European Council

Lord Maples Excerpts

Monday 20th December 2010 Lords Chamber

[Lord Strathclyde]

My Lords, we certainly played a part in the Irish bailout because we perceived it to be in our national interest, whether Ireland was in the eurozone or otherwise, for reasons that the noble Lord knows well.

The noble Lord asked another question: what happens if another country asks for similar support? He went on to list a few of them. There have been no requests for financial assistance from other member states. It is therefore inappropriate for me from this Dispatch Box to speculate on what may or may not happen in other member states given that no request for assistance has been made. The European financial stability mechanism and the European financial stability facility are fully operational. Any request for assistance from a member state would be considered on its own merits.

The noble Lord started by saying that the eurozone was designed for disaster. It is not easy for those who were not in favour of us joining the euro in the first place to make a coherent argument for the euro, but it is in existence. It is in our political and economic interests in Britain for the euro to succeed and that is why we continue to support it.

[Lord Maples]

My Lords, could my noble friend help me with my memory of the Maastricht treaty, which set up the euro? I seem to remember that two of the conditions were that: first, no Government should run a budget deficit of more than 3 per cent of GDP; and, secondly, that there should be no bailouts? Is not the reason that the European Union—or the eurozone at least—is now having to breach the no-bailout clause because Governments were allowed to breach the deficit clause? Will that change not create a huge moral hazard? They were getting away with breaking the deficit clause but they did not know that they were going to get bailed out. Now that they know they are going to get bailed out, that is creating a moral hazard that surely will encourage bad behaviour in the future. When my noble friend says that we are in favour of these arrangements, is that because we think that it will make the euro stronger or weaker?

[Lord Strathclyde]

My Lords, my noble friend is right some of the conditions for entry into the euro that were laid out in the Maastricht treaty, and other conditions including those on deficits, have been broken. I believe that there is a sense of moral hazard because they have been bailed out, but it is in the interests of everyone within Europe to make sure that no further countries find themselves in financial trouble. That is why the eurozone is itself taking steps to try to manage its affairs in a more coherent way.