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Common Market Fails to OK Budget Reform; New Talks Set in February

December 06, 1987|TYLER MARSHALL | Times Staff Writer

COPENHAGEN — After two days of intense negotiations, leaders of the 12 European Communities nations failed Saturday to agree on a pivotal budget reform package essential to prevent the Common Market's slide toward bankruptcy.

Instead, they decided to continue negotiations at a special summit Feb. 11-12 in Brussels in a further attempt to resolve their complex financial problems before the organization runs out of money about mid-1988.

"It is far better to see us try again for a good agreement than come away with a bad agreement now," British Prime Minister Margaret Thatcher said.

The inability of European leaders to reach agreement was viewed as an embarrassing setback for the communities' image, especially on the eve of the U.S.-Soviet summit in Washington.

Mitterrand Dejected

"What we see is a Europe that is absent while others decide the future of the world," a dejected French President Francois Mitterrand told reporters at a news conference after the summit meeting. "Sometimes you need to be sick to be cured."

And Prime Minister Ruud Lubbers of the Netherlands said: "Many delegations came to Copenhagen to get something good for themselves, and if they cannot get something good, they would rather get nothing."

While failing to resolve their internal differences, the 12 leaders approved three political declarations, including an endorsement of the U.S.-Soviet agreement to eliminate medium-range nuclear missiles from Europe as a "milestone."

"The 12 hope that this agreement will enter into force soon," the declaration said. "They consider it essential that this achievement in nuclear arms should give further impetus to substantive progress in the whole range of present and future bilateral U.S.-Soviet and multilateral negotiations on arms control and disarmament."

The European leaders also called for the Soviets to withdraw their troops from Afghanistan before the end of next year and reiterated their call for an international peace conference to resolve the Arab-Israeli conflict.

Thatcher, Kohl Clash

The collapse of the important budget reform negotiations for the Common Market came after Thatcher and West German Chancellor Helmut Kohl clashed over the size of the proposed cuts in farm subsidies.

Although mundane to the layman, farm subsidies are the most politically volatile issue in the European Communities. They are also extremely important, consuming 70% of the communities' total budget.

In his presentations to the other leaders, Kohl pressed for a program that would include paying Common Market farmers not to sow crops and subsidizing their early retirement from farming.

Such a plan would help ease the problem of the market's embarrassing food surpluses without imposing hardships on the farmers themselves, the West Germans maintained.

"We're prepared to compromise, but we're not prepared to suffer endlessly, either," Friedhelm Ost, a West German spokesman, told reporters.

Kohl was backed by Mitterrand and French Premier Jacques Chirac.

West Germany and France both have politically powerful, but relatively inefficient, farming sectors that rely heavily on Common Market subsidies for their survival. Thus, leaders of both countries pressed for a comprehensive plan that would cushion farm income reductions.

With French presidential elections scheduled for early next spring, Mitterrand and Chirac are especially sensitive to these pressures.

Little Room for Compromise

The absence of similar pressures from Britain's smaller, highly efficient agricultural sector, coupled with Thatcher's fanatical belief in fiscal discipline, left little room for compromise.

Important decisions of the communities, such as that concerning budget reform, have always been reached by consensus.

Sharply rising agricultural subsidies have threatened to undermine the communities' finances.

Aside from subsidizing farmers to grow crops, Common Market funds are also used to store the surpluses created by the subsidies. Farmers are also reimbursed if they sell overseas at prices lower than those of the Common Market, which are usually well above world market levels.

The 12 leaders all agree in principle that subsidies must be reduced, but the political will to implement the cuts has been lacking.

Other elements of the budget reform package, including proposals to generate more revenues and double the amount earmarked for a regional development fund to help poorer areas, have been linked to cuts in farm subsidies.

These parts of the package are considered essential if the communities' stated goal of a border-free trading bloc by 1992 is to be achieved.

"We need effective, binding discipline on our resources," Thatcher said. "We've made progress, and we'll come back early in the new year."

If the 12 leaders fail to reach agreement in Brussels next February, there would be only a few months remaining before the Common Market, which is not permitted to borrow money, runs out of funds.

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