European Council Decision: EUC Report

Lord Harrison Excerpts

Monday 21st March 2011 Lords Chamber

[Lord Harrison]

My Lords, the importance of this debate is that the decisions will be made by the European Council at the end of this week, on 24 and 25 March. I speak as the chair of the Economic and Financial Affairs and International Trade Sub-Committee, which has had correspondence with the Government on this. The matter has also gone to your Lordships’ European Union Select Committee for scrutiny. It was thought appropriate in the light of the importance of this debate that this report should be provided on amending Article 136 of the Treaty of the Functioning of the European Union in order to help colleagues to come to a decision.

The noble Lord has rightly pointed out the origins of the problem and the creation of a response to the financial crisis brought about by our Greek colleagues. That relates to the establishment of the European financial stability facility, which is agreed by member states within the eurozone, and the EFSM, the separate mechanism that draws on the European Union budget and, therefore, involves the United Kingdom.

As the Minister said, the matter was raised under Article 122(2) of the European Union treaty, which points out that, in exceptional circumstances that are beyond the control of any one member state, action can be taken to help out that member state. We wrote to the Government and asked whether they felt that that conflicted with Article 125, which is the no-bailout clause, but the Government replied to us insisting that the EFSM provided loans not bailouts and that, therefore, there is a distinction. Incidentally, we have also drawn on the report, which we hope will be cleared by the Select Committee tomorrow, on EU economic governance. Within that report we interviewed many experts on these matters in looking at the basis for the decisions made. There is agreement that this was the right and proper way forward.

We arrive at a situation where a new permanent crisis mechanism has to be created at the end of 2013 when the mechanism and the facility are abandoned. On 16 and 17 December 2010, the European Council decided on the new mechanism, which is to be called the European stability mechanism. It is also the case that Article 122(2), the exceptional circumstances clause, is no longer to be used. Instead—I think that it is true to say that there was pressure from Chancellor Merkel of Germany, who wanted not to fall foul of the German constitutional court—there was insistence on having a treaty change and hence an amendment to Article 136 as printed in the document that we have submitted and which is being proposed now. The process is that, under Article 48(6) of the European Union treaty, amendments to part 3 of the Treaty of the Functioning of the European Union, which includes Article 136, the subject of the debate this evening, can be appropriate. Therefore, as the Minister has explained, we have the simplified revision procedure as the mechanism for achieving that. Perhaps we should say that this is the first use of that procedure.