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increased investment from Britain and other EC countries to match the preponderant weight of West German trade and investment flows. On the other hand, East Germany and the other reforming East European countries would have great difficulty in practice in implementing the structural changes necessary to create genuine market economies based on private enterprise. This was likely to be a long process.

e.

West Germany had a trade surplus of £35 billon with the rest of the EC in 1988. Closer economic links between East and West Germany would present a formidable challenge to the

her members of the EC. With a combined population of Yearly 80 million people this economic entity would have a for distorting effect on EC projects for closer economic d financial unity and the concept of the Single Market. The EC could not afford to ignore this emerging reality. The process would also affect the EC's relations with the European Free Trade Area (EFTA).

Trade Area (EFTA). The EC's import standards would need to be maintained both in relation to East Germany

and EFTA

THE PRIME MINIS summing up the discussion, said that it was of cardinal importance for Western governments that all these complex questions should be handled carefully and prudently. Allied governments shord remain in close touch, especially Britain, France and the ited States who had Four Power rights and obligations. Althoug

Although Western governments had taken a formal position since 19 favour of East German self- determination, German reunification should not be treated as an immediate issue. Government should take due account of the implications of the present of events for President Gorbachev's position. A change the Soviet leadership would inflict major damage on the prospects for the further spread of democracy in the Soviet Union and Pastern Europe. The EC would need to discuss these issues in den both at President Mitterrand's dinner and at the Euan Council in Strasbourg. EC member states could not simply oncentrate on internal developments within the Community without taking account of trends in Europe as a whole. A single European currency was no answer to these wider changes. Although events were moving in a favourable direction, Europe faced a diffult decade ahead.

Elections

in Namibia

THE FOREIGN AND COMMONWEALTH SECRETARY said that

Namibia had taken place in a peaceful atmosphere.

West African People's Organisation (SWAPO) had obtained

cent of the votes counted. This was likely to be sufficient to persuade SWAPO to accept the outcome of the elections they did not obtain the two-thirds majority needed for constitutional changes. The United Nations Special

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