Eurozone Financial Assistance

Margot James Excerpts

Tuesday 24th May 2011 Commons Chamber

[Margot James (Stourbridge) (Con)]

I wish to preface my remarks by acknowledging the hard work and bitter battles engaged in by so many members of my party, several of whom are in the Chamber today, that resulted in the freedom that our country enjoys in not being part of the euro. That the euro has proved such a disastrous policy for members of the eurozone is evident to all. The improvements to our trade balances and the growth in our exports this year would not have been possible without the devaluation of sterling. The recovery of our manufacturing sector and the stabilisation of employment figures have been facilitated by the low interest rates that the UK, unconstrained by membership of the euro, has been free to pursue.

I share the view, in principle, that as we are not part of the eurozone we should not be bound by its bail-out commitments. That principle has, I believe, been upheld by our Government, but our Government cannot undo the commitments set in stone by the previous Government. The die was cast at the ECOFIN meeting last May when the UK agreed to the creation of the €60 billion European financial stability mechanism. That placed an obligation on the UK to underwrite emergency loans to crisis-hit member states.

[Mr Cash]

I do not want to interrupt my hon. Friend’s flow, but it was open to the Government to challenge the issue before the European Court and they did not do so. It was open to them to say that they would veto the treaty unless we had an unravelling of the EFSM, but they chose not to do so. They went for integration, not for dealing with the situation.

[Margot James]

I thank my hon. Friend for his intervention, but I shall proceed to make the point that it is no good dwelling on what our Government should or should not have done and whether the former Chancellor should have committed the UK to the EFSM. The point is that the Labour Government signed up to the Nice treaty way back and gave away our veto on the costly European bail-out funds. The decision to establish the EFSM was therefore subject to qualified majority voting and would have been passed. I am not convinced that there is any basis in law to challenge that decision.

The other question raised by the motion concerns whether the loans granted under the EFSM are being granted correctly given the requirement that they should be made in conjunction with the IMF and the other much larger European financial stability facility, in which Britain, thanks to our Government, has no obligation. Under the terms of the proposed loan to Portugal, those three sources of finance share the commitment equally. If there is evidence that the EFSM is bearing a disproportionate load compared with the other two sources of finance, the Government should raise that at the next meeting of the Council of Ministers or the European Council. I cannot see any argument with that.

I contend that the situation facing Europe is so dire and potentially calamitous that we might well look back at this time and conclude that being up for a proportion of the loans distributed by just the EFSM, commensurate with our share of the European budget, was the least of our problems. The Government are to be congratulated on securing a complete withdrawal from Britain’s liability from 2013 and a very tight cap on anything we might have to underwrite between now and then—something akin to just 1% or 2% of the potential total bail-out loan facilities that might be called on by the eurozone countries. I will therefore support the amendment to the motion proposed by my hon. Friend the Member for Daventry (Chris Heaton-Harris).