Eurozone Crisis

Debate between Stephen Hammond and Douglas Carswell

Tuesday 15th November 2011 Westminster Hall

[Stephen Hammond]

My hon. Friend is right, and my hon. Friend the Member for Basildon and Billericay made exactly that point. I will not go on, but it seems simply ridiculous. If the eurocrats of Europe think that saving the euro is more important than working out the solution to the economic crisis, progress will be, at best, tortuous.

From a UK perspective we must be interested. The idea that we are not interested in what the IMF bail-out is—or, indeed, in the fact there is a eurozone crisis—is clearly wrong. The impact on the UK is extraordinary. We trade with the eurozone, and therefore have a significant interest. My hon. Friend the Member for Cities of London and Westminster (Mark Field) referred to the possibility of a default of Greek banks. It may or may not be true that we have little or no exposure to Greek banks—I think it is broadly true—but we have great exposure to banks that lend to Greece within the eurozone. That contraction of balance sheets will affect lending to small and medium-sized enterprises in the UK. Therefore, we must have that interest.

A basic and necessary precondition of what the IMF must say to the leaders of Europe is that they must recognise their wider international responsibilities. My hon. Friend also made the point about the Germans effectively wanting to control the eurozone, but not being prepared to accept the economic leadership that that implies by allowing the ECB to attempt to solve the liquidity crisis. We should extend money to the IMF, but I am realistic in accepting that, overall, that means the IMF would extend extra money to the eurozone. Any money that the IMF extends to the eurozone should be met with the precondition that the ECB becomes entirely independent and able to print money for the eurozone, or else it is bound to fail.

The IMF also needs, and almost certainly will accept, a necessary theoretical construction that provides a solution. The most likely solution is that we see a number of countries leave the eurozone—leave the euro—and some perhaps form a tighter unit. That being so, the IMF must stand up and say that it is prepared to fund the cost of dislocation for those leaving the eurozone, so that they have a chance to devalue, make the necessary adjustment to living standards and the necessary lowering of labour costs to allow a competitive solution.

[Mr Carswell]

Is my hon. Friend saying that he wants the IMF to fund the cost of eurozone members’ dislocation from the euro?

[Stephen Hammond]

I am saying that I accept that the IMF will make a bail-out to the eurozone. On that basis, one of the best solutions for the eurozone is for a number of countries to be allowed to leave the euro. The IMF will therefore need to fund the cost of the dislocation of those countries leaving the euro to give them any hope, attendant with their devaluation, of an economically sustainable future.