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

Kelvin Hopkins Excerpts

Monday 10th September 2012 Commons Chamber

[Mr Clappison]

I beg to move amendment 1, page 1, line 14, leave out subsection (2) and insert—

‘(2) This Act shall not come into force until the day after the Secretary of State has laid an order certifying that the constitutional requirements of all the member states of the EU have been complied with and all the related legal challenges have been disposed of.’.

I am grateful to the right hon. Member for Rotherham (Mr MacShane) for giving the Committee a perhaps unintended trailer of the film, as it were, but I hope to persuade hon. Friends that the film is rather better than his trailer for it. The gist of his argument was: what business is it of ours and how dare we lecture Europe on what it should do? But there is a difference between what he said and the amendment, which is concerned with what Europe has decided and how it takes effect in this country. That is rather a different matter, and I hope that I will persuade the Committee that important questions arise from it.

The amendment, which I do not intend to press to a vote, is designed to probe some of those questions. In the negotiations leading up to the amendment to article 136 of the EU treaty, the Prime Minister secured a good deal for Britain. It was a good deal for reasons I shall explain shortly. I do not want to go into the background of how in May 2010 the country became committed to the European financial stabilisation mechanism, which was different from the European stability mechanism, which we are talking about now, and from the European financial stability facility—there is no shortage of such acronyms and measures. In fact, I asked the House of Commons Library this morning how many attempts the EU had made since 2008 to resolve the euro crisis, but it said that it was difficult to say in the time available because there had been so many and it was so complex. However, it gave me a rough estimate of 17, including the latest one from Mr Draghi—we must hope that the 17th is more successful than the previous 16.

[Kelvin Hopkins (Luton North) (Lab)]

I agree with the hon. Gentleman. Some say that these repeated measures to try to save the euro are like kicking a can down the road, trying to fend off the inevitable for a little longer. Is that a fair assessment?

[Mr Clappison]

I pay tribute to the hon. Gentleman, who has been consistent in his analysis. I have not yet heard anyone who has convincingly contradicted his analysis of the underlying economic problems.

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[Kelvin Hopkins]

I am astonished that my right hon. Friend should say that the value of a country’s currency is not important. If that is so, why did Britain recover after 1931 only by coming off the gold standard? We devalued our currency in 1949 and in 1967, we allowed for a big depreciation after the crisis of the early 1980s, and after the collapse of the exchange rate mechanism we recovered simply because we devalued our currency substantially to bring it into line with the needs of our economy.

[Mr MacShane]

I do not know whether my hon. Friend has spent much time holidaying in Europe in recent years, but there has been a substantial devaluation of the English pound against the euro since, roughly, 2008, and what have we seen? A recovery in Britain? An increase in exports? A decrease in imports? An increase in the creation of firms and jobs? In fact, we have seen the very opposite. My hon. Friend is right historically—he is always right historically—but I prefer to live today rather than in history.

The main problem with the amendment is that it is a wrecking amendment, and I hope that when the Minister replies he will have the honesty to say so, although the amendment was tabled by his hon. Friend the Member for Hertsmere. The notion that nothing can be ratified until every other country has ratified it and disposed of putative legal challenges is a circle that can never be broken. If the same rule were adopted by even one other EU member state, nothing could be ratified until we had agreed to ratify it, and we could not agree to ratify it until other Parliaments had done so.

Not only are we, as usual, condescendingly and patronisingly lecturing other Parliaments on what their constitutional settlements should be, but this is nothing short of a wrecking amendment, and I wish that Conservative Members would have the intellectual honesty to say so.

[Martin Horwood]

It is generally a pleasure to follow the right hon. Member for Rotherham (Mr MacShane) in European debates, as he and I share a broad enthusiasm for the European Union and its development. However, I think that on this occasion he is being a little unkind to our hon. Friends on the Conservative Benches. I do not think that this is a wrecking amendment; I think that it asks legitimate questions about the timing of the transfer between the European financial stability facility and the European financial stabilisation mechanism and the new European sustainability mechanism—although I think that by demonstrating that we know the difference between the EFSF, the EFSM and the ESM, we are probably all showing that we need to get out more.

The right hon. Gentleman asked whether the old EFSM, which made Britain liable for the financial bail-outs, could be brought back. That is an interesting question, and I too would like to hear the Minister answer it. I assume that a vote by the Council, probably with unanimity, would be required to bring the EFSM back into operation, given that the Council voted to end it, or at least not to involve it in any new bail-outs. If that is the case, I think that it would reassure Conservative Members considerably to know that the EFSM is, in effect, dead and buried, at least in respect of new bail-outs.

There are two problems with the amendment. The right hon. Member for Rotherham pointed out one of them in what was a rather pre-emptive intervention. This amendment ties the triggering of United Kingdom legislation to actions of other countries—to events in Berlin, Dublin or the European Court, for instance. That is a strange principle for Members who have generally been rather keen to emphasise the unique sovereignty and independence of the United Kingdom Parliament to be trying to introduce into a British Bill. It raises a constitutional question, too: should we be putting clauses into British legislation that are entirely dependent on events in other countries?

The second problem is the political roundabout problem. If other countries follow our example and make their ratification of the treaty dependent on others finishing their processes, we will be like cars at a roundabout, with everybody waiting for everybody else to go, and the whole process will completely logjam. I am not sure whether that is what was intended, but it would make the amendment something of a wrecking amendment, in practice if not in theory. I think this is an impractical amendment—albeit perhaps a well-meaning one, which has produced an at least mildly illuminating debate.

[Kelvin Hopkins]

First, let me say that I entirely support what the hon. Member for Hertsmere (Mr Clappison) said, and I was pleased to sign his amendment.

The idea that we are being difficult by talking about delaying our effective support for this European Union measure is wide of the mark. We are being asked for a favour in respect of something that does not technically affect us, because we are neither contributors to nor beneficiaries from this new mechanism. We as a country are being gracious by putting this Bill forward, as we are helping out. It is absolutely sensible that the eurozone countries, who are very different from this country, should make sure that they have approved this mechanism and that there is no possibility of legal challenges before we say, “Yes, okay, as you’ve all approved it, we’ll sign on the dotted line to help you out”—and we should do that at the end of the day rather than at the beginning.

If we were to rush ahead and do this, the left-wing Eurosceptics in Holland would rise up to derail the Dutch situation, or the German constitutional court would decide it did not like the system, and we would be left having approved something that the eurozone countries do not even like very much themselves. We would be in a very silly position. It is therefore entirely sensible that we and other countries outside the eurozone should only go along with any decisions once the eurozone countries have agreed to them.

However, I must say that I still believe this mechanism is simply another measure for kicking the can further down the road and putting off what some think of as the evil day when the euro comes to an end. I do not say that simply because I have been sceptical about the euro from the beginning and disagree with the whole principle of the single currency, because it is not just me saying this now; other people agree. Indeed, this week George Soros said that Germany should leave the euro. It would be daft of the Germans to do that, however, because if they did, the new Deutschmark would immediately appreciate in value and Germany would become very uncompetitive in comparison with other member states.

[Emma Reynolds]

I read reports of that George Soros quote as well, and will my hon. Friend clarify that what he actually said was that Germany should either lead or leave, and that he would prefer the former, not the latter?

[Kelvin Hopkins]

I stand corrected, but George Soros leaves open that possibility of leaving, and by talking of Germany leading he presumably means the country putting vast amounts of German funding into saving the euro.

Others have also been looking at the future of the euro—which I think is doomed. There was an interesting article by Anthony Hilton in last Tuesday’s Evening Standard. He said that, in a sense, the euro is already dead, because a genuine currency has a number of features. It should be a medium of exchange, and some people are starting to mistrust it as a medium of exchange and want to be paid in other ways. Indeed, some economic advisory bodies are advising their clients not to accept especially long-term payments in euros, but to accept other currencies—sterling or dollars, for instance. That is understandable.

Currencies should be a store of value. Even Greek politicians, as I understand it, are buying gold because they do not trust the euro. Greek people do not want their euros to be devalued into drachmas overnight, so quite sensibly, they are buying gold. Trust in the euro as a store of value is dying by the day; so, let us wait a little. This could all happen very quickly, of course. It could happen over 10 days or over a year, but at some point a decision will be made that the euro is no longer going to function.

[Dr Julian Lewis]

Is not the real choice that is going to have to be faced that the euro will be dismantled in an orderly way, or will collapse in a disorderly way? Is not the danger that we feel that we cannot be seen to be sabotaging this project, in which so many of our colleagues in the European Union have invested so much energy and treasure, and yet, by not speaking the truth about the matter, we are making more likely a disorderly collapse, rather than orderly dismantling?

[The First Deputy Chairman of Ways and Means (Mr Nigel Evans)]

The hon. Gentleman will answer that intervention through the prism of amendment 1, please.

[Kelvin Hopkins]

Of course, Mr Evans. Amendment 1 is essentially about delaying our approval of this measure until such time as the eurozone countries have agreed, signed and sealed it. That is a very sensible way forward. The hon. Gentleman is right, and I and others have made the point a number of times that there are examples of single currencies that have been dissolved in an orderly and managed way. When the Soviet Union was dissolved, the first thing its countries did, wisely, was to create their own currencies. Such countries were able to choose an appropriate parity and interest rate, and to do what was necessary to make their own economies work well in relation to others. That is obviously the way forward, and in the journals it is increasingly being said that the dismantling of the euro, which would enable countries to reflate their economies, would be far less painful than what is happening now in some of the eurozone’s weaker countries, which is dreadful for working people. There is mass unemployment and falling living standards, and growth in Greece has fallen by upwards of 20%. They really are in serious pain and difficulty, and it could not be worse if they re-created the drachma, devalued and started selling cheap holidays to British people who want to enjoy the sunshine of Greece. That is their way forward, and the same is true for other countries.

There has been talk about how to help our Irish friends. I have many Irish friends and constituents, and I have said before—even last week—that the way forward for the Irish is to persuade them to re-create the punt, depreciate and come to a sensible parity with sterling. We are their major economic partner, and they belong much more in the sterling zone than the eurozone. That would be massively beneficial to the Irish, including the relatives of many of the people who live in my constituency.

Delay is absolutely sensible and the right thing to do. I ask that, even now, the Government consider delaying our ratification until such time as the eurozone countries have all signed and sealed the deal.

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[Mr Baron]

I rise to support my hon. Friend the Member for Hertsmere (Mr Clappison), and to question my right hon. Friend the Minister for Europe on a number of what I consider to be design flaws in the ESM.

First, although £500 billion in lending capacity sounds like a big figure—and it is—it would be a drop in the ocean should an economy the size of Italy need help. That is especially the case as the ESM’s mandate will be broader than was initially envisaged. In fact, it could be argued that the perception that the eurozone rescue funds could run out of money could drive borrowing costs higher for the Italian and Spanish Governments and raise the likelihood of such an outcome.

Another design flaw, and perhaps a more fundamental one, concerns the circularity of having the facility guaranteed by the same group of countries that might need to draw on it. What will happen if one of those countries needs to draw on it? The burden on the remaining countries will increase, thereby increasing the likelihood that they, too, will face a debt crisis. That is another potential flaw that I wonder whether the Minister has considered.

A further flaw is the reliance of the ESM on the creditworthiness of all its guarantors. The triple A credit rating that it aims to achieve, and hence the low borrowing costs, hinge on a sufficiently large number of eurozone countries maintaining their credit ratings. We have seen in the past the effects of ratings downgrades, such as in January 2012 when Standard and Poor’s downgraded nine eurozone countries, including France. That was followed by a downgrading of the European financial stability facility only four days later. Has the Minister considered those potential but fundamental flaws in the design of the ESM?

Finally, I put it to the Minister that the ESM would not exist if were it not for the political will to maintain the euro. It is quite obvious to many, and certainly to many eurozone leaders, that one cannot have monetary union without fiscal union and, in large part, one cannot have fiscal union without political union. As many of us on the Conservative Benches and, to be fair, some on the Opposition Benches, have long argued, the euro endeavour is a political initiative to move towards closer political union, and the chickens have finally come home to roost.

If the politicians were not interfering so much, we would have something similar to the Asian debt crisis at the end of the 1990s. For a short period, that was a pretty bloody affair, but as nations’ sovereign debt was allowed to be reneged on, as countries defaulted and as currencies were allowed to depreciate, there was a rapid bounce back in economic growth. GDP was higher two to three years after the start of the crisis than it was at the beginning, because market forces kicked in, currencies devalued and growth rates picked up because of the greater competitiveness. The Asian crisis moved on and the countries involved are in a much better state than at that time, because their currencies were allowed to depreciate.

What do we have? We have a system by which countries are locked into a single currency and cannot devalue, which prolongs the agony. What Greece needs now, desperately, is to devalue its currency so that it can become more competitive and can grow its way out of its problems. Holidays for British tourists, for example, would be 25% cheaper with a 25% devaluation, which would help the economy. The goods that Greece manufactures would be 25% cheaper, which would help it to export its way out of its problems. However, the euro is sealing its fate in many respects, and prolonging the agony. My concern is that the ESM is part and parcel of the package to preserve the euro and prolong that agony.

[Kelvin Hopkins]

To return to the hon. Gentleman’s earlier point about the Asian crisis, the Asian countries were strongly advised by the International Monetary Fund not to do what they did in the end. They ignored the IMF, did what they thought was right—rightly—and of course they recovered, as he said.

[Mr Baron]

The hon. Gentleman is absolutely right, as he has been so many times; he has a long track record of being fundamentally right on this subject.

Although it can be argued that the ESM does not really affect us, that this is just a treaty change and that we should not get involved, I ask the Minister to reflect on the fact that we are actually playing a small part in prolonging the agony of the euro. We need some fresh thinking on this issue, because, to return to a point made earlier, by not facing reality we risk a very disorderly break-up of the euro, which cannot be good for this country or, indeed, eurozone members generally.

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[Wayne David]

I profoundly disagree with the previous contribution. I am no fan of the Government, but it is simply sensible for the Bill to be agreed and the amendment to be defeated, because it is sensible for us to introduce the European stability mechanism as quickly as is practicable. That is in Europe’s interests, but more importantly it is in the United Kingdom’s best interests. I say that for one simple but important reason: about 40% of the United Kingdom’s trade is with our eurozone partners, so it is in our best interests for stability and eventually prosperity to be achieved and maintained inside the eurozone.

[Kelvin Hopkins]

I absolutely agree with my hon. Friend that a large portion of our trade is with the rest of the European Union. Of course, we have a massive trade deficit, and one of the reasons why is the effective undervaluation of the German currency. If the eurozone broke up, the new Deutschmark would appreciate and we would become much more competitive with Germany, which would help our manufacturing.

[Wayne David]

I am afraid that I do not share that confidence. If that course of events took place, it would be a massive step into the unknown. Nobody could say with any definiteness what would happen. Indeed, the converse of what my hon. Friend says could also be true, and there would be greater economic difficulties. It is therefore important to recognise the size of the single market and of the eurozone, and to recognise that much of our trade is dependent on the success of the eurozone.

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[Kelvin Hopkins]

I thank my hon. Friend for giving way again. The problem is a lack of demand—the great chasm where there economic demand should be. That is the case because all the countries in the European Union, including ours, are in a process of fairly savage deflation, including deflation of demand, which means that we cannot sell anything. If the eurozone were to be dissolved tomorrow and all those countries were able to reflate, we would sell more and everyone would be better off.

[Wayne David]

Indeed; I have some sympathy with that last comment, but it is not an argument against the European stability mechanism. It is an argument, which I fully support, for having austerity and the European stability mechanism, but it is also a reason for having a positive, stimulating policy, across the European Union as a whole, to ensure an increase in demand and in the activity of the economy, which is sadly lacking at the moment.