European Union Fiscal Union

Richard Shepherd Excerpts

Wednesday 14th September 2011 Westminster Hall

[Mr Cash]

I very much agree with that. I put that same point to the Prime Minister in the Liaison Committee last week. I asked him whether he seriously believed that Germany was going to be able to bail out the other member states. The money is simply not there. To imagine that Germany could carry the weight of the Spanish debt is, as Camilla Cavendish has said, complete cloud cuckoo land. We can see the Italian position getting increasingly out of control, while the Greek situation is beyond critical. Greece should exit the euro—that is perfectly clear—but there are desperate attempts to prevent it happening, although that is literally trying to do something impossible. One might as well believe, as Alice said in Wonderland,

“six impossible things before breakfast”,

and the truth is that one of them is the idea that Germany will be able to sustain the whole of the European Union or, indeed, that its own people will allow that. All the evidence is that there is a very serious concern that they simply cannot afford to do it and that they do not want to do it. I will not give all the instances, because they are so well reported in the newspapers and other media.

[Mr Richard Shepherd (Aldridge-Brownhills) (Con)]

One of the reasons that things have worked quite well for Germany is that, without the southern countries, the exchange rate of the euro would have been even higher. They therefore helped suppress the exchange rate in the free markets, to some extent, which has been of benefit to Germany.

[Mr Cash]

Absolutely right. Germany has gained much, but now the chickens are coming home to roost. The system is not working because the Germans have made investments in other countries. If we look at the Greek sovereign debt situation, an enormous amount of investment—by far the greatest amount—is from Germany, followed by France. So the sovereign debt question is now part of the overall problem of Europe as a whole, and the mess created, which many of us predicted, is now with us. Any sovereign debt default will become all the more serious the longer that the European Union attempts to sustain the euro. Economists such as Tim Congdon and others have made that case, but it is absolutely clear that the situation will get worse the longer that the European Union tries to put sticking plaster over what is a clear case for complete renegotiation of the treaties to get some sanity back into the situation.

The idea that those of us who are eurorealists and who have argued this case for so long would take any satisfaction from the fact that the situation might implode is complete rubbish. Of course we do not want it to implode; we want to get stability back, to reduce our deficit and to increase growth, but none of those things can happen if we have over-regulation, too much integration and too much governance from European institutions, which prevent oxygen reaching our small and medium-sized businesses. That is an issue not only for this country, but for other countries, which all face greater and greater unemployment. I therefore strongly urge the Prime Minister to sort this out at the next summit.

We cannot create growth unless the money to pay for the public sector comes from reasonable taxation on private enterprise. It must be reasonable taxation, because growth must come from the development of small and medium-sized businesses. There is no way we will reduce the deficit if we continue trading as we are with a Europe that is bankrupt, with the exception of Germany. Incidentally, while we had a £53 billion trade deficit with the EU in 2010—that went up by £40 billion in one year—we had a trade surplus with the rest of the world of £7 billion, and it could be much more if we made the big strategic change that I am proposing. That, too, underpins my resistance to the idea of fiscal union.

Fiscal union will lead to greater implosion, greater sovereign debt, more defaults and more trouble. It might also—I say this cautiously—lead to the rise of the far right, because that is the consequence of implosion in democracies and of their being forced into situations where their people start saying, “We’re not going to put up with this any more.” One has to be careful about what is done. That is the dangerous crossroads we are at, and the Prime Minister must make the right call.

--- Later in debate ---

[Mr Hanson]

If the hon. Gentleman allows me, I shall cover some of those points in a moment. It is important to record the fact that we have economic growth partly because of co-operation, because of the single market, because of the widening of the European Community to the east and because of EU investment in this country.

[Mr Shepherd]

I am sorry that the right hon. Gentleman has repeated the old canard about 3 million jobs, but perhaps he will comment on the other side of the equation. How many jobs on the European continent depend on trade with Britain?

[Mr Hanson]

I believe that the single market and the European Community have contributed to growth and jobs in this country and throughout mainland Europe. The hon. Member for Stone touched on the potential difficulties with the euro and Greece, Portugal, Spain and Italy, but the argument that he advanced about renegotiation does not fly and would not be a starter in relation to the positive policies that I hope I share with the Minister on engagement and the future of Europe.

We need to look at three issues. The economic growth strategy for Europe is key to economic growth as a whole. When we look at what we are doing in reducing public spending—in achieving a balance between public spending and private expenditure—we see that the growth strategy is missing in Europe and that the collective strategy of reducing public spending will not lead to economic growth.

Given the potential collapse of the euro, it is important that we look at the current stability mechanism, and I am sure that the Minister will speak about the future stability mechanism for 2015. We must consider negotiating an earlier end to the temporary European financial stability facility, of which the UK is a member. The UK’s exposure is too high and is a risk, and if the euro collapsed now we would face severe difficulties with the funding mechanism.

My right hon. Friend the Member for Edinburgh South West (Mr Darling) negotiated the facility—with, I believe, all-party agreement, although there is dispute about that—before the general election, and it is key to stability with the euro. It is not in this country’s interest for Greece to fail, for the euro to break up or for other countries to default. As my right hon. Friend the Member for Oxford East (Mr Smith) said in an intervention on the hon. Member for Northampton South, one of the reasons why the Prime Minister and the Chancellor are looking to develop an EU fiscal policy to follow the current agreement is to ensure that a collapse is avoided, that the currency is strengthened and that a positive Europe, geared to growth in the future, is maintained.

Eurozone (Contingency Plans)

Richard Shepherd Excerpts

Monday 20th June 2011 Commons Chamber

[Mr Hoban]

I do not think anyone is in a position to accuse this Government of being complacent. We are the Government who have taken action to tackle the fiscal deficit that we inherited from the Labour party. That has enabled the spreads between UK gilts and German bunds to narrow, reflecting market confidence in the measures that we are taking to sort out the problems in the British economy. The Labour party is failing to take its responsibilities seriously or to acknowledge the mistakes that it made when it was in government. It also fails to recognise the strength of support for the actions that this Government have taken to resolve the economic crisis in this country. Had we not taken that action, we might well have been in the firing line with Greece.

[Mr Richard Shepherd (Aldridge-Brownhills) (Con)]

The eurozone was never an optimal currency zone. It is predicated on a treaty arrangement that calls it irrevocable and irreversible. We should never have accepted the hubris contained in those phrases, which brought about the passage of the Maastricht Bill and the current situation. This Government and this country should not be involved, and it would be helpful if we said what everyone in the press now says: this arrangement cannot survive in its current form. The hubris of those politicians who led the poor Greeks and all those who believed in this arrangement should be exposed as such.

[Mr Hoban]

My hon. Friend is absolutely right that we have seen during this crisis the strains within the eurozone mechanism. The actions that needed to be taken to resolve the consequences of those strains include the bail-outs of the Greek, Irish and Portuguese economies. It is absolutely right that we secured that opt-out to the Maastricht treaty, to ensure that this country did not have to be a member of the euro, a position that the previous Government seemed not to support.