Greece

John Redwood Excerpts

Monday 29th June 2015 Commons Chamber

[Mr Osborne]

Let me deal with the specific points that the hon. Gentleman has raised. Our advice to the many British people who are planning to go on holiday to Greece is very clear. They should continue to check the travel advice on the Government website. As I have just explained, that advice has been changed, and we are advising people to take more euros with them than they might have been expecting to take.

The hon. Gentleman makes a point about our conversations with the Greek authorities. Clearly they have tried to, in some sense, protect tourists from their capital controls, because if people have access to a foreign bank account, they can withdraw up to €600 from the ATMs. But of course one has to think through a situation where the ATMs potentially start to run out of money, particularly in certain locations. That is why we are advising people to take more cash with them but also to be aware of the safety issues involved in that.

On the question about British citizens who have deposits in Greek banks, I hope I made it clear in my statement that deposits in branches of Greek banks, and indeed, in that sense, also the host bank, are not covered by the UK’s compensation scheme, but the deposits in the subsidiary are in the UK. If people are not entirely sure what their situation is, they should check with their bank, but that has been spelled out for them. On the support for the British embassy and our consular teams in Greece, the Foreign Secretary is here, we have discussed this and the Foreign Office has put in place contingency plans to step up the support it can provide on the ground should the situation deteriorate.

On the exposure of our banking system, it is less than 1% of the common tier 1 capital of the UK banks. As I said in my statement, it is fair to say that as a country and as a banking system we have dramatically reduced our exposure to Greece, as has pretty much every other bank in Europe. In terms of how this is co-ordinated across government, the Bank of England leads on financial stability issues, the Foreign Office covers the consular issues, and the Treasury is covering the financial stability issues and working with the Department for Work and Pensions on payments, but we are meeting regularly. We had the meeting today and we also had a meeting last week, which the Governor also attended. On businesses affected, advice is available on the Department for Business, Innovation and Skills website, and, as I say, HMRC’s time to pay scheme can help with cash flow. Only 0.6% of the UK’s exports of goods and services go to Greece, so it is a small amount, but of course there could be a considerable impact on individual firms.

The IMF was created after the second world war to provide support for economies that have been struggling. We took steps in the last Parliament to increase the capital available to the IMF—I might point out that the Opposition divided the House on that issue, but it was a sensible step to take. The IMF has precautionary balances, and let us be clear that no one has ever lost money lending to the IMF and providing support to the IMF. Of course the IMF is very important in this situation, not least because of the rigour that it brings, which is one of the reasons why quite a few members of the eurozone are absolutely insistent that the IMF is around the table.

The final point I would make is this: of course we would like a peaceful—if that is the right word—or less traumatic resolution of this crisis, but things have taken a turn for the worse because of the decision to hold this referendum and because the Greek Prime Minister said he was going to recommend a no vote. I would therefore suggest that at the moment, in the next few days, the ball is largely in the Greek Government’s court. Of course if things change, there is a very big role for the eurozone to play in helping to achieve a negotiated settlement.

The observation I would make is that five years ago we were much less well prepared to deal with shocks from abroad: we had a very high budget deficit, one of the highest in the world; and our banks were not as well capitalised as they should have been. We are in a stronger position as a result of the difficult decisions we have taken over the past five years and if the hon. Gentleman is willing to support the further decisions that we are going to take in the Budget next week, I look forward to his saying so next Wednesday.

[John Redwood (Wokingham) (Con)]

The European Central Bank has lent €89 billion so far to the Greek banking system, and that money is now at risk. Will the Chancellor confirm that, thanks to our prudent approach, UK taxpayers would not make any contribution to the recapitalisation of the ECB if that money has now been lost?

[Mr Osborne]

My right hon. Friend is right to point out that in effect what has happened over the past few years is that the private exposures to Greece have been converted into eurozone public exposures and, of course, into IMF exposure. That is part of what has happened. One key decision that we took in the previous Parliament was to get the UK out of these eurozone bail-outs. The previous Government had signed us up to those bail-outs, but the Prime Minister got us out of them and, as a result, dramatically reduced the UK’s direct exposure. But, as I have said, we are part of the financial system of Europe and we will be affected if there is a Greek exit.