European Union (Approval of Treaty Amendment Decision) Bill [Lords]

Emma Reynolds Excerpts

Monday 3rd September 2012 Commons Chamber

[Emma Reynolds (Wolverhampton North East) (Lab)]

It is a great pleasure to be back from holiday, although I do not lament the end of the cricket season in quite the same way as the hon. Member for North East Somerset (Jacob Rees-Mogg). We have had a wide-ranging debate, some of which concerned the short Bill before us. It is an enabling measure that will amend article 136 of the treaty on the functioning of the European Union, and allow member states to set up a permanent bail-out fund—the European stability mechanism.

We have heard speeches from many right hon. and hon. Members. My right hon. Friend the Member for Rotherham (Mr MacShane) reminded us of the great dangers of what he called a “Grexodus”—an exit by Greece from the eurozone—and of the fact that the vast majority of Greeks want to stay within the eurozone. My hon. Friend the Member for East Kilbride, Strathaven and Lesmahagow (Mr McCann) warned of the great dangers of a wider euro collapse, and we heard also from my hon. Friend the Member for Luton North (Kelvin Hopkins), who takes a somewhat different position, as was reflected in his original opposition to the euro.

From the Government Benches we heard a characteristically detailed and lengthy critique of both the euro and the EU by the hon. Member for Stone (Mr Cash), and the hon. Member for Camborne and Redruth (George Eustice) reminded us that the UK is not bound by the ESM. We heard an uncharacteristic speech—it was almost gushing and positive—about the Government from the hon. Member for North East Somerset, and a somewhat more critical speech from the hon. Member for Rochester and Strood (Mark Reckless). The hon. Member for Stroud (Neil Carmichael) reminded us that it is in the national interest that the euro survives and does not collapse.

As the shadow Foreign Secretary, my right hon. Friend the Member for Paisley and Renfrewshire South (Mr Alexander), set out at the start of the debate, the Opposition are in favour of the Bill and the European stability mechanism not because the ESM is a silver bullet to solve all the eurozone’s problems, but because it is part of the solution. We are, however, concerned about the delay in its introduction, and about the insufficient scale of the firewall. Since the start of the crisis, political inaction has produced uncertainty in the markets, which in turn has deepened the eurozone crisis. Markets need to know that European leaders have the political will to tackle the crisis. Therefore, alongside the establishment of the ESM, further measures are urgently needed to restore stability to the eurozone, and to provide a greater role for the European Central Bank, a recapitalisation of European banks, and a greater emphasis on growth rather than austerity alone.

The British Government and other European Governments have imposed collective austerity. That has provoked a simultaneous shrinkage of our economies and produced a downward spiral with a devastating recession in Greece and an unemployment crisis afflicting many European countries.

The International Monetary Fund and several ratings agencies have been clear in their criticism of austerity-alone economics. Last April, the IMF stated:

“Austerity alone cannot treat the economic malaise in the major advanced economies.”,

and Standard and Poor’s has stated that

“austerity alone risks becoming self-defeating.”

Thankfully, a number of changes of Government in the rest of the EU have led to a recent shift from severe austerity towards a focus on growth, and we welcome the growth package agreed by European leaders in June. The UK Government, however, have little authority in promoting growth in Europe, given that they have produced a double-dip recession at home.

Growth and stability in the eurozone are manifestly in the UK’s national interest—40% of our exports go to the 17 members of the eurozone, and the wider EU is our biggest trading partner. The Government like to lay the blame for their economic mistakes at the doors of others, and Ministers have blamed everybody but themselves—the banks, the royal wedding, bank holidays, the rain and, of course, the snow. The eurozone is the latest smokescreen for the Government’s economic mistakes, but the uncomfortable truth is that, had it not been for our exports, our economy would have gone back into recession a year ago.

Several hon. Members have called for the break-up of the eurozone, but that is neither in the British national interest, nor an easy, cost-free way out of the crisis, just as “I told you so” is not an economic policy. Several hon. Members have suggested that Greece leave the eurozone. However, the consequences would be disastrous both for the Greek people and the rest of the EU. A new Greek currency would be likely to plummet in value. Imports, on which Greece relies heavily for both food and medical supplies, would become prohibitively expensive and, without a huge injection of capital, the Greek banking sector could collapse, wiping out ordinary people’s savings. Further severe spending cuts would be needed to enable the Greek Government to finance its deficit and pay public sector salaries and pensions.

More widely, the contagion effect of a Greek exit could be disastrous for Europe. The eurozone’s largest banks, not to mention the European Central Bank, have huge exposure to Greek debt, and British banks would also be affected. Moreover, by setting a precedent for eurozone exit, a Greek exit would seriously damage depositor confidence. At best, this would introduce greater uncertainty to the eurozone, and at worst it would precipitate a run on Europe’s biggest banks. Finally, a credit event, which might follow a Greek exit, would cause turmoil on financial markets. Far from stabilising the eurozone, a Greek exit might serve only to deepen the crisis, and there is no possibility that Britain would be completely insulated from that.

As ever, today’s debate has highlighted yet again the deep divisions in the Conservative party over Europe. Clearly, the wounds of the last 20 years have not healed. We have the usual suspects making speeches that sound oddly reminiscent and the party leadership is having trouble managing some of its Back Benchers. I might not agree all of the time with the hon. Member for Stone, but at least he is consistent. The same cannot be said for the Government, who try to placate their Back Benchers while at the same time trying to rebuild bridges with our European partners.

I welcome the Europe Minister’s new found linguistic skills which he has used to pen articles in several European newspapers—Le Monde, entre autres—in which he extols the virtues of the UK’s membership of the EU and reassures the reader that the Government are wholly committed to the UK remaining in the EU. Perhaps he could clarify when he is going to write a similar article for the British press.

I am happy to leave the Tories squabbling amongst themselves: we are clear that enabling the setting up of the ESM is in the UK’s national interest, as is a return to growth and stability both in the UK and the rest of the EU. For that reason, we support the Bill.