TNAG-1148-FCO40-1428-Effect-on-Hong-Kong-of-the-Portuguese-and-Spanish-accession--1982 — Page 22

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would hope that the size of their gross contributions

could be minimised during a transitional period; this

would be preferable to trying to boost inflows from the

structural funds, where they would have difficulties in

the co-financing. There would be a particular problem

as regards cereal imports and payment of the Community

levies. Mr Hannay appreciated the difficult situation

for the Portuguese. He explained the background to the

UK budget problem and our thinking as regards reaching

conscious decisions on the outturn of the budget so

that its broad impact was proportionate to the relative

size and prosperity of the individual Member States.

Such an approach would clearly be beneficial to the

Portuguese. Dr Marta agreed that the principle of

contributions proportionate to wealth was a good one.

without some automatic mechanism, the present system

could lead to an increase in the economic disparities

within the Community. Portugal could not agree to

being a net contributor.

Mr Hannay handed our copies

of the Background Brief on the Community Budget

Problem, the paper by Mr A Edwards 'Some Reflections on

the Budget of the EC' and the Chancellor of the

Exchequer's Speech of 3 June 1981 The European

Communities: An Opportunity for Progress'.

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