Eurozone Crisis

Lord Tyrie Excerpts

Thursday 27th October 2011 Commons Chamber

[Mr Osborne]

I thank the hon. Lady for some of her questions. Of course, we miss the constructive and consensual approach of the shadow Chancellor. We are talking about the Bretton Woods institutions, and it turns out that he is at a place called Buttonwood, which adds to the pantomime feel of Labour’s economic policy.

Let me deal directly with the hon. Lady’s questions. First, of course we keep the capital and liquidity positions of the British banks under constant review. We would do that in the absence of any European agreement, but of course we have also participated in the recent work by the European Banking Authority. We thought it was important that that was done at EU level rather than eurozone level. I repeat what I said in my statement: the EBA and our own authorities confirm that no British bank requires additional capital, which of course is very good news for us all.

On the hon. Lady’s question about getting private sector involvement in the write-down of Greek debt, that is of course one of the key unresolved issues from last night. We now need to see whether the headline agreement reached on behalf of the private sector can be implemented in practice. I am confident that it can, but that is one of the crucial next steps that need to be got on with.

The hon. Lady asked about the exposure of the UK banking system and the UK economy to various peripheral economies of Europe. Those figures are published regularly by the Bank of England. I do not propose to repeat them today, but they are available for everyone to see.

On the question that the hon. Lady asked about the overall fund, €1 trillion is the number that the eurozone has put on its firewall. Of course, some said it should be larger, but it is very significantly larger than what we had yesterday, which we should welcome. As with private sector involvement in the Greek deal, we now need to see the details of how the eurozone will create that leverage. It has set out two options that can work side by side. One is a kind of first loss insurance on newly issued debt, and the second is the special purpose vehicle, by which it hopes to get external private sector investment. Of course, it is openly speculating about getting Chinese money into that.

The IMF can only lend directly to countries, and countries with programmes or agreed and negotiated flexible credit lines, which will remain the case. It cannot lend into that special purpose vehicle. That is also the UK position. We do not think that Britain, with its deficit, can contribute to the special purpose vehicle. If we were to do so, we would add to our debt, and we do not think that that is appropriate. We have had to use our own resources to deal with our own problems in this country.

It is of course crucial that the IMF remains a central economic institution in dealing with the world’s problems, and I urge the hon. Lady, newly appointed as shadow Chief Secretary, to reconsider Labour’s position—[Interruption.] I know that the hon. Member for Nottingham East (Chris Leslie) led the Labour party in Committee to vote against the increase in IMF resources, which the last Labour Prime Minister negotiated at the London 2009 summit. Whatever I have said about the right hon. Gentleman—and I have said quite a few things—I do not think that anyone would doubt that the highlight of his premiership was the negotiation of the London 2009 G20 deal. It is completely astonishing that the Labour party voted against that agreement.

As we discuss over the next few months increasing the IMF’s resources to deal with all the countries of the world, I urge Labour Members to reconsider their position on that, and also their rather odd position on the euro. They seem to be holding out membership of the euro—[Hon. Members: “No!”] Well, that is certainly what the Labour leader was doing at the weekend. To be in the euro but out of the IMF strikes me as a rather bizarre economic policy at the moment.

That brings me to my final point. Britain has been arguing consistently for months that a solution to this crisis requires recapitalising the banks, reinforcing the firewall and resolving the Greek crisis. We have insisted that the appropriate issues are discussed at the level of 27, which is why there have been two European Councils this week, and an ECOFIN. We will continue to argue for Britain’s national interest as we enter the difficult discussions ahead on the potential treaty change, on making the euro work, and above all on getting the growth and jobs that the hon. Lady talks about across Europe and in this country, by making this continent far more competitive and stopping Britain and Europe from pricing themselves out of the world economy.

[Mr Andrew Tyrie (Chichester) (Con)]

Following on from the Chancellor’s final remarks, I am sure he would agree that without a restoration of growth in the eurozone, the debt crisis simply cannot be resolved. He has been with his counterparts quite a lot in the past few days. What evidence has he seen in discussions with them that the EU has the will to implement the necessary reforms on the supply side of the economy to restore Europe’s global competitiveness?

[Mr Osborne]

There is increasing evidence that people are focused on the structural issues facing the European economy. Indeed, when my hon. Friend looks at the agreement issued by the eurozone last night, he will see that when it refers to Spain and Italy, it stresses the importance not just of getting their budget deficits down, but of plans to increase the pension age and make labour legislation more flexible and competitive—all the sorts of things that this Government are pursuing here in Britain, although every one of those measures has been opposed by the Labour party.