Loans to Ireland Bill

Debate between Andrew Gwynne and Alan Johnson

Wednesday 15th December 2010 Commons Chamber

[Alan Johnson]

I will not bother to take an intervention from the hon. Lady next time, because that point does not even begin to be germane to this problem.

My third concern is how we are going to draw a line under this matter. We had the Greek bail-out, and now we have had the Irish bail-out. There is no sign of any real stability in the eurozone to stop such events happening again.

[Andrew Gwynne (Denton and Reddish) (Lab)]

Is it not important that Europe gets ahead of the crisis? As we saw with the Greek bail-out, such short-term measures do not solve the fundamental problems across the eurozone.

[Alan Johnson]

I am coming to exactly that point.

Some Conservative Members think that the root cause is the single currency. I do not share that view. The euro had nothing to do with the property boom and bust, and a failed euro would be an economic and political disaster with repercussions well beyond our continent. Ireland needs a healthy eurozone, or it will end up with years of deflation and unemployment, and we will be less likely to have our loan repaid.

As the loan that we are being asked to approve is equal to the amount of money that we would have contributed had we been a member of the eurozone, surely that gives us the right to influence the necessary debate on what action is needed to address the underlying causes of this recurring crisis. This bail-out buys time, but there is no sign that Europe’s leaders know how to put it to good use. In May, we had the Greek bail-out; six months later, we have to deal with Ireland. In neither case is there much sign that these countries have resolved the core dilemma, which is solvency.

Collective austerity across Europe offers countries with high debt burdens no way out. Cutting demand in Germany is the last thing that Ireland needs at the moment. What we are seeing in Europe bears out the IMF’s conclusion that fiscal austerity does not boost short-term growth and that deficit cuts are more painful if they occur simultaneously across many countries. Ireland needs a healthy eurozone with markets such as Germany consuming Irish goods, or it will end up with years of deflation and unemployment. Having engaged in repeated rounds of austerity, with VAT rises, welfare cuts and redundancies, Ireland still finds growth elusive: it has been consistently poor for the past three years. Indeed, the economy has shrunk in 11 of the 14 quarters since the beginning of 2007, and sluggish growth has made getting the deficit down much harder.