European Union (Approval of Treaty Amendment Decision) Bill [HL]

Lord Ahmad of Wimbledon Excerpts

Wednesday 23rd May 2012 Lords Chamber

[Lord Ahmad of Wimbledon]

My Lords, my right honourable friend the Prime Minister has consistently maintained that in all matters European he will put British interests first, while recognising that we, as a fully fledged member of the European Union, will continue to play our part. The Bill is therefore good news. It is good for us and good for the eurozone. It gets the UK out of future liabilities that the previous Labour Government signed us up to, with the EU budget lying as a guarantee, and rightly replaces them with a permanent European stability mechanism that is guaranteed only by eurozone members.

This is right for the eurozone and, most importantly, for Britain. It addresses the urgent need for the euro area to put in place a regime that will provide collaboration and support, and that will make eurozone members take direct responsibility for the monetary union of which they have chosen to be part. Importantly, it means also that there will no longer be a reliance on others who chose to opt out to provide treaty-mandated bailouts when crises hit. However, it is just a small component of the crisis that the eurozone faces.

The rules must be adhered to because they are important. My noble friends Lord Lawson and Lord Lamont referred to the time that the single currency was born. Let us cast our minds back to that time. Economic tests were set. They were established as stringent criteria for qualification. Were they applied in reality? Sadly, they were not. It was clear to me, as it was to many others, that the euro had many flaws. Joining together in a monetary pact and without fiscal union 11 members with different economies in different states of development and with different industrial structures was setting up a currency zone on weak foundations. A one size fits all approach, as the then Conservative Government said and as the Conservative Party has maintained consistently since, does not work. I am glad that the Labour Government led by Mr Blair listened to their predecessor and did not join the euro.

Even if we entertain for a moment the notion that the criteria for monetary union were sensible when they were set, their practical application was not. Allowing countries to qualify on the basis of very loose interpretations of the criteria set up the currency to fail—and it is failing. At the time, those who predicted that during the good times the disparities between the economies of member states would not matter but that they would matter in harder economic circumstances when the currency would be tested, were dismissed as doomsday merchants.

Let us fast forward to 2010 and where we are now, as countries in the eurozone and outside it seek to scramble it out of its crisis. Reforms and austerity measures are essential if we are to succeed in restoring some sense of stability to both markets and the eurozone. However, the members of the eurozone cannot ignore their obligations. It is no good for Greece to say that it wants to remain in the eurozone if it cannot implement austerity measures. I do not agree with the premise that a lack of integration has led to the rise of extremism. It is forced integration, with national identities being lost, that has led to the rise of extremist parties throughout Europe.

If—and it is a big “if”—some of these infant steps work towards restoring stability in the markets, perhaps we can then look to and advise on other measures such as the issuing of Eurobonds, which is currently on the agenda with the election of the new French President. Today the euro crisis predicted by the “doomsday merchants” is upon us. Countries are struggling on the brink of implosion because of widely differing levels of indebtedness and competitiveness. The architects of the euro did not put that down as a major objective—far from it. Countries such as Greece are heavily indebted and pay heavy risk premiums. As we all know, its debt is unsustainable. Some suggest that the solution is to refinance the debt through Eurobonds. However, as other noble Lords said, Germany is the key player in this. Why would Germany, which is currently benefiting from the current rate of the eurozone, seek to devalue? It does not wish to, but compromise and consensus must be the call. If the eurozone is to survive, compromise will be necessary.

It was said in this Chamber and elsewhere that the introduction of the euro would mean Britain losing its influence; that our lack of participation would marginalise our status both in Europe and on the world stage; and, indeed, that our lack of membership would render the City of London second to Frankfurt. It did not. When our Prime Minister rightly stood up for British interests and threatened to veto any legislation that would tax the City of London, again it was said that that would marginalise the UK. It has not. Britain’s continued engagement and involvement in discussions on the creation of the ESM, our contributions through the IMF and our influence as an active and influential member of the G8 and NATO lay to rest the absurd suggestions that Britain lacks influence.

The Bill reflects the promise to put British interests first. It was a decision by the previous Labour Government, albeit at a time of crisis, which committed Britain to bailing out the eurozone even though we chose not to be a member. The Bill simply puts right that wrong. I therefore welcome the establishment of the permanent mechanism of the ESM but, in doing so, also welcome the fact that we no longer face the liability of bailing out a currency zone that we chose not to be part of, that we are not part of and that we should never be part of.