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exercises, since this would increase pressure in Britain for reductions. The new arrangements in the Federal Republic would not lead to an increase in low flying in Britain and it would be damaging if a contrary impression were created.

The Cabinet -

Took note.

ONFIDENTIAL

COMMUNITY

AFFAIRS

Informal

Meeting of Finance Ministers

8 September

THE CHANCELLOR OF THE EXCHEQUER said that the informal meeting of Community Finance Ministers at Cap d'Antibes on 8 September had taken up the remit on Economic and Monetary Union given to them by the Madrid meeting of the European Council. The measures necessary for the start of Stage 1, which presented no great problems, had been considered but the discussion had focussed mainly on the preparation needed for subsequent stages. The French Presidency wanted unreasonably rapid progress, but had made no attempt to isolate the United Kinghiem the discussion. Finance Ministers had rightly concentrated on the principles involved rather than on institutional

one changes. He felt that there was a dawning realisation amongst several Minister notably the German, Dutch, Spanish and, above all, Danish representatives of the magnitude of the steps contemplated and therefore the need to proceed slowly. He had himself put forward an alternative market-based conception of evolutionary progress towards monetary union through freely competing national currencies. This would involve removing the legal impediments to the use,

the

-

put the Community, of all member state currencies and would be a natural development of Stage 1. The main impact would be in the corporate area and on savings. In order to retain the attraction of its currency, each member Government would have to aim at sound and inflation policies. He had promised a paper on the subject to the November meeting of the Council. It would be wrong to suggest that this idea held the centre of the stage but consideration of it should serve to expose the underlying issues.

Agriculture

C

THE MINISTER OF AGRICULTURE, FISHERIES AND Did there were disturbing signs that some member states were to resile from their commitment to the reform of the Common Agentural Policy. He had received reports that the German Government, pleading the need to combat the influence of their extreme right-wing peal party, would refuse to agree to any new price reduction before the Federal Elections and might even resist the automatic price cuts resulting from the stabiliser mechanisms. The Netherlands Minister previously the United Kingdom's staunch ally, was said to be moving towards a similar position: he might judge that politically unavoidable

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