Greece: Default Contingency

Lord Lamont of Lerwick Excerpts

Monday 20th June 2011 Lords Chamber

[Lord Sassoon]

My Lords, I am not sure that I entirely accept my noble friend’s starting premise. The position is that Greece is a member of the eurozone, and the eurozone will continue to be the eurozone. We want to see the strengthening of fiscal and economic discipline within that zone. When the IMF put together and led the programme that Greece signed up to—which had elements of fiscal consolidation, structural fiscal reform and wider structural reform—it was done precisely in the context of Greece continuing to be a member of the eurozone, and that is the continuing position. The package has been put together and the new Government have some decisions to take. The IMF is coming up to its regular review before the next drawdown of the package, but that is entirely in the context of Greece being able to finance itself on an ongoing basis within the eurozone.

[Lord Lamont of Lerwick]

Has my noble friend seen the extraordinary anti-German graffiti and the slogans being shouted by the crowds in Athens? Does that not illustrate what Professor Martin Feldstein, the Nobel prize-winning economist at Harvard, has always said—that the euro, far from bringing countries together, increases tensions between them? Can my noble friend also explain what sense there is in Ireland and Greece borrowing more money to lend to Portugal, and Ireland and Portugal borrowing more money to lend to Greece?

[Lord Sassoon]

My Lords, I have not been on the streets of Greece or seen what is going on in Athens, but clearly it is regrettable if anti-German sentiments are being expressed on the streets there. However, I have not been following the detail of the riots. The main thing is that we need to support the Greek Government and encourage them, as the eurozone Ministers have done in their statement today, to progress their package and enable the IMF to complete the upcoming assessment. As for the second-order effects of who needs capital where in order for loans to flow, my noble friend reinforces the point that this is a very interconnected system and the ongoing work on the short-term and medium-term stability of the eurozone has to be mindful—as we have been reminded already this evening—of the interconnectedness of the systems at every level.