European Financial Stability Mechanism

Lord Lamont of Lerwick Excerpts

Thursday 12th May 2011 Lords Chamber

[Lord Harrison]

My Lords—

[Lord Lamont of Lerwick]

My Lords—

[Noble Lords]

This side!

[Lord Lamont of Lerwick]

My Lords, does my noble friend agree that there is widespread surprise that the original financial stability mechanism was allowed to be established under Article 122 of the European Union treaty, which deals with natural disasters such as earthquakes and floods, not sovereign defaults, and that that was done despite Article 125, which specifically prohibits sovereign debt bailouts? Although my noble friend is absolutely right that the new stability mechanism is to come into place, that requires unanimity. If that is not achieved, is it not possible that Britain may be dragged into bailing out not just Ireland, for which there was an argument, but Portugal and Greece? If those provisions of the treaty are going to go on being ignored, surely the only result will be more scepticism and cynicism about the way in which the EU operates.

[Lord Sassoon]

My Lords, my noble friend embedded a number of questions in what was apparently one question. As to the use of the different articles, another key part of the agreement at the European Council in December 2010 was that Article 122 would unequivocally not be used in future for these purposes. Without going into the debate about whether Article 122 should ever have been used for this sort of operation, it will not be used in future—that is agreed. As to Article 125, that is used for loans for medium-term financing under things such as the balance of payments facility and quite other purposes, and that will continue. As to the UK’s participation, the new mechanism has been agreed by the Council. Its resolution is completely clear. A treaty amendment will bring in the new mechanism. That position could not be clearer. As to Portugal, my right honourable friend the Chancellor has made it completely clear that as the negotiations go forward to completion, the UK will not participate in any bilateral loan to Portugal. Ireland was a special case, and the same considerations do not apply in the case of Portugal.