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

Lord Wallace of Saltaire Excerpts

Wednesday 23rd May 2012 Lords Chamber

[Lord Davies of Stamford]

I am most grateful to the Minister for giving way. He said that it was the intention that the ESM should now enter into force next month. Indeed, we support the urgency of that, as I understand it. Therefore, why are we taking so long to ratify this? If we really support the initiative and recognise its urgency, why cannot we ratify it as soon as Parliament has approved this Bill?

[Lord Wallace of Saltaire]

My Lords, I do not think that it has been the usual practice of this House to interrupt Ministers in the middle of their opening speeches, when they are also winding up and when the interrupter has his chance to take part in the debate afterwards. These are questions that the Minister can answer in his wind-up speech.

[Lord Howell of Guildford]

As I have sought to explain, the ESM treaty is an intergovernmental affair between eurozone members, and they are going ahead with it—and they want to go ahead with it—in July. Nevertheless, the individual eurozone members have said that they would want the comfort of cover via an amendment to the European Union treaties, and we are pressing ahead with that as best we can in our own time. The two things are not ultimately dependent; it is just that the changes that we are proposing give comfort, support, reassurance and legal reassurance to the eurozone members so that they can go ahead. Therefore, those who say, “You are not doing anything to play your part in contributing to orderly developments in the eurozone”, are wrong. We are playing our part in doing so, although there are considerable benefits for the UK in making this move, which I have already outlined.

This brings me back to why this Bill is important. It represents Parliament giving a simple yes or no to amending part of the TFEU that does not actually apply to the UK at all. However, as I have made clear, by giving approval to this decision the UK avoids liability for future eurozone bailouts under the EU budget and gives the eurozone the legal clarity—this may reinforce the point I have just made—that it wants to back the European stability mechanism. We also uphold the commitment made by both the Prime Minister and the Chancellor to help the eurozone to get itself out of a crisis. Whichever way the situation goes, that must be to the advantage of us all.

If we were to refuse to agree the decision, the impact on our trading partners in the eurozone would not be positive, to put it mildly. We are under no illusion that the ESM alone will resolve the eurozone crisis, but, as the Prime Minister said last week, an effective firewall is part of the solution. It is safe to assume that markets would not view favourably any uncertainty about the eurozone’s ability to establish a permanent support mechanism. That is just what would arise if we failed to ratify this decision.

As the Prime Minister, my right honourable friend the Foreign Secretary and the Chancellor have repeatedly made clear, a stable Europe is directly in the UK’s interests. That must be so. We rely on the eurozone states for over 40% of our trade. London is Europe’s international financial centre. Stable progress in the eurozone states is vital to stable progress in the United Kingdom.

Therefore, agreeing to this treaty amendment is in our best interests. As I have said, it means that the UK will not be exposed to any future programmes of financial assistance for the eurozone through the EU budget, specifically the European financial stability mechanism—that will be closed—and it helps our neighbours in the eurozone in their search for financial stability in the currency area. Your Lordships have already agreed that the Prime Minister could sign this treaty amendment, as he has done. I hope that we can now take the necessary steps to allow us to ratify it. I beg to move.

--- Later in debate ---

[Lord Lawson of Blaby]

Yes, I am aware of that. I am also aware that he subsequently changed his mind on that point.

Those who promoted European monetary union were guilty of great arrogance and unbelievable irresponsibility. They were arrogant because the only way to have political union was with the consent of the peoples of Europe. The people of this country, the people of France, where I live nowadays, and the people of most, if not all, of the countries of Europe—Luxembourg may be an exception—do not wish to give up national self-government. They do not want to be part of a full-blown European political union. It is a sad thing but I am afraid that for all its, no doubt, high-minded motives, the European movement has been marked by the most appalling contempt for democracy throughout the years that I can remember. The irresponsibility is that political leaders must have known that if this gamble did not come off and they were not able to achieve the political union, the disaster which we see all around us was bound to ensue. That seems to me to be the most irresponsible thing that political leaders could ever have done.

What now? In my judgment, the least bad course—I say “least bad” rather than best because I accept that it is not good—is the orderly dissolution of the eurozone, which will begin with the departure of Greece in only a matter of time, and it will not be a long time. This dissolution is already happening before our eyes, even if the politicians do not accept it. Holders of euro deposits in Greek banks are taking them out at a rate of knots and they will do so increasingly. After that, I am afraid that the same thing will happen as regards euro deposits in the banks of other countries considered to be likely candidates for withdrawal—whether it be the Spanish or Portuguese banks, or wherever.

I agree that the dissolution of the eurozone will be far from painless. There will be a whole lot more sovereign defaults. We have already had getting on for an 80% write down of Greek government debt. That will be bigger. There will be other sovereign defaults. There will be banks in difficulty.

[Lord Wallace of Saltaire]

My Lords—

[Lord Lawson of Blaby]

I will come to a conclusion soon. There will be banks which may have to be saved. But we have handled something like this before. It may not have been on this scale but it was quite substantial. The first international economic issue I had to grapple with as Chancellor of the Exchequer in the mid-1980s was the Latin American sovereign debt crisis, which had many factors in common with this and the IMF played an important part.

In conclusion, there is a heavy cost in the course that I am suggesting but the EMU is a Doomsday machine. If the question is, “How do we keep it going?”, that beggars belief. We have got to get on with it. I do not believe that this will happen, but if there is a serious move to a political union, we can no longer be part of the European Union. That is not the form of European Union which the people of this country are prepared to accept, or, I believe, one which the politicians will accept. It is a very serious matter. The noble Lord, Lord Owen, referred to this in a very thoughtful contribution in the Queen’s Speech debate. He said that in those circumstances, we would have to leave the European Union, although with a referendum first. I do not believe that we will go to a political union. Therefore, the conclusion is that the European monetary union is doomed and the treaty change we are discussing today is supremely irrelevant.