Common Market Fails to Reach Budget Accord : Major Aviation Compact Also Collapses Over Britain-Spain Gibraltar Dispute

The 12-nation European Economic Community suffered two major setbacks Tuesday when the heads of government failed to agree on guidelines to bring a $6-billion budget deficit under control and a major civil aviation agreement fell apart because Spain objected to including Britain’s airport at Gibraltar.

British Prime Minister Margaret Thatcher was the lone holdout at the end of two days of intensive--sometimes acrimonious--budget talks at the semiannual summit meeting. But her one vote was enough to block the budget plan because such decisions by the EEC must be unanimous.

At a late-night news conference, Thatcher asserted that the proposed measures were insufficient, lacked “effective and binding discipline” and reflected “a tendency to fudge the issue.”

“The community is facing bankruptcy,” she said. “The problem will not go away and will get worse if it is not tackled firmly. We must do something about the bloated level of agricultural spending. The world needs a strong and vigorous and self-confident . . . (EEC), but it can only be strong and vigorous with self-discipline and solvency.”

In the long arguments here, Thatcher resolutely refused to support an increase in national contributions to the European budget until she is satisfied that spending on agricultural subsidies will be cut and discipline imposed on all other Common Market outlays as well. She declared that a previous agreement at Stuttgart 2 1/2 years ago to hold agricultural spending within budget limits had been “flouted” and said she would not allow this to happen again.

A set of guidelines to deal with the budget problem was approved by a vote of 11 to 1, but the guidelines were “issued,” not “adopted.” They will form the basis for a series of negotiations and studies during the next six months, focusing particularly on the agricultural problem. Member nations will try to have an effective budget package in place by the next European summit meeting, scheduled for Copenhagen in December.

“It will be a long and difficult period ahead,” French President Francois Mitterrand commented. West German Chancellor Helmut Kohl expressed the hope that Britain’s reservations could be resolved by the Copenhagen meeting. Thatcher herself said: “It is a great pity we failed to reach an agreement, but it is not necessarily disastrous.”

While the heads of government were working on budget issues in Brussels, the Common Market’s transport ministers were meeting in Luxembourg, watching 18 months of work on a European aviation agreement go down the drain over the issue of sovereignty over the Gibraltar airport.

The proposed agreement is aimed at introducing more competition into European aviation, eventually leading to lower air fares. It is far from a breakthrough of the dimensions of U.S.-style deregulation but it would have been a starting point for ending national restrictions on access to key airports, with lower fares to follow.

However, Spain, because of its claim to sovereignty over Gibraltar, objected at the last minute to a clause that would have included the Gibraltar airport, which operates under British sovereignty, as a “hub airport” for increased traffic access by other European airlines.

The British offered Tuesday to exclude Gibraltar from the agreement for a year or more while the sovereignty question was discussed “urgently” and also proposed issuing a joint British-Spanish statement to make clear that ultimate resolution of Gibraltar’s sovereignty would not be prejudiced by the Common Market agreement.

Spain, however, rejected the concessions as inadequate. Since the agreement required unanimous approval, it now appears dead.