Loans to Ireland Bill

Lord Johnson of Marylebone Excerpts

Wednesday 15th December 2010 Commons Chamber

[Mr Osborne]

My hon. Friend will be very focused on what I am about to say, so if he does not mind I shall make a little progress, and then I shall be happy to take an intervention.

Let me turn briefly to the arrangements for a permanent stability mechanism for eurozone economies. The European Council this week is expected to discuss the matter. Both the Prime Minister and I are very clear that when it comes to putting in place a permanent mechanism, the UK is not part of the eurozone and so will not be part of that mechanism. The president of the euro group has accepted that the UK will not be part of the permanent stability mechanism, and that the European financial stability mechanism, which the previous Government agreed in May and of which we are part, will cease to exist when that permanent eurozone mechanism is put in place.

We will seek to bring to an end the use of the mechanism established in May for the resolution of sovereign debt problems. It was established under article 122 of the Lisbon treaty and originally intended to provide support for member states following natural disasters. European Finance Ministers, including my predecessor, chose to apply that article in May to deal with the eurozone crisis at that time, but that temporary solution should not become a permanent way of doing things, and the time has now come for the eurozone to put in place its own mechanism for dealing with the imbalances in the eurozone. That needs to be part of a comprehensive solution whereby countries address their own problems more decisively, including in their banking systems. We in Britain have shown the way.

[Joseph Johnson (Orpington) (Con)]

The Chancellor speaks of a comprehensive solution. Does he recognise that we face not only a crisis of liquidity in Portugal, Greece and Ireland, which we are assisting bilaterally, but a crisis of solvency? The solvency crisis will require us to address not just Irish bank restructuring, but Ireland’s sovereign debt—it is impossible to distinguish the two, given that the Irish state has guaranteed all the Irish banking system’s liabilities—and the solvency of other peripheral eurozone economies. We are helping with financing, but we have not yet addressed the fundamental solvency of those peripheral countries.