Eurozone Financial Assistance

Austin Mitchell Excerpts

Tuesday 24th May 2011 Commons Chamber

[Austin Mitchell (Great Grimsby) (Lab)]

I largely agree with the argument about the incompatibility of eurozone countries, as the hon. Member for Stone (Mr Cash) outlined, although I do not agree with his defence of the Government. If we pay tribute to anybody it should be to the previous Chancellor and then Prime Minister, my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown) who, against great opposition from the Liberal Democrats and from sections of the Labour party, kept us out of the euro and avoided the consequences that have fallen on the eurozone states that are now in need of support and finance.

I do not think that the hon. Member for Bristol West (Stephen Williams) should feel uncomfortable about his lonely defence of the euro as he sits there like an Amplex advert on two empty Benches—because nobody wants to sit with somebody who is going to defend the euro in his kind of fashion—as the Liberal party policy has always been, “My euro right or wrong.” I can well remember, as can many others, the exchange rate mechanism crisis. Just as the ERM was about to collapse, there were the Liberals chanting, “Move to the narrower bands now” in unison with a lemming-like folly, which the hon. Gentleman demonstrated again today. He should not worry about this peculiar position; he should say with triumph that the Liberal Democrats have persuaded the coalition into accepting and financing these bail-outs. It is not a small sum. He mentioned a liability for £7.5 billion—this from a Government who are cutting Sure Start children’s centres and police budgets and who cannot afford anything for beneficiaries in this country, yet who are prepared to back a bail-out that could cost us £7.5 billion.

To have persuaded the cautious Conservatives, who have always been rather sceptical about Europe, to accept that position must be a triumph for the Liberal Democrats, in which I think they should rejoice. It is a demonstration of the impossibility of the eurozone’s working. What we are being asked to do today is pay for the consequences of the fact that it could never have worked because it brings together incompatible economies. It brings together the southern economies, which are frankly uncompetitive, and many of which are close to defaulting in any case, and the powerful German economy, where inflation is kept very low by agreement between the two sections of industry, continuous investment and continuous improvement.

The southern economies, which have higher rates of inflation and lower rates of productivity, can never keep up. The gap therefore widens, and Germany comes more and more to dominate the European economy, to a point at which the others must deflate to clear the deficits caused by their balance of trade with Germany. That is the incompatibility with which we are dealing, and that is the cause of the problems of the southern states in which we are being asked to involve ourselves—although we kept out of the euro, in the face of some derision from the Liberal Democrats and, indeed, liberal opinion in the country as a whole.

We kept out, so why should we be responsible for the failures implicit in the euro? There are only two possibilities for the countries that are now failing and needing help or the ability to default. They can deflate, which they are being asked to do to a degree that is impossible for their electors to accept, or they can get someone to write off their debts, a strategy mentioned by the hon. Member for Rochester and Strood (Mark Reckless). They cannot do what France and Italy did for many years when they became uncompetitive and their balance of payments deficits built up, and simply devalue. Such action was precluded first by the European exchange rate mechanism, which broke up because it became impossible, and it is certainly precluded now by the euro. These failing countries can have no recourse to either reducing interest rates or accepting adjustments to the exchange rate, as this country has done, and they have therefore moved towards a crisis.

I cannot conceive why we—having kept out of the euro and warned of the consequences of joining the euro, and having drawn attention to what was implicit in a system that brought together incompatible states with different rates of productivity and competitiveness and with no central mechanism to redistribute or help them with their difficulties—should be asked to contribute to the bail-outs, and I therefore strongly support the motion. I cannot see what the sob sisters who tabled the amendment have to offer by saying, “Let us talk about it later.” Let us talk about it now, because the House must be the master of its own destinies and the country’s destinies.

This cannot be left to a Government who, in European matters, are always facing the threat of the tar baby. One contact with the euro, and countries are dragged in; one contact with Europe, and they are dragged endlessly into further and further commitments to a line that is impossible to hold. We should say in the Chamber today, “We cannot hold this line. We will not help to hold this line. It is not our problem.”

[Several hon. Members]

rose—