Brunson
Prime Minister you have apparently got some pretty good words in the Communique on the Budget. The commitment looks pretty firm—but these things have a very nasty habit, don't they, of slipping in the Community and the fine words suddenly don't produce the goods.
PM
Yes, they slipped certainly from last November. We were promised a solution to our problem by last November, but then you know that that was complicated by some of the decisions of the European Assembly when they said they didn't want any more annual refunds, they wanted a long term settlement of the Budget It's not possible to get that this year so we have to go to a separate arrangement for this year. We came here without any understanding at all. That was very worrisome indeed because we've got the refunds in respect of last year but we must have a formula in respect of this year. As the Budget is made up in June we have to have provision made in it. We have got a timetable, we have got an undertaking, we have got an agreement that sums have to be entered into that Budget. Your're quite right, it will be difficult to put figures to the undertaking but they know we have a good case and they know we are pretty resolute and they know we will battle on until we get a reasonable settlement—and we shall.
<$/intnonmt>Brunson
But suppose the Community goes back to its old habits of simply letting it slip, raising all kinds of difficulties with you. What are you going to do then?
PM
Oh, I think then there'd be a major crisis and I don't think there will be a major crisis because I think they know that would be the consequence of not reaching agreement by June. So I think they will reach a reasonable agreement by June.
Brunson
When you say a major crisis, it's quite some time since you banged the table, as it were, as you did in Dublin which really started this off. Is that what you are saying you will do this time if … .
PM
Well yes, I would have to bang the table but [end p1] I don't want to have to bang the table and because I banged it before and they know I will bang it again there is less likelihood that I'll have to bang it.
Brunson
Isn't it possible that some people—indeed they've been doing it already, the Commission, President Mitterrand we understand, and the European Parliament in the past—will say ‘I'm sorry this time we are not going to have a short term solution unless we have a long term solution’?
PM
I don't think François Mitterrandhe can because we are not going to get a long term solution this year and because he caused no difficulty at all with today's communique and that accepts the need for a short term solution this year by June.<$/pers>
Brunson
May I ask you about the statement you issued on the Middle East? It contains for example a very specific condemnation of Israel over its settlements policy. Yet this very past 24 hours we have heard that Israel are announcing eight new settlements. Doesn't that typify the way that these statements are disregarded?
PM
I think the attitude of Israel over new settlements in the West Bank is very worrying indeed. That's why we said in that statement quite clearly that we think that if we are to get the peace process going again for the settlement of the Palestinian problem it would be helpful if two things occurred. First, if Israel did not set up any more settlements on the West Bank nor enlarged existing ones, and, secondly, it would be immensely helpful if the Palestinian people could make it clear that they would negotiate with the King of Jordan and go into talks about the Reagan and the Fez principles which are already on the table. If Israel did something and the Palestinians did something that would help. From the visit of the Arab states to London, which was very successful, last Friday we know full well that they are all committed to securing a peaceful settlement to this problem. That helps too. And also in the conclusion we do of course say that Israel too has the right to exist in peace and security behind borders. [end p2]
Brunson
But what about my point if I may press it? The fact that Israel then goes and announces—as this very statement is being produced here—that it is going to go ahead with more settlements. Doesn't that mean that they pay no attention whatsoever to what you are saying here?
PM
I agree it's bad. It shouldn't happen. President Reagan after all does not want any more settlements either. But if we make our views clear and President Reagan makes his views clear then I hope that together we can bring influence to bear together with much opinion of world Jewry that can be very, very influential on Israel. I personally believe that it was world Jewry and some within Israel who got an enquiry into the massacre because they believe that Israel should uphold certain standards and therefore they thought an enquiry was necessary. I believe that if we make this statement the United States and world Jewry—much of which does not believe that it's right or proper to build more settlements on the West Bank—then that helps towards a climate of opinion which those who govern Israel might take into account.
Brunson
Can I ask you quickly about the Pound? You have explained why you think the Dollar is so strong at the moment—the fact that people go to the Dollar when there has been uncertainty in Europe and the fact that people believe that interest there may stay high. But even so, is not now the Pound in extremely serious trouble against the Dollar and is not the time now perhaps where you have to take measures to protect the Pound?
PM
The Dollar is strong against all European currencies and that is so regardless of whether they are in the EMS or not, regardless of whether they have exchange control or not. Exchange control does not stop a Dollar going high against European currency and indeed when we had exchange control it didn't stop it either. So that course of action is not open.
Brunson
So you won't have any exchange controls to protect the Pound? [end p3]
PM
You can't, because having exchange controls means that you have to defend it with your reserves. What does that do to put money into the pockets of the speculators? That you must never do. You must never pursue a policy which takes your reserves down. As soon as they go into the hands of the speculators and you are still left in the underlying position. The sums of money moving around the world are enormous compared with our reserves. Exchange control does not deal with the problem, all it deals with is ensuring that people in this country can't move their money out. But the real problem isn't that. When you get your Dollar strengthening or sometimes weakening it's because of large sums of money moving around the world outside our control.
Brunson
Leaving the present situation as it is—isn't that going to do very serious damage to the British economy?<$/intnonmt>
PM
But I think that the settlement reached in Europe at the weekend was a great help. Before it was said that there was an extra uncertainty and I believe in the end the Dollar will weaken again. During the first part of my Prime Ministership we had a very weak Dollar and therefore up went our own currency to levels that were too high for some of our industrialists. We were not able to do anything about that. Now you have got a very strong Dollar—for reasons I have indicated—first I think people still say how in the world is the United States going to finance that very big deficit? Won't they need to have very high interest rates? If they are going to have high interest rates, the money goes there in order to earn the high interest. Secondly, because in an uncertain world people tend to go to the United States. It's a strong free enterprise country. It's a very strong economy, it is strong politically. Those are reasons why they tend to go there. I think what's been achieved this weekend in realigning the European currencies will help, and gradually, as we sort out our problems, so I think you will find that more money will come back to Europe as we strengthen.