Eurozone

Stewart Hosie Excerpts

Monday 10th October 2011 Commons Chamber

[Mr Osborne]

My hon. Friend makes a very good point. We repeatedly argued that the stress tests should be tougher and more credible, but there were strong vested interests that did not want to see that happen and did not want to confront some of the problems in their own banking system. They are now having to confront those problems, however. The fact that Dexia passed the test, and that when it identified a capital shortfall it was in the low billions of euros across the entire European continent—given that tens of billions of euros were required to deal with the Irish problems that occurred around Christmas—demonstrates that those tests were not credible enough. To be fair, I do not think this is an EBA problem; it is more a problem with the membership of the EBA, but the association is now, with our support and encouragement, finally conducting what I think will be a much more credible set of assumptions for the European banking system.

[Stewart Hosie (Dundee East) (SNP)]

I thank the Chancellor for his statement and for giving me early sight of it. He said that the eurozone countries needed to undertake structural reform and to move towards greater fiscal integration—he later mentioned fiscal union—and that that would form part of a comprehensive package that he had been urging. He has not, however, described what he means by fiscal integration or fiscal union. Would they involve the European Union controlling 2% or 3% of countries’ gross domestic product, or 20% or 30%? Would they involve a counter-cyclical stability mechanism, or an enhanced European stability fund? Would the measures be applied uniformly, irrespective of debt ratios or savings ratios? It is important that we hear publicly what the Chancellor is saying in private, if we are to avoid speculation and confusion over the UK’s position when none need exist.

[Mr Osborne]

The debate on how that fiscal union should take shape is just starting in the eurozone, and we can contribute to that debate while ensuring that Britain is not part of it and that Britain’s important national interests are protected in regard to the single market, competition policy and financial services. Key components of the measures will include some transfer of resources: in effect, the European financial stability fund is becoming a sort of central resourcing fund. The measures will also mean greater surveillance and mutual vetoes and the like over each other’s budget policies. I have raised the issue of eurobonds, as have the Italian Finance Minister and the chair of ECOFIN. I think there will be a number of components. In the end, it has to be, in part, a decision for the eurozone itself to take the lead, provided that our interests are protected.

I cannot help but make the observation that one of the things we are learning about the eurozone is that if we have a single currency, we need much greater co-ordination of economic policy. That is rather contrary to the Scottish National party’s approach, which is to maintain a single currency but to have a dis-integration of fiscal co-ordination.