. Having heard from the shocked and outraged father of the kidnapped maiden, so cruelly violated, they were now going to listen to the person what did it.

It was a very significant occasion for me. I was a three-time election winner (which made some admire me, and some resent me especially on the left, since they took the view that a progressive leader who won elections was therefore almost certainly unprincipled); I was, after Iraq, a divisive figure; I had not got Britain to join the euro. Though my general posture was pro-European, I took care not to go beyond what was reasonable for British opinion. This meant I was slagged off by the right for being pro-European and by the left for being insufficiently so. But it allowed me to govern and to move things forward where I could.

And so I did, and with Jacques Chirac launched Europe's common defence policy. As president in 1998 I had actually chaired the Council which brought the euro into being (I was being a trifle facetious a few pages ago), and managed to negotiate the appointment of Wim Duisenberg as president of the European Central Bank a mess of a negotiation, by the way, where French pride ran into Dutch obstinacy and collided with German interests, represented by the great (but by then somewhat fading) Helmut Kohl. I had been instrumental in the Lisbon process, the first serious attempt to put European economic reform within a coherent framework of action, with limited but still real success. I had weaved my way through three major European treaties Amsterdam, Nice and the Rome Const.i.tutional Treaty all of which could easily have pushed Britain back to the margins of Europe where we had languished from 1992 to 1997. Instead, Britain remained pretty much at the heart of things.

Most of all, in June 2004 I had organised opposition to the French/German demand that the Belgian prime minister Guy Verhofstadt become president of the Commission, and instead got Jose Manuel Barroso appointed. This was the first time that the twin-engine motor of Europe had been stalled in respect of such a big issue. My relations.h.i.+p with Gerhard Schroeder never recovered. Jacques Chirac took it more philosophically. But Barroso was plainly the better choice if you wanted Europe to reform in a non-federalist direction. However, the point is that without that relations.h.i.+p with other leaders, without Britain being mainstream and not marginalised, it would never have happened. It was, in fact, a real object lesson on why it is important to stay at the centre of things. As a result of being in the middle, we could achieve. On the periphery, counting for nothing, we achieve nothing.

Of course, there was also the fact that I was criticised by the pro-Europe lobby for not being sufficiently 'courageous' in taking Britain into the euro. In truth, this was nothing whatever to do with courage or the lack of it. Nor was it to do with Gordon's opposition. At first, indeed in 1997, he had been the one wanting a more pro-single-currency position and I was resisting. My problem with the euro was very simple. In principle, I was in favour and for me the politics were clear: better to join and be full players in Europe's economic decision-making. But I also knew that the politics were also very clear in another direction. It is, after all, as I used to say to my folk, an economic proposition. It is called economic and monetary union. Unless it was economically plain that it would be good for Britain, it was simply not politically sellable, i.e. the political problem was the economics. The trouble was the economic case was at best ambiguous; and certainly not beyond doubt. At the time of the 2001 election, I thought it conceivable the economics would s.h.i.+ft decisively in favour and I was absolutely determined that if they did, I would chance it all on a referendum. My disagreement with Gordon was that he was expressing himself negatively on the euro. I was always saying, Even if we don't join and maybe especially if we don't, for reasons of diplomacy always sound positive. If the economics had changed, I would have gone for it. They didn't. And for me, that was that. (Just for the record, it is also completely untrue that I offered to stand down if Gordon agreed to try to take us into the single currency.) So, in summary, I had a record which gave me supporters and detractors, but right at that moment on 23 June 2005, the latter outnumbered the former.

The speech ended up as one of my more important ones. I wrote it myself, sat at my desk early in the morning in my Brussels hotel. It was one of those that just flowed. I picked up my pen, and wrote until it was finished.

As I stood up in front of the EU Parliament, they were ready to jeer. Mind you, after the House of Commons at PMQs, it was like being in a girls' school playground after serving a long stretch in a high-security prison.

I knew what I wanted to say. I had thought about it for years, and this was my chance. For me, Europe was ripe for a debate over cla.s.sic third-way politics. It was pinned between those who talked of social Europe, which basically meant more regulation, and those who wanted Europe to be only a market and nothing else. So: sceptics versus federalists. Essentially I said that the purpose of social Europe and economic Europe should be to sustain each other, and that 'the purpose of political Europe should be to promote the democratic and effective inst.i.tutions to develop policy in these two spheres and across the board where we want and need to cooperate in our mutual interest. But the purpose of political leaders.h.i.+p is to get the policies right for today's world.'

I then went on to set out Europe's challenge: how to change in a changing world in which not just the US but China, India and the emerging powers would play an ever bigger role, as nations far outweighing individual European nations in size, population and thus, in time, influence.

I praised Europe. I also mocked the pretensions of the endless const.i.tutional focus, pointing out that each time we said that the purpose of such an obsession was to bring us 'closer to the people' we lost even more of their support. I then set out an agenda for change, based on big policy decisions and direction.

Of course, I was hugely a.s.sisted by the fact that due to the French and Dutch rejections of the Const.i.tution in the referenda, it could hardly be argued that the present politics of Europe was working. That Europe was in crisis couldn't really be disputed, and this fuelled my argument for change.

The speech made a big impact, and resulted in the first decent publicity I had had in Britain for years (though that was for bad reasons as well as good, since Eurosceptics also liked it). It reverberated around Europe and became the talking point.

In the questions in the Parliament that followed the speech, I also gave them a bit of PMQs showmans.h.i.+p, slapping a few of them around a bit (their colleagues always like that), putting down the UK Independence Party mavericks (demonstrating you could take on the British sceptics), and generally making jokes and delivering put-downs that entertained the crowd. Danny Cohn-Bendit, the 1968 Paris revolutionary, was due to speak after me. I told him I used to listen to his speeches in the old days, and now he had to listen to mine, which was progress. They all liked that and it flattered him.

In time the effect wore off, naturally, but it set the stage well for the presidency. What could have begun very inauspiciously ended up with people intrigued and willing to give it a go.

Of course, the hard fact remained we had no budget deal. Europe's politics were also about to undergo a big change in leaders.h.i.+p with the September election in Germany. Gerhard and the SDP fought back really hard from being way down in the polls and very nearly did it, but Angela Merkel just came through to become the new Chancellor.

As I say, my friends.h.i.+p with Gerhard had dimmed. He got over Iraq, but he was furious over Guy and the presidency of the Commission. At the dinner where Guy's appointment was blocked, he rounded on me in a very personal way. I tried to explain that Guy was not someone whose direction for Europe I could agree with. It wasn't personal on my part. Gerhard made it clear: it was on his, and that was that. It was a pity. He had many really significant leaders.h.i.+p qualities, which I admired.

I had spent time with Angela before the election. The truth is and I fear this was becoming increasingly the case in my relations with the European centre right we had more in common with her than with the German SDP. The SDP were very close to Russia, and although Gerhard was a reformer, his party wasn't. Their view of the European social model was very traditional. Angela would see the need for change. I liked her as a person also. She seemed at first rather shy, even aloof, but she had a twinkle that swiftly came through. I thought she was honest and instinctively a kindred spirit, and we got on well.

Her arrival made somewhat ungainly by the protracted German coalition negotiation after her narrow victory was a major new factor in the budget deal. It also bore on another critical challenge: relations with Turkey. Under its new government, Turkey had been making significant strides towards Europe. The government was controlled by the Islamist AK Party, contrary to the secular mould of Turkish politics. The prime minister Tayyip Erdogan, however, and the then foreign minister, Abdullah Gul, were sensible, forward-looking men who, frankly, at least at that time, were the easiest Turkish politicians I had met. They were smart, knew what they wanted, were anxious to come into Europe and, what's more, reasonable on Cyprus.

Europe had worked out a position that was in favour of Turkish EU members.h.i.+p in the long term, but it was going to take time. There were criteria for accession; they should be met to allay the nervousness of European countries with large Turkish migrant populations like Germany; and they gave Turkey's modernisers something to aim at. So, in principle, yes; in practice, very much in the future. But that was OK. It just about held together.

The reason for the reluctance was partly that EU members.h.i.+p had only recently enlarged and people wanted time to digest, and partly that Turkey, a nation of over 70 million Muslims, was clearly une autre chose une autre chose. The point was not that EU leaders were anti-Muslim, though among the population no doubt that sentiment was present. But, plainly and actually reasonably, this would be a major change in the nature of Europe and had to be got right.

I was and am in favour of Turkey's accession. I want Turkey looking west and Europe looking east, and, handled correctly, Turkey's members.h.i.+p would do us all good. It is very dangerous for us and for them to push Turkey away, because it would appear to underscore the fact that Judaeo-Christian and Muslim civilisations cannot coexist. The implications of estrangement are very large. After I left office, Turkey was politely but firmly pushed back in the direction of something less than full members.h.i.+p. It is a perilous mistake for both parties.

At the end of October, I held an informal EU summit at Hampton Court Palace. Unusually for such meetings, it produced an agenda on issues like universities, research and development, energy and innovation, on which a new European budget should sensibly concentrate. Europe was at risk of falling behind, and I attempted to lay out a programme that focused on areas that would be vital to Europe's compet.i.tiveness in the future.

But the budget remained as the only real issue, and the UK rebate was the point most talked about. The more it was discussed the harder it was for me since, as I say, even talking about it was tantamount to political blasphemy. The French would raise it in a real 'pulling your nose' way, and did so constantly. I sparred back with some anti-CAP rhetoric.

As the budget of course also spanned the whole of EU expenditure, here's where the complexity set in. This really was a zero-sum game. It was a fixed budget, so someone's gain meant someone else's loss. In this arena every country had an active interest, with the new members wanting EU money to develop, and the old members looking to hang on to whatever concessions history had tossed them.

It was a nightmare of detail, political cross-currents, national pride, presidential and prime ministerial ego, all played out in vivid public technicolor. After the December summit, which would be the final negotiation, each partic.i.p.ant would have to go back home to cheers or tears. They would all spin like crazy to get the cheers, but each nation's media was prepared to believe the outcome should merit tears. I was stuck in the middle and very obviously, because of Britain's position on the rebate, parti pris parti pris.

The negotiations involved hours, days and, in the later part of the year, weeks of painstaking discussion. I became a veritable expert on the intricacies of structural and cohesion funding, on the Spanish preoccupation with Ceuta and Melilla, on the Swedish and Dutch formulae for their rebate on the rebate, on what the average French farmer might earn, on what the German Lander Lander might tolerate, and of course on the details of the appropriations in respect of each crucial policy area of EU spending. might tolerate, and of course on the details of the appropriations in respect of each crucial policy area of EU spending.

I was blessed with a great team led by my EU adviser in Number 10, Kim Darroch, and the UK Brussels representative, Sir John Grant. They were utterly brilliant, the British Civil Service at its best, immensely creative, willing to think outside the box (and there was a legion of boxes) and with a deep network of contacts in member states.

The final negotiations were set for 1516 December. It was clearly going to be an all-nighter. Like a giant jigsaw with myriad pieces, if the contours of one piece were changed, suddenly another five wouldn't fit. Around a third of the total budget had to be reallocated in favour of the new members. That meant all the old members, including Britain, had to pay more.

European councils meet on the fifth floor of the Justus Lipsius building in Brussels. The meeting rooms are so ghastly that you always have an incentive to agree and get out. The country holding the presidency has a suite of rooms just off the main corridor, where you sit and see nation after nation, listen to their leaders complain, cajole and threaten as you a.s.sess what is bl.u.s.ter and what is real, what can be conceded and what has to be confounded, and when it is right for the president to turn menacing.

No nation likes to be taken advantage of, but no nation likes to be fingered as the cause of failure. So throughout every successive wretched meeting in that boring and soulless room, you are calculating when to advance, when to retreat and when to defer.

My strategy was this: make an ally of Angela and share credit for success with her that could settle down her Chancellors.h.i.+p and make her well disposed; sort the Spanish and the Italians; champion the Poles; deal with the French. And then slip in our own piece of the jigsaw right at the end, when everyone wanted an agreement and wanted to go home.

We got a deal which actually left Britain paying roughly the same as France for the first time. The UK media called it a betrayal, but frankly they would have done that even if I had led Jacques Chirac in chains through the streets of London. And by then I was past caring. We preserved the rebate, tied its demise to the CAP and agreed a break in the budget period where both could be reformed. Though I shouldn't say it, it was close to a minor miracle.

I had had the most frightful time with Gordon throughout, however. He was essentially insisting that France accept the demise of the CAP, and in public statements was a.s.serting this in terms that enraged the French. Actually, he didn't merely want them to disown the CAP, but also sort of apologise for ever having supported it. In a funny way it helped me, because I was able to say: see my problems? Now are you going to be reasonable? So we did a kind of unintentional good cop/bad cop on them.

But as the negotiations went into the early hours, it became more serious. He was refusing to agree the deal. Jon Cunliffe, an exemplary and bright Treasury official who was go-between, was doing his nut, poor bloke. Gordon was content to let the thing go down and fight on in the next presidency. I knew that would be absolutely appalling for the reputation of the country, the government and me; and once we were out of the driving seat, there could be no guarantee that Britain would get a better deal. In fact, the deal would almost certainly be worse.