Greece

Baroness Ludford Excerpts

Monday 6th July 2015 Lords Chamber

[Lord Davies of Oldham (Lab)]

My Lords, I thank the Minister for repeating the Statement made by the Chancellor of the Exchequer in the other place.

Yesterday’s referendum in Greece presents the European Union with the most fundamental test that it has faced for a generation. The Greek people have given their backing to their Government, but clearly this does not overrule the position of other elected eurozone Governments who are now faced with a tremendous problem. It is imperative that the Greek Government and their creditors sit down and plan a pragmatic way forward, and avoid creating any chaos by impulsive or precipitate steps.

What are the Chancellor and the Prime Minister doing to press both sides to find a new timetable? Greece’s position in the euro and the EU affects us all. Will the Prime Minister and the Chancellor actively engage with both sides of this impasse and do what they can to help reach a necessary agreement? Does the Minister agree that there is more scope for proactive diplomacy here? What conversations has the Chancellor had with the Greek and other eurozone Ministers since last week’s Statement? It is crucial that the Chancellor plays a full part. What is he saying to the International Monetary Fund, on which we have direct influence, about emerging options for restructuring Greek debt? Last week the IMF signalled that alternative analysis was needed. Can the Minister clarify what course the British Government are advising the IMF now to take?

I turn to some of the immediate issues for the UK and for British citizens. What can be done to help British firms selling goods or services into Greece, which may be awaiting payment because of the suspension of Greek banks that is due to continue? What changes are being made to the advice and assistance given at this time by UK Trade & Investment? Businesses will expect the department to keep them apprised of developments. Can the Minister provide reassurance that the Government are working closely with tour operators and airlines so that travel arrangements are not adversely affected by disruptions to the currency in Greece? Can he assure us that the embassy in Athens and our consular network stand ready to help with the volume of inquiries from British citizens that are now likely? It is not possible to overestimate the pressures that may exist.

Can the Minister reassure the House that Britain’s financial system is properly insulated from risks emanating from a possible Greek exit from the euro? Last night the President of the European Parliament called on EU member states to prepare in the coming weeks for a possible humanitarian intervention, given that children, the sick and the vulnerable in Greece may feel the strain of any volatility in the basic operations of a normal economy. It is clear that in some parts of Greece the issue of essential medicines is becoming an acute problem. How are the British Government responding to this?

Finally, does the Minister agree that both sides of this stand-off still have much work to do? Eurozone countries need to do their best to offer to Greece the opportunity of a return to negotiations. The Greek Government need to face up to their responsibilities for stronger governance and economic reform. These are serious times for Greece, Europe and the United Kingdom. The UK needs to do all that it can to prevent disorder occurring, but to be fully prepared in case disruption does come to pass.

[Baroness Ludford (LD)]

My Lords, I, too, thank the Minister for repeating the Chancellor’s Statement. I find the Statement curiously semi-detached, and I would have hoped—to repeat a word which the noble Lord, Lord Davies, used—for something a little more proactive. The Statement says that we will do whatever is necessary to protect the UK’s economic security, but then it just talks about remaining vigilant and monitoring the situation. Can the Minister be rather more precise about what action is being taken to protect the UK’s economic security? Is the UK as protected as it can be from whatever might happen after tomorrow, whether that is a Grexit or other financial difficulties? Is it the Government’s view that a Grexit has been priced into the markets? What can we expect in that respect?

What about British people who have money in Greek banks? If I recollect correctly, it was said last week that four of the banks are represented in this country, three of which have branches and one of which has a subsidiary. If there is a haircut of deposits, which there has been speculation about, what will happen to British deposit holders? Over the weekend it was remarked that the Government intend to reduce the cap on deposit guarantees from £85,000 to £75,000 because of the drop in the value of the euro. That seems rather bad timing in view of the potential difficulty with bank deposits.

What will be the advice to British tourists if it is clear after tomorrow that Grexit will happen? We all hope that there is not social upheaval, but we have to anticipate that the difficulties in getting cash, medicines and so on will only get worse. What is the Government’s contingency plan? I find what is mentioned in the Statement a little abstract. I do not see clear plans for those who, for instance, might need pharmaceutical supplies during their visit. Will the Government advise people with medical needs not to go to Greece? I would regret that, but is it possible that it will happen? Can the Minister be more specific about what the Government plan to protect our economy and our citizens?

[Lord O'Neill of Gatley]

My Lords, the noble Lord, Lord Davies, and the noble Baroness, Lady Ludford, asked many questions, so I shall try to be as brief as possible.

A number of these matters were touched on in my right honourable friend the Chancellor of the Exchequer’s Statement, but, to repeat, the Prime Minister and the Chancellor have had discussions with a number of key participants in trying to bring this crisis to an end, including—for the Chancellor—the head of the IMF, today, and a number of members of the eurozone finance group. I believe that we are as up to date as possible in the thinking of all the key participants ahead of the key meetings tonight and tomorrow.

With respect to businesses and tour operators, I shall expand on what I said. BIS has published detailed guidance to help business as a result of events in Greece. It is available on the Government’s websites along with a business support telephone number. As I also said, the Trade Minister has met a number of UK companies and business groups to discuss the situation and they seem pretty calm. He plans to meet with them again this week. The same goes with respect to our contacts with a number of important tour operators.

It is indeed the case that the four largest Greek banks have branches in the UK. However, their balance sheets are pretty small by the standards of these things, with deposits totalling less than £225 million. Eurobank is now a branch of the Luxembourg subsidiary and so the Luxembourg subsidiary deposit guarantee scheme will provide protection to eligible deposits there. The others are covered by the Greek deposit scheme. There is one Greek bank with a subsidiary in the UK, Alpha Bank, and this is a separate, stand-alone entity from its parent bank. It is small with assets slightly over £0.5 billion at the end of 2014 and, as a UK subsidiary, it is regulated by the PRA and its deposits are covered by the Financial Services Compensation Scheme.

There were further questions about the schemes in place for the deposit guarantee. The amount of €100,000 was agreed back in 2010 in euro terms. It is being reduced in sterling terms at the end of this year merely because of the resulting appreciation of the pound against the euro.