Eurozone Crisis

Martin Caton Excerpts

Tuesday 15th November 2011 Westminster Hall

[Several hon. Members]

rose—

[Martin Caton (in the Chair)]

Order. I want to start the winding-up speeches at 10.40 am. At least seven hon. Members are indicating that they would like to speak, so greater brevity of speeches will mean a greater number of them.

--- Later in debate ---

[Neil Carmichael]

Well, we were blasted out of the ERM. We do not want to repeat that fiasco, and we should all recognise that.

We talked briefly about the United States. Gerald Ford, President of the United States in the mid-1970s, refused to bail-out New York, and quite right, too. He was a fiscal conservative. That was the right decision in the long run, and, of course, a decision that did not affect New York’s membership of the dollar. I just wanted to put that on the record.

We must focus on two things, and the Prime Minister identified them both in his speech yesterday. I want to ram home the importance of reforming the European Union, because that is what it needs. In particular, we have to drill down on the single market, to ensure that it is a single market and that competitiveness in goods and services is enhanced. We can really do that.

On euro measures, this country would be making a big mistake if we assumed that the euro will not affect us significantly, because it certainly will. [Interruption.] I shall wind up. I have been so generous with interventions that I do not have the time to point out that we need fiscal union in the eurozone, the ECB to be enhanced—as my hon. Friend the Member for Cities of London and Westminster (Mark Field) rightly said—and much more rigorous auditing of what is going on.

Last but not least, there is a democratic deficit, although the IMF extension was discussed in the House and we voted on 11 July. I have noticed two things. First, Germany and France are effectively bypassing the Commission in a lot of their decisions—

[Martin Caton (in the Chair)]

Order. The hon. Gentleman has gone on beyond the time at which I said that I wanted to start the winding-up speeches. Many Members have asked the Minister questions to which they want to hear the answers. I should be grateful to the hon. Gentleman if he stayed seated now.

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[Mr Baron]

Returning to a previous point, I suggest that the reason why the eurozone crisis is causing a bit of a problem over here is that existing policy is making the situation worse. Denying devaluation is forcing greater austerity packages on populations that are already trying to pare down their debt. That is the problem that the Government do not see.

May I take my hon. Friend back to devaluation? The Government make great play of the fact that only three of the 53 packages go to the eurozone. Can he name one programme outside the eurozone where a country cannot devalue?

[Martin Caton (in the Chair)]

Order. That was a long intervention.

[Mr Hoban]

My hon. Friend seems to believe that devaluation is necessary to restore economic growth. That is not the case. Ireland is a country that cannot devalue, but a consequence of how it implemented its reform programmes is that in quarter 2 growth increased by 1.6%, with a 2.3% increase year on year. That demonstrates that devaluation is not necessary to improve a country’s competitive position, for it to earn its way out of problems or for it to grow. Devaluation may make life easier, but it is not impossible for an economy to grow, even if currency devaluation is not possible. In September, the troika concluded that the programme is on track and remains well financed. In Ireland, the authorities are implementing a programme policy.

In the euro area, we are seeing programmes to restore competitiveness, but those reforms must be made throughout the eurozone, if the eurozone is to strengthen and help to underpin economic growth in the UK. No request has been received as yet for additional resources from the IMF, but the role that it can play in underpinning global economic stability is important, and this is an opportunity that the UK should consider if we are to resolve some of the problems in the wider global economy, tackle the fragility and, by definition, improve stability in the UK.