EU: Recent Developments

Baroness Falkner of Margravine Excerpts

Thursday 16th February 2012 Lords Chamber

[Baroness Falkner of Margravine]

My Lords, I too welcome the opportunity to speak to recent developments in the EU. I recognise that it is inevitable that the debate will be dominated by the eurozone crisis. I anticipate that there will be numerous speeches expressing disappointment with the developments in the EU over the past few years. I understand some of those views, particularly as the lack of leadership by some players in the EU has affected our own economy so detrimentally. The profligacy of others is particularly keenly felt when one’s own prudence is imperilled through the behaviour of others.

I am speaking today, though, in support of recent developments in the EU against the backdrop of the turbulence of the past few years. It is now nearly three years since the Commission issued warnings to Greece, Ireland, France and Spain to reduce their budget deficits. It is a full two years since Greece’s budget deficit was revised upwards from 3.7 per cent of GDP to 13.6 per cent—something that could be described only as fraud on an industrial scale—yet the EU continues to bump along and the eurozone itself, for which headline writers had prepared their “Rest In Peace” banners, is still with us.

It is conceivable that the eurozone will lose a member along the way, but it may yet confound predictions and emerge from this crisis far stronger. Whatever happens, we in the UK have to be clear that we will not simply be onlookers but will be affected by what happens there. We would all have wished that the previous decade had not seen the mushrooming of private debt, the housing and construction bubbles and wage spirals with productivity losses in some of the less competitive countries. We can all agree that, had the financial crisis of 2008 not put pressure on government borrowing too, we would not be here. The human cost across the EU and beyond is considerable but, as commentators talk of a 1930s-type recession, it is instructive that we have avoided that sort of catastrophe to date.

If one thing has become apparent over the past three years, it is that the EU is more than a sum of its parts. The intention to create more than a free trade area was there from the very outset, and evidenced in the preamble of the treaty of Rome—an ever closer union of the peoples of Europe. Over its existence we have seen a convergence of policy-making but, more than that, there has been a genuine convergence of the values that bind Europe together. It was for the prize of a united Europe that western Europe held out together in the Cold War and our perseverance paid off handsomely, with those well beyond what was conventional Europe joining the queue to come in over the years.

I turn specifically to the eurozone crisis. Its handling is essentially a political issue. There are those in this Chamber who quite legitimately express concern about the installation of technocratic governments in Greece and Italy and the democratic cost of so doing. There is also concern about the power exercised by the bigger eurozone countries in imposing conditions on the indebted states. The argument goes that this is proof of the power of those faceless Brussels bureaucrats in the Commission, who are accountable to no one. However, it is exactly the opposite. The eurozone crisis has demonstrated the renationalisation of European policy, and it is ironic that those of an anti-EU posture do not like that either. The pull and push of democratic politics is very much in demonstration here, just as it should be.

Let us consider Italy and Greece, the two countries that are being led by technocrats. It was evident in both cases that the Government of the day had neither the resolve nor the numeric capability to carry out the measures needed. An alternative was proposed and accepted by the populations of those countries. What is important is that, in the case of Italy, the Monti Government have taken the necessary steps and should now be allowed to get on with putting themselves to rights. The case with Greece is different. The posturing of both the main parties is synthetic—calculated with an eye on the elections in April rather than the main issue, which is Greek insolvency.

Germany is cast as the villain of the piece, but if you were Germany, with elections forthcoming next year, would you willingly ask your citizens to write an open cheque for someone else’s party? We in the UK have little appreciation of what a charged debate this is in Germany, coming as it does within living memory of the sacrifices made during unification, which resulted in higher unemployment and flat growth for over a decade in the 1990s. The words of the Oxford-educated Polish Foreign Minister Radoslaw Sikorski to Germans are instructive. He said:

“Because of your size and history you have a special responsibility to preserve peace and democracy on the Continent”.

The eurozone 17 have themselves bought time in their handling of the peripheral countries so as to let the system stabilise against unrelenting market pressure. It is salutary that Iceland, which is pulling itself together again, has only recently reiterated its intention to join the EU and the eurozone as it embeds its recovery. The cost of borrowing for the deeply indebted Italy, Spain and Portugal is slowly coming down. In institutional terms, over the past two years we have seen a determined move by the eurozone to address systemic failure and to put in place, albeit belatedly, a series of measures which are intended to shock-proof the system going forward. Improved governance, though little noticed, has taken several steps forward, and a new, more robust architecture is now visible.

Notable among these steps is the so-called “six pack” set of rules aimed at strengthening economic governance in the EU. It will ensure that both the EU and the euro area will benefit from improved surveillance of both budgetary and economic policies. These measures have “Made in liberal north Europe” stamped all over them, and are entirely in keeping with the UK’s traditional approach of embedding legal norms, with the European Commission and the European Court as the guarantor of compliance. Indeed, the agreement of the European Parliament was in large part due to the steerage of Liberal Democrat MEP Sharon Bowles, who as chair of the Economic Affairs Committee ensured that while tough rules on deficits and debt were agreed, sufficient flexibility simultaneously remained to allow for automatic stabilisers to operate in downturns.

The European Central Bank has quietly worked to keep the credit markets liquid and has made significant progress in ensuring that the EU has built up its capital base. Basel III is on track and stress tests are ongoing. The European Financial Stability Facility, or the ESM as it will become, is making progress—slow progress, but progress nevertheless—to erect a firewall as well as to engage emerging markets and others in further capitalisation. The fiscal pact is now agreed, with its emphasis on balanced budgets. So the EU has proved to be extraordinarily resilient. A recent World Bank report on Europe puts it this way:

“America has taken in poor immigrants and turned them into high-income individuals. The European Union has taken in poor countries and turned them into high-income countries”.

However, to believe that Europe's economic model is valid is not to say that there is no case for reform. As the Economist put it recently:

“If America is a defence superpower, spending almost as much on defence as the rest of the world combined, Europe is a ‘lifestyle superpower’, spending more than the rest of the world put together on social protection”.

Demographic change and the pressures of ageing will stretch health and welfare budgets further, while productivity is declining apropos emerging economies. Having closed the productivity gap with America in the mid-1990s, Europe is again falling behind, particularly in the southern countries. That brings me to the Government's priority on a comprehensive growth strategy for Europe, with a renewed emphasis on innovation and enterprise. The single market still has to operate better in certain sectors, not least research and industry, where there are still significant barriers in some countries, hence the importance of the newly agreed growth tests.

I may be presenting too optimistic a picture of where the European Union and the eurozone are presently, but perhaps I can justify my optimism in my closing remarks with a quick overview of where we were just three years ago. The shock that hit the world economy in 2008 was analogous to the great depression. In the 12 months from 2008, industrial production fell as much as it did in the first year of the depression. Falls in equity prices and global trade were greater. Unemployment has risen in some counties to levels above those of the great depression. However, we have survived all these upheavals. The shared safety nets and the ability to act together in international co-operation, to pool resources and share markets, were absent then. When historians look back on this period, the spirit of common endeavour and unity will stand out as the variable that made the difference.

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[Lord Stoddart of Swindon]

The eurozone has proved that a single currency cannot work without fiscal and political union. A lot of people have pointed that out this afternoon.

This debate is about developments in the European Union. So far we have heard about great issues, but all sorts of things are going on all the time in the European Union, many of which affect ordinary people in this country. For example, the Solvency II capital rules, which I believe are now being agreed, will cost the British financial industry £600 billion, according to JP Morgan. They will cause massive damage to the United Kingdom’s pensions industry and will virtually kill off the last vestiges of final salary schemes. That will hurt ordinary British people. We should take note of that.

Then there is the proposal to make mortgages in default after 90 days in arrears, which conflicts with the Government’s own policy of helping people, quite rightly, to hang on to their homes when they are in financial difficulty. Then there is the demand for another £9 billion to meet the additional commitments in the present financial round, which will cost the United Kingdom £1 billion. That is extra to the £10.3 billion that we have already committed and money that we do not have. We will have to borrow £1 billion more. Only on Tuesday, the EU Commission announced that 12 member states, including the United Kingdom, are suffering from severe economic imbalances leading to economic shocks and that they will be placed under stringent observation so that they do not compromise the stability of the EU.

That dictatorial language and action is now commonplace in the EU. The treatment and humiliation of Greece by the EU is alarming, disgraceful and completely undemocratic. Furthermore, the Greeks have had the right to govern themselves taken away and the leaders of the Government are unelected Prime Ministers. The political parties now have to guarantee that they will put into place measures that will hurt ordinary Greeks in a manner that is totally unacceptable in anything other than a third world country. That is in advance of what will be done.

Some of us predicted that eventually there would be fighting in the streets in the European Union or Common Market. We now have it. We have fighting in the streets not only in Greece but in other countries as well—

[Baroness Falkner of Margravine]

But that was happening in London in August.

[Lord Stoddart of Swindon]

Perhaps I may repeat that we have fighting in the streets in Greece and in other countries, such as Spain and Romania. That cannot be denied.

As usual, a crisis situation is being used to transfer more power to the EU institutions. The fiscal agreement was made between countries other than the United Kingdom and the Czech Republic. It may be intergovernmental at this stage. However, all experience has shown that inter-governmentalism eventually collapses and becomes an EU competence. That happened following the Single European Act, the Maastricht treaty, the Amsterdam treaty, the Nice treaty and the Lisbon treaty, all of which transferred more powers from nation states to the institutions of the European Union.

However, even this does not go far enough for the European top dogs. Frau Merkel, for example, was recently reported in the German newspaper Handelsblatt as saying that, step by step, European politics is merging with domestic politics. She called for closer political integration, with members ceding further powers to the European Commission, which ought to be the real government of Europe, with the Council of Ministers operating as a second chamber and adding strength to a European Parliament. That is the vision of people such as the Germans, which is also supported by the current President of France. The noble Lord, Lord Howell, does not agree with that. He is calling for a completely different sort of Europe—but Germany and France in particular are determined to go very much further than the noble Lord outlined in his speech. Of course it is not only the leaders of individual states who are doing this. Mr Barroso was this week telling the Chinese that the EU will become a fully fledged political union after the financial crisis. I hope that the Government will tell these people that that is not the vision that the United Kingdom has for the European Union; and, indeed, that the British people will not tolerate that. They want to continue to be governed by their own elected representatives and by institutions that have been built up and been successful over many hundreds of years.

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[Baroness Stowell of Beeston]

My Lords, I hesitate to rise in a debate that is not time-limited, but perhaps noble Lords will find it helpful if I advise the House that we are running slightly behind schedule, based on the guidance that my noble friend issued at the start of the debate, and that is bearing in mind that two noble Lords have scratched. Most noble Lords have been very diligent in keeping to the guidance, but I thought it would be useful for me to remind noble Lords that the guidance is for about nine minutes.

[Baroness Falkner of Margravine]

My Lords, perhaps I could respectfully say to the noble Baroness that the Order Paper says that the House is intended to rise at 7 pm. We only have four speakers remaining, plus the substantive wind-ups. They have sat here patiently through many hours of this very interesting debate, and I am sure the House would prefer to hear everyone in line with their own aspirations to be heard, rather than now to be time-limited or curtailed.

Libya

Baroness Falkner of Margravine Excerpts

Thursday 2nd February 2012 Lords Chamber

[Lord Howell of Guildford]

The noble Lord touches on a difficult issue. The situations in the countries he has mentioned—Egypt, Libya and Syria—are completely different. We can see the horrors of Syria, including what are apparently child murders and other appalling atrocities, and we are pressing this matter as hard as we can at the United Nations—my right honourable friend the Foreign Secretary has been in New York for the past two days—to get full UN backing for the efforts of the Arab League and all those who want to bring to a halt the ghastly situation in Syria. I think that the noble Lord is fully aware of the difficulties at the United Nations in bringing along some of the members of the permanent Security Council, notably Russia and China. However, we are working very hard to bring them in line to meet the appalling situation in Syria.

[Baroness Falkner of Margravine]

Does my noble friend accept that in countries which are emerging from conflict, the building of institutions takes its time and is quite problematic? Can he tell the House whether the ample resources of the Stabilisation Unit and the Conflict Pool might be available to help train Libyan judges and the country’s police force so that they can comply with due process and improve their judicial standards?

[Lord Howell of Guildford]

My noble friend is quite right to draw attention to the fact that it takes time and that these are early days. It is just about a year since the Libyan liberation drama began to unfold. We must be patient but, in addition to what we are doing already, we will examine further means of supporting the training of judges and so forth. I have before me a long list of activities where the UK is supporting the Libyan democratic process and trying to ensure that it rolls forward smoothly. I could delay the House with the details, but I will not do so. However, my noble friend has certainly touched on one very important aspect.

Falkland Islands

Baroness Falkner of Margravine Excerpts

Tuesday 24th January 2012 Lords Chamber

[Lord Howell of Guildford]

We keep in constant touch with all our EU colleagues on this matter and have had considerable understanding and support. Inevitably, there are different perspectives but the general acceptance is that in international law the Falkland Islands people have the right to have their wishes respected and that any development in the future must be guided by those wishes. If they wish that to change, it will change; if they do not wish it to change, it will not change.

[Baroness Falkner of Margravine]

Will my noble friend tell the House whether the reports are accurate that almost all the ships that are now banned from visiting Mercosur ports while flying the Falklands ensign are owned by Spanish shipping companies? In light of that, are we having discussions with the Spanish about the commercial damage which is clearly being done to them through this ban? Are we having discussions with Chile, as President Kirchner has asked the Chilean Government to ban commercial flights to the Falkland Islands?

[Lord Howell of Guildford]

We have had discussions with Chile of a thoroughly positive nature. It is one of the countries that has agreed to accept ships flying the British Red Ensign. I cannot comment on the ownership of some of these ships. I have seen rumours in the media but I have no further information on that matter.

Iran

Baroness Falkner of Margravine Excerpts

Tuesday 24th January 2012 Lords Chamber

[Baroness Falkner of Margravine]

My Lords, does my noble friend agree that Iran is not currently in breach of its NPT obligations in seeking to enrich uranium up to 20 per cent? Does he therefore accept that a return to negotiations, including the offer on the table of Iran maintaining a civil nuclear capability under a heavy IAEA inspection regime to ensure that no weaponisation occurs, is what we should be aiming for? Does he agree with US Defense Secretary Leon Panetta’s comments last month that an Israeli attack could consume the Middle East in a confrontation and a conflict that we would surely regret? What discussions are we having with the Israeli Government to the effect that any action they might take will embroil them and the rest of the region in a wider conflagration that they may deeply regret?

[Lord Howell of Guildford]

To answer my noble friend’s last question first, it has been the constant position of Her Majesty's Government that we would like Israel to come out fully and join the non-proliferation treaty if, as is widely alleged, it has nuclear weapons. We have not been given any firm facts on that, but it is an important aspect. As to Israeli action, that is constantly debated. Again, we have not been hesitant in making clear that action by Israel against Iran would lead to very dangerous developments. We take a very strong view that that is not the way forward and is at all costs to be avoided. That is the position vis-à-vis Israel.

My noble friend is absolutely right that one of Iran’s claimed excuses, shall we say, for pushing ahead—one of its reasons for defying IAEA resolutions and UN resolutions, as it has—is that it should have nuclear weapons because it says that Israel has a nuclear weapon. That reality must be faced. My noble friend is not entirely right in saying that Iran is not in defiance of resolutions; it is; it has broken resolutions in the past. I hope that I did not misinterpret what she said on that. This is the problem: we have a regime in Tehran that cannot be trusted and has been declaring that it was co-operating and collaborating with NPT and IAEA resolutions when it was not, as has been revealed by various alarming discoveries along the way.

EU: December Council Meeting

Baroness Falkner of Margravine Excerpts

Wednesday 11th January 2012 Lords Chamber

[Lord Howell of Guildford]

I am afraid that that is upside-down thinking, because the enlightened view in Europe is that we should move towards the reform of the European Union in all aspects. Everyone agrees that maybe the time has come to revise its great purposes in the 20th century. I was fascinated by a remark made the other day by the noble Lord, Lord Liddle, who I hope will speak in a moment on this issue. He rightly said that the old arguments for Europe will no longer do. We are in a new situation in which many intelligent people throughout the European Union realise that new approaches are needed. I am sorry that the noble Lord is not one of them.

[Baroness Falkner of Margravine]

My Lords, does my noble friend agree that the concept of ever closer union in the treaties was about an ever closer union of the peoples of Europe? Nothing that this coalition Government are doing would prevent a closer relationship between the peoples of Europe, but that does not imply the Governments of Europe for ever being bound in ever closer unions. On the financial transaction tax that France has agreed to pursue unilaterally, our understanding is that the German Government are reluctant to proceed unilaterally. Are we having conversations with the Germans on the effects of the tax should it be implemented more widely?

[Lord Howell of Guildford]

My noble friend is absolutely right about the first point. The peoples of Europe, the communities of Europe and the interests of Europe are binding more and more closely together in the internet age and in the age of the information revolution, but the question of how this resolves at governmental level is obviously much more complex. She is absolutely right about that. As far as the financial transactions tax is concerned—the so-called Tobin tax—Her Majesty’s Government’s view is that if this was a universal tax, the chances of which are frankly pretty remote, it would begin to make sense to apply it, but that if it was merely going to be for the European Union or even for selected countries in the European Union, it would not make much sense at all. That seems to be a view that increasingly the Germans are sharing.

Arab Spring

Baroness Falkner of Margravine Excerpts

Tuesday 29th November 2011 Lords Chamber

[Lord Howell of Guildford]

The right reverend Prelate is correct that a whole nexus of undesirable social customs and pressures creates the bad conditions in which this kind of discrimination can occur. Our policies, such as our Arab partnership policy, contain specific modules or elements that are designed, for instance, to support the rights and position of women, to promote family law in every possible way and to challenge some of the highly coercive and illiberal practices of the past. There are difficulties, as the right reverend Prelate will appreciate, but we must not go around intruding heavily on the practices of other countries. Why should we do that? However, we must certainly support and encourage the kinds of practices that bring equality and decent values to countries where, in the past, darker customs have prevailed.

[Baroness Falkner of Margravine]

My Lords, have the Government had any consultations with these Middle East Governments about reforming personal status laws so that the 14 million Christians who live in the Middle East might have access to divorce in civil courts if they wish to do so, rather than having to convert to Islam or other religions?

[Lord Howell of Guildford]

Those issues come into our fairly constant dialogue and exchanges with the countries of the Middle East as they go through reform processes at varying speeds and to varying degrees. That is the content of our exchanges in seeking to support and encourage the peaceful, democratic, liberalised development and opening up of these countries, which is directly in our own interest as a great trading nation as well.

EU: Integration

Baroness Falkner of Margravine Excerpts

Tuesday 22nd November 2011 Lords Chamber

[Lord Howell of Guildford]

Some of those aspects are correct, but the noble Lord overemphasises the polarity and the rigidity of the choice. There is no doubt that one of the propositions that is current throughout the eurozone is that the only way forward is towards fiscal union. Indeed, if that is a way of avoiding total chaos in the European markets, it is in our interest, too, that the process should be non-chaotic. That is perfectly clear. However, in other areas, as I said earlier, some degree of decentralisation and flexibility might play a much more useful part in making the European Union fit for purpose in the 21st century.

[Baroness Falkner of Margravine]

Would it help my noble friend, in answer to the question of the noble Marquess, Lord Lothian, if the networked Europe that he talked about was a flexible EU of variable geometry, in which those that want to join the eurozone can do so, and those that want to deepen the single market for a more competitive open trading system to the benefit of all our citizens can also participate in the decision-making? Should that not be the way forward, not fretting about variable speeds and referendums?

[Lord Howell of Guildford]

I do not know about my noble friend’s remarks on referenda. There is a case for them on certain occasions, as the Government have made clear. However, the broader issue she described is not very different from what we had in the past. This nation and several others are not members of the eurozone; others are. There is absolutely no reason why we should not co-operate very closely with those who are in or out of the zone in what is in effect a multi-speed Europe, as long as we recognise that we work together in a co-operative pattern within the Union to address constructively the very dangerous challenges from the outside world.

Bahrain

Baroness Falkner of Margravine Excerpts

Wednesday 16th November 2011 Lords Chamber

[Lord Howell of Guildford]

Yes, we will certainly do that. One can draw some cautious optimism from the fact that the retrials are by civilian courts. The military courts have been closed and certain detainees have been released—not in this case, of course. A substantial commission report on human rights is about to be published next week that will cover all aspects of the kinds of concerns that we have and the noble Lord rightly has about what has been going on in Bahrain.

[Baroness Falkner of Margravine]

My Lords, on the subject of the international commission of inquiry, which is due to come out on 23 November, will my noble friend tell the House whether he has complete confidence in the impartiality of this commission? He will know that the opposition parties in Bahrain were very concerned at the delay in the publication of the commission’s report and fear that there had been external pressure for the commission to revisit its findings?

[Lord Howell of Guildford]

I believe my noble friend’s concerns to be unfounded. There were delays. It is a massive report and there were sheer technical problems in getting it forward in due course. As for impartiality, it is by all accounts—we have not seen the full detail yet—a substantial report that has gone into everything in great detail. One of the members is the distinguished British jurist, Sir Nigel Rodley, and there are other distinguished jurists and impartial members on it as well. I am fairly confident that this will be a very substantial report. It will be published at the same time as it is presented to the authorities in Bahrain and I think it will carry matters forward substantially.

UNESCO

Baroness Falkner of Margravine Excerpts

Wednesday 16th November 2011 Lords Chamber

[Lord Howell of Guildford]

The kind of pressure that can be brought to bear on UNESCO, and may have to be brought to bear as it faces the huge cut of 22 per cent in its budget, is to suggest that it should streamline and improve its administration. There have been improvements; it has made progress, and it is focusing on some very valuable programmes, as my noble friend pointed out. On the specific issue of Syria and Syrian projects, I cannot comment as I have no details. I will look into the matter. Broadly, there is now a British member on the UNESCO board, and we believe that UNESCO, which had some difficulties in the past, is improving and can focus on valuable things, of which the tsunami warning programme is a very good example.

[Baroness Falkner of Margravine]

Does my noble friend accept that as UNESCO's new Secretary-General is attempting to put it on to a much more streamlined and efficient path, the shortfall in funding will only undermine her position? Have the UK Government been in touch with other Security Council members to see whether they, as well as the G20, might be able to assist in making up the shortfall, at least on a temporary basis until UNESCO can revise its budget?

[Lord Howell of Guildford]

It is early days for that. We will have to see whether the United States follows through on what appears to be its intention not merely to withdraw future funds but current funds as well. A very large number of countries—107—voted for Palestine's membership of UNESCO. There were 52 abstentions and 14 countries voted against. Therefore it was a fairly solid commitment to Palestinian membership. On the question of funding, we will have to wait and see how the matter turns out. Certainly there are major difficulties to be faced and resolved.

Iran

Baroness Falkner of Margravine Excerpts

Tuesday 15th November 2011 Lords Chamber

[Lord Howell of Guildford]

We are discouraging every kind of trade and business with Iran, not only those covered by sanctions but also investment by oil companies, for instance, and a whole range of others as well. The specific product that the noble Lord mentioned is one that I will certainly examine, but my overall understanding is that we are discouraging in every possible way all areas of trade with Iran, over and beyond both the EU and the US sanctions.

[Baroness Falkner of Margravine]

My Lords, does my noble friend agree that, alongside the 3+3 talks, it would be very useful for the UK to advocate re-examining the Turkey-Brazil option which was on the table some months ago in order to keep open the door for future negotiations? Does he accept that unilateral military action by any state in a pre-emptive fashion would be deeply dangerous to the region as it stands today?

[Lord Howell of Guildford]

My Lords, I certainly accept the second point. On the first point about the Turkey-Brazil initiative, that was an interesting initiative but it did not actually deal with the major problem, which we have here, of proliferation. It was focused, as my noble friend knows, on the enrichment processes and the obtaining of enriched uranium which might be necessary for weapons-grade purposes. So, without saying that the Turkey-Brazil initiative was the answer, we certainly recognise that it might be part of the answer in the future.