Eurozone Financial Assistance

Claire Perry Excerpts

Tuesday 24th May 2011 Commons Chamber

[Mr Cash]

Very simply, we now have a new coalition Government who have been seeking to achieve a reduction in the deficit, but they are not doing the accompanying things that are required in respect of the failing European project. That is the key problem. There are young people throughout Europe—and, for that matter, in this country—who simply cannot get jobs because companies will not take them on as a result of European employment regulations and because the deficit in the public sector cannot be stabilised without reasonable tax revenues from the small business community, which is being deliberately destroyed by the refusal to repeal the burdens that strangle it.

In the meantime, Germany has had unit labour costs of a mere 2% on average over the last 10 years, whereas the average for the rest of the European member states is between 25% and 30%. It is an impossible situation, making it impossible for Europe—this entity that the integrationists believe in—to be able to compete with the BRIC countries. Germany invests in cheaper labour markets in Europe, with 67% of all its trade being with Europe, while 45% of all European trade with China is German.

The reality is that what we are debating today is symptomatic of a failure in the coalition Government’s strategy. We are not going to get out of this problem—I say this in all sincerity and in the great hope that people will listen at last—as long as we go on with this failing project. We will not get out of the mess. Today’s debate is an opportunity to get the issue straight. As Michael Stürmer, the chief correspondent of Die Welt argued, the dream is over and the Maastricht treaty has to be revised, but the coalition has no will to do so. The European bail-out of Portugal is a symptom of this deeper problem.

[Claire Perry (Devizes) (Con)]

Given my hon. Friend’s very pessimistic view of the outlook for the eurozone, which many of us share, does he not feel like giving just a tiny cheer that, thanks to the Chancellor’s efforts last December, we will take no further part in a permanent bail-out mechanism for Europe?

[Mr Cash]

I did not say anything adverse about it at the time other than that the opportunity was not taken, despite advice I tried to give, to use the treaty opportunity to say to other member states that we would not agree to the treaty and would veto it unless we were taken out of the EFSM; we could then have brought forward the arrangements currently proposed for 2013. That proposition was eminently reasonable, eminently possible and €440 billion was available under the facility, which is in operation until 2013. In other words, the whole EFSM issue pivots on vanity and a determination not to unravel something that cries out for unravelling. It is not just; it is not right; it is completely irrational.

There are going to be further and deeper riots and protests. Worse still, I believe that the Government are contributing towards instability throughout Europe while claiming that within the time frame extending to 2013, bailing out the German and French banks—we should remember that that is what lies at the root of the problem—as well as Portugal and Greece will achieve stability. It will not. The argument is not only wrong, but totally—

--- Later in debate ---

[Claire Perry (Devizes) (Con)]

I speak with some trepidation from the depths of the Maastricht maestros on the Government Benches. If I may echo the point made by my hon. Friend the Member for Stourbridge (Margot James), it is a tribute to many people, surrounding me today and not in the House, that we are no longer part of the euro and that we have been able to establish a healthy Euroscepticism both in opposition and since we came into government.

Let me go back in history to see how we reached this sorry state of affairs. Many Members will remember the debates around the time of the Nice treaty in 2001. Indeed, there are Ministers on our Benches today who urged the Government of the time in the strongest possible terms not to sign up to the treaty as they believed it would give away any future veto on bail-out mechanisms. We were assured at that time by the then Minister for Europe that article 103 made it clear that there would be no bailing out of member states, whether that meant Britain or any other member state. I question whether the Minister for Europe at that point knew what was being done.

In May 2010, the acting Chancellor of the Exchequer signed Britain’s commitment to the temporary European financial stability mechanism. Our total commitment is 12.5% of the putative total of €60 billion—€7.5 billion, a substantial sum. Later, I shall address what that means for hard-pressed British taxpayers. First, let me move the timeline further forward one step to December 2010. As has been said several times, the Conservative Chancellor of the Exchequer agreed that Britain would play no further role in a permanent European bail-out facility and also fought for and had implemented a number of stringent requirements for draw-downs from the existing facility.

What will this facility cost the taxpayer? As my hon. Friend the Member for Orpington (Joseph Johnson) said earlier, it is a contingent liability. A number of things must happen before there is any cash bail-out. The entire thing has to go belly up and the countries all have to default. Given that our ranking on this debt is pari passu with the facilities put in place by the IMF, we will have a superior credit position and will be paid first in the unlikely event that there is a partial or full default. It is not a gift or a grant but a contingent liability of €7.5 billion, of which approximately €1.2 billion has been put into the facility to date. The suggestions we often hear from Members on the Government Benches that hard-pressed taxpayers will see further cuts to public services or will not see the schools, hospitals or road repairs that they have been promised are simply fiction. It is not the case.

This amount is a proportion of the EU budget and the budget is agreed for this year, so the liability is capped at this level. There is no further liability under the facility. What is the “so what” of this point? It is my belief that the action of this Government’s Chancellor has stopped Britain further sleepwalking into handouts, bail-outs, gifts or grants to the European Union. This fund is a eurozone experiment about which we have many concerns and I share the concerns that have been eloquently raised by Government Members about the long-term future direction of countries that are hamstrung by the tightness of their currency conditions and the overall problems with their economies.

A Conservative Chancellor argued for tough conditions and pari passu rating with IMF debt for this facility, the only facility in which we have involvement. If hon. Members consider the conditions under which a country can access the facility, they will see that extremely tight conditions must be met and plans must be made. Although the situation is not ideal, the Government have done far more than the previous Government to put a stop to such developments—in fact, they have done the opposite of what that Government did for 13 years. The point that has been made about fighting to ensure that there is equal draw-down from the facility is right and I believe that the amendment also calls for that.

I urge Members on both sides of the House to stop this Eurosceptic scaremongering, to focus on the facts of the debate and to ensure that we collectively never again sign our country up to the sort of bail-out mechanisms and removal of vetoes with which the previous Government left us.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

I call Andrea Leadsom. You have two minutes before the Front-Bench wind-ups.