Euro Area

Julian Lewis Excerpts

Tuesday 21st July 2015 Westminster Hall

[Mr Steve Baker (Wycombe) (Con)]

It sometimes feels like we need a new language in which to have this conversation about the European Union and our relationship with it. I am grateful that, over the course of his career, my right hon. Friend the Prime Minister has on many occasions given us that language by saying things such as:

“It is the last gasp of an outdated ideology…that has no place in our new world of freedom”.

I agree with him.

A new nation state is hoving into view, and people should be clear about what we are discussing. The question is: should we continue on the path into that new nation state? There can now be no doubt that that is the trajectory of the eurozone. Advocates of European Union membership on substantially the current basis are in danger of being blindsided. We can see from this debate’s attendance that people are not paying close attention to the important issue of what the five Euro-presidents have said. By the way, the “five Euro-presidents”—the ridiculousness of it is palpable.

The five Euro-presidents have set out a new nation state, and it is clear that those who advocate membership on a substantially unreformed basis have not kept up with events. Too often it seems that people complacently assume that there will be a yes vote and that things will go on as before in a kind of status quo, but there will be no status quo on the ballot paper when the referendum comes. The choice will be either to continue on a substantially unreformed basis, if the Prime Minister does not get what he wants, or to say no and continue on a fundamentally different basis. Of course, I hope that the Prime Minister succeeds in delivering everything that he has ever set out. When the day comes, I would like to see yes meaning a fundamentally different relationship with the European Union that we and the Prime Minister can wholeheartedly support, and I would like no to turn out to be something that we do not need to consider.

The five Euro-presidents have set out a path to a new European nation. I fear that the truth is that they will not be willing to allow us to move to a fundamentally different path and that, in due course, the choice will be either the wild ride to political union that my right hon. Friend the Member for Wokingham (John Redwood) set out or the conservative, moderate choice of sticking with our Parliament, our British courts, our British Lords and our ability to govern ourselves in the way that seems fit to us and that is accountable to the British people.

[Dr Julian Lewis (New Forest East) (Con)]

I am grateful to my hon. Friend, and to my right hon. and hon. Friends who spoke earlier, for their efforts in delving so deeply into the questions without completely losing the will to live, but can he explain to me how, despite all their sufferings, the Greek people seem to regard membership of the euro as the addict regards the use of heroin? It does them enormous harm, yet they do not seem to be able to give it up.

[Mr Baker]

My right hon. Friend makes a good point, and it may be that through the euro system Greece has done rather well in the past, through the fact that money was very easy for Greece—probably much easier than it should have been—and a nation that had probably been quite parsimonious was encouraged to take advantage of cheap credit and get into bad debt problems. It may well be that that system encouraged Greece to believe that a new way of living beyond one’s needs was possible; but as good Conservatives we will recognise that one must live within one’s means and balance the books. One must have low taxes, small government and sound money. However, I do not want to divert my remarks too far down that path.

I want to pick up on something that my hon. Friend the Member for Stone (Sir William Cash) said about Germany. It has been an interesting journey, considering how people reflect on Germany. I am inclined to think that German commitment to the EU project is not malicious or controlling. It is not a problem, except that, perhaps because the EU is perceived as an anti-war project, the German people and their leaders have pursued the project far beyond what was reasonable, just and right, out of a sense of war guilt and a historical sense of shame. We as good individualists, in rejecting collectivism, may have to look at today’s generation of German people and say that they are not responsible for the horrors of the past. They must forgive themselves and move beyond the corrupting view that they have the responsibility to take forward, in a way that is quite dangerous, a project that can now be seen to have failed. History may not repeat itself, but it sometimes rhymes. We have had a horrible financial crisis.

--- Later in debate ---

[The Financial Secretary to the Treasury (Mr David Gauke)]

It is a great pleasure to serve under your chairmanship, Sir David. I congratulate my right hon. Friend the Member for Wokingham (John Redwood) on securing this debate, and I thank all participants. It has been enlightening. I particularly congratulate my hon. Friend the Member for Stone (Sir William Cash) on his election—I am surprised that anyone would dare challenge him—and am delighted that he has been returned in place as Chairman of the European Scrutiny Committee.

As previous speakers have said, the UK’s relationship with the euro area and further euro area integration raise important challenges. That is particularly the case in the context of the situation in Greece. By not joining the euro, the UK retained the economic flexibility to adjust to shocks. This Government cannot be clearer: we are committed to keeping the pound and staying out of the euro area. Under protocol 15 of the treaties, the UK has a permanent opt-out from the euro area, so we are

“under no obligation to adopt the euro”.

That said, it seems likely that the euro area—I stress “the euro area”—will need further integration to stabilise its economy. That is the premise of the recent five presidents report. Our position is simple: the EU must be flexible enough to meet the interests of both those inside the euro area and those outside it. The single currency is not for everybody, but the single market is, so it must work for all of us. My right hon. Friend the Chancellor has made it clear that, as the euro area integrates, we will need to reconcile the integrity of the EU as a collection of 28 member states with the integration of the euro area as a currency union of 19 economies. Our interests as a euro-out must be protected.

The immediate outlook for the euro area is improving. Its first-quarter growth was 0.4%, the fastest rate of quarterly growth since 2011. Nevertheless, the outlook for growth remains sluggish, which should be of concern to us all. The lesson from our own experience in the United Kingdom is that what is needed to embed recovery is a mutually reinforcing mix of active monetary policy to stimulate demand, maintain price stability and support the flow of credit to the economy, clear commitments to medium-term fiscal discipline that provide a firm anchor for market confidence and a focus on growth-enhancing structural reforms to rebalance and strengthen the economy. We therefore welcome the European Central Bank’s recent actions to stimulate the economy and tackle the potentially damaging threat of deflation. However, as the latest forecasts show, ECB action alone is not sufficient to change materially the euro area’s growth trajectory. Structural reforms are crucial to support the effectiveness of the ECB’s action.

The Chancellor has long made clear his view that there is a remorseless logic meaning that the euro area, like any currency area, needs closer economic and fiscal integration to secure its future. The recently published five presidents report is part of an ongoing process to identify next steps to better governance in the euro area.

[Dr Lewis]

Is it our Chancellor’s view that there should develop in the eurozone a single state with a single Government?

[Mr Gauke]

The logic of the position—this point was made by numerous right hon. and hon. Members before the formation of the euro—is that if there is a currency union, certain other things flow from it. Indeed, we are seeing the consequences of that. In a way, it is the background to the five presidents report. It is part of an ongoing process to identify the next steps to better governance in the euro area. There is a clear appetite for reform demonstrated by the process, which echoes the conversations that the Prime Minister and Chancellor have had in their bilateral discussions. The Government have submitted two written contributions to the five presidents’ process. We note the report’s proposals and have set out its content and implications in an explanatory memorandum. Therefore the Government do not currently plan to issue a further formal response. However, although the report’s focus is on the euro area, many issues it covers affect the interests of all member states. The UK will therefore remain fully engaged in discussions in this area.

So far, other member states have expressed a range of views on the report’s proposals. It is worth nothing that these reviews have been mixed. As I said, it is in our interests that the euro is a successful, strong currency area, so we do not want to stand in the way of the euro area resolving its difficulties. However, we will not let integration of the euro area jeopardise the integrity of the single market or in any way disadvantage the UK. The Government are pushing for further reform to improve the single market, focusing on the digital single market; further liberalisation of sector-specific services; and better regulation for small and medium-sized enterprises.

In return for supporting the euro area’s efforts to stabilise its economy, we want a settlement between the UK and the euro area that protects the single market, that is stable and fair and that lasts. This is in the interests of everyone—it is the basis for stable and sustainable governance of a reformed and prosperous EU—and is one of the UK’s important objectives in its renegotiation with the EU.

It has been 40 years since the British people last had a say on our EU membership. The organisation has changed vastly since then and it is time that we addressed this matter. The British public are clear that they are not happy with the status quo. My right hon. Friend the Prime Minister is determined to address those concerns. He has already talked about four areas where he wants change: sovereignty, competitiveness, immigration and fairness. For example, ever-closer union—a theme that runs through the five presidents report, to some extent—may be right for others, but it is not right for Britain, and change should include increasing economic competitiveness to create jobs and growth for hard-working families, and reforming welfare to reduce the incentives that have led to mass immigration from Europe. Those things are important to us. These reforms will improve fairness, which cuts to the heart of today’s debate: protecting Britain’s interests outside the euro. They will also improve the EU’s effectiveness as a whole. We want a dynamic, competitive, outward-focused Europe, delivering prosperity and security for the benefit of every country in the EU, with the UK playing its role.