EU: Recent Developments

Baroness Stowell of Beeston Excerpts

Thursday 16th February 2012 Lords Chamber

[Lord Teverson]

My Lords, we have heard an excellent diversity of views around the Chamber. I will take up one point. On a number of occasions Greece was described as a victim. My noble friend Lord Dobbs, who is not in his place, used the term. It is worth remembering that Greece and its Governments—perhaps not its people, although the Governments were elected—are completely responsible for their fiscal condition. I absolutely agree that they should not have been allowed into the eurozone. Again, however, the Greek Government applied to join, and although the other eurozone states should take some responsibility for not refusing the application, it would be wrong to say that Greece is purely a victim. However, when it comes to dealing with Greece now, screwing it down further and further is not a solution. We need solidarity and we need to find a way forward, whether through a Marshall plan or otherwise, that does not breach the moral hazard of sovereign states and debts. I will come back to that theme later. Another thing I have found delightful in this debate is that so many of my Conservative coalition colleagues are Keynesians and are for growth as well as fiscal rectitude. I join them in that.

I want to follow up the point made by my noble friend Lord Risby, who made an excellent case for where the European Union has been successful. Indeed, I see it as the most successful multinational organisation, apart from Coca-Cola, that there has been since the Second World War and perhaps since well before that. It is far more decisive and has far more power than the United Nations. It has performed rather better than OPEC and has been able to fulfil its objectives. The African Union is nowhere near, and although NATO has been a very successful and important organisation, it has not been as able to fulfil its mission as the European Union. The European Union has done it largely through soft power, but it has generally managed to make things happen. There is a long waiting list from Iceland to Turkey with a lot of western Balkan countries in between. It is the largest single market in the world. It has a reserve currency. At the moment, 26 per cent, I think, of all international reserves are in the euro, while 4 per cent are in the UK pound and around 60 per cent are in the dollar. It has produced stability—military, democratic and market—across central Europe.

That success in Europe has been, and will increasingly be, more important because Europe is becoming relatively less important. We are all aware of the growth of China and the Asian economies. China passed Germany as well as Japan, I believe, in the past year. United States Secretary of Defense Panetta recently announced defence cuts including a reduction of 100,000 armed forces personnel and half a trillion dollars over the next 10 years. In that context, there is no way that the United States is going to take its eye off the ball in the Asian theatre so, whatever is said, that can only mean that its focus on Europe and European defence is going to become far less in future. Europe has to look to its own security and defence far more, whether as part of NATO or through the European Union. I believe it has to be through both. If it is through either, then both benefit.

This region has also become less important because it has less authority since the 2008 financial crisis which was in many ways seen as the end of western financial hegemony over the rest of the globe. The western model of finance and capitalism, as opposed to state capitalism or whatever, was brought into question. This watershed in 2008 was a great irony because, as this House will know, at that time the Lisbon treaty was ratified and came into force. At the time when we expected Europe to raise its game in terms of democratic accountability and, particularly, in terms of world presence, it was totally tripped up in global public opinion by three of its smallest economies: Ireland, although it is recovering well, Portugal and Greece, which accounts for 2 per cent of total EU GDP. The European Union, which contains three of the old G7 members, was completely unable to sort out its own economic future and to solve a problem that, to the rest of the world, seemed quite minute: debt issues in one of its 27 member states.

What happened after that? Angela Merkel went to China and started negotiating—as Europe still is—about whether China could help us out with our financial difficulties. This was summed up very well by Martin Wolf in the Financial Times on 31 January when he described the European Union as “stuck on life support”. As for Herman Van Rompuy, the President of the European Council, I do not even know where he is or what he has done. For someone who believes that Europe is critically important for the future, not just of our own region but of the world, this is a very difficult time indeed.

Where is the UK in this? As many other Members of this House have mentioned, we opted out—although perhaps saying that we have been opted out would be more accurate. Before that fateful night when we did not manage to do the deal with the other 26, I read a letter in the Evening Standard from a Back-Bencher from the other place, which said that the Prime Minister needed to call Angela Merkel’s bluff and that we should make sure to leverage all the benefits out of this crisis. Of course, the bluff that was called was our own, not Europe’s, and we are in the situation that we are.

Unfortunately, we continue to lecture but, I have to say, nothing like how we used to under the previous premiership, which was even worse. We continue to exercise all our discussions around red lines. Some of these are important, like the fact that the EU budget should not increase in real terms in the short term, but a lot of the others are far more minor, which makes the UK brand rather toxic and, I believe, demeans us.

We are at a turning point. It is quite clear to me that despite all the difficulties, the eurozone and the euro will survive. There will be increased membership of the eurozone, as a number are still queuing up to join, strange though that may be. As the noble Lord, Lord Tugendhat, said, we have a German leadership, but that is a bit like the Americans in Libya saying that they were driving from the back; we have Germany in the driving seat but without the leadership that a lot of the rest of Europe is asking for. Although there may be some resentment in the rest of Europe, I remember the Polish Foreign Minister actually demanding more leadership at this time from Germany, given its unique position.

Europe is a part of the world that must not be marginalised. We are far too important for that. Securing the future of the European Union is one way to prevent that. I do not believe that the fiscal pact is sufficient as a way forward. We have to find a way for growth and we have to persuade the other 26 in the European Union to modify that policy so that we can move forward in growth and not have the lost decade that was the fate of Japan.

[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.