European Council

Edward Miliband Excerpts

Monday 27th June 2011 Commons Chamber

[The Prime Minister (Mr David Cameron)]

With permission, Mr Speaker, I would like to make a statement on last week’s European Council.

The main focus of the Council was, quite rightly, Europe’s economy. In advancing Britain’s national interest, I had two objectives: first to ensure that Britain did not have to contribute to any new Greek bail-out through the European financial stability mechanism; and, secondly to support efforts to bring stability to the eurozone and growth to Europe as a whole, while fully protecting Britain’s position. Let me take each in turn.

I turn first to the situation in Greece. As I have always said, Britain is not in the euro—and while I am Prime Minister it never will be—so we should not be involved in the euro area’s internal arrangements. Only eurozone countries were involved, alongside the IMF, in the first Greek bail-out, and only eurozone countries have been involved in discussions about potential further bail-outs. It is absolutely right therefore not to use the EU-wide EFSM for future support to Greece—that is what I asked for an assurance about at the Council, and that is what I got.

That was not a simple matter because, as the House knows, article 122 of the European treaty is being used to provide aid to eurozone countries that have mismanaged their economies. That was not our choice; it was agreed before the Government took office. We have dealt with it for the future, however, because when the new permanent arrangements replacing the EFSM come in—from 2013—we will not be part of them, and article 122 will no longer be used for eurozone bail-outs. That was the deal that I secured last December. However, we still had to deal with the prospect of a bail-out under the existing arrangements. Under qualified majority voting, that required real negotiating effort, but the Government have consistently stood up for the interests of British taxpayers, and as a result the British taxpayer will avoid a potential liability of billions of pounds.

My second objective was to support efforts to bring stability to the eurozone and to promote growth across Europe. Although we are not in the eurozone, we would be badly affected by a disorderly outcome to this crisis. Why? First, banks across the world, including in the UK, hold Government debt of all eurozone countries, including Greece; and, secondly, the effect on other countries far more exposed to these debts would have a knock-on effect on us. As Sir Mervyn King made clear when unveiling last week’s financial stability report, the present difficulties in the eurozone are:

“The most serious and immediate risk to the UK financial system”.

It has always been a long-standing principle that the British Government do not comment publicly on market-sensitive issues, and I am not going to depart from that very wise approach. What is important is that a solution be found quickly that is credible in the markets and that will address over time Greece’s fundamental problems and contribute to providing stability in global markets and the world economy.

One element of that solution must, in my view, be using the time that we now have to ensure that banks and banks’ balance sheets are strong enough to withstand any problems and difficulties, and that there is full transparency across the financial system. In the UK, we are stepping up efforts to ensure that our banking system is resilient to risks originating from the eurozone. That needs to be done right across Europe, it needs to be done now, and it needs to be done properly. I argued for that very strongly at the Council, and it is reflected in the language in the communiqué. As a first step, that means that the current stress tests being conducted in the banking sector must be conducted properly and transparently, unlike last time, and that Europe must implement in full—rather than water down, as some have suggested—the new detailed Basel capital and liquidity standards.

A key way in which we can help all economies in Europe, including the eurozone, is to promote sustainable economic growth. The best stimulus available for European economies is to ensure that we are promoting competition, deregulation, supply-side reform, the single market, innovation and structural changes, and also using the EU to advance the cause of free trade, both via Doha and, where appropriate, through bilateral deals. Following the proposals that Britain set out at the last Council, which many member states now support, I pressed in particular for concrete steps to reduce the burdens on small businesses and micro-enterprises, which are vital to promoting innovation, jobs and growth. The Council agreed that

“the regulatory burden on SMEs needs to be further reduced,”

and that the European Commission would now assess the impact of new regulations on micro-enterprises and identify existing regulations from which micro-enterprises should be excluded altogether. That mirrors what we are doing in Britain, and it is the right thing to do. For too long, European Council conclusions have focused only on what member states should do, rather than on what the European Commission needs to do; and when we think of the quantity of regulation that comes from Brussels, we realise that that must be the right approach.

Let me briefly turn to other issues raised at the Council, of which there were three of significance: migration, the Arab spring and the accession of Croatia. First, on migration, Britain does not participate in the Schengen border area, and we are not going to weaken our border controls. As an island, Britain has an important geographical advantage in preventing uncontrolled immigration. At the same time, practical measures to strengthen our external borders in Europe are in Britain’s interests too. However, there was a proposal ahead of the Council to suspend the measures in the Dublin regulation that allow us to return asylum seekers to the first safe country that they arrive in. Together with Chancellor Merkel, I ensured that those proposals were rejected, and they are not referred to in any way in the Council conclusions. We will not have our border controls compromised in that way.

Next, the Arab spring. On Libya, the Council agreed a declaration confirming its full support for UN Security Council resolutions 1970 and 1973, and the efforts that our brave servicemen and women are undertaking to implement them. There is now, I believe, real unity of purpose and political will across the European Union on this issue. The wider world is turning against Gaddafi too, recognising that the transitional national council is the only credible diplomatic body that can represent the people of Libya right now. The Russians and the Chinese have accepted the importance of the transitional national council, and Premier Wen made this point to me in our meeting this morning. Gaddafi is increasingly isolated; indeed, today the International Criminal Court has issued a warrant for his arrest. Gaddafi is now a fugitive from international justice. The pressure and the time are telling on Gaddafi, and we will not let up until the job is done.

On Syria, the Council condemned in the strongest possible terms the ongoing repression, and the unacceptable and shocking violence of the Syrian regime against its own people. At my instigation, we expressed particularly grave concern about what Syrian troops are doing close to the Turkish border. On the middle east more generally, the Council called on all parties to engage urgently in negotiations, and, on the fifth anniversary of his capture, demanded the immediate release of Gilad Shalit.

Finally, on Croatia, earlier this month I met Prime Minister Kosor and welcomed her country’s progress towards completing European membership negotiations. At the European Council we agreed that the negotiations would be concluded at the end of this month. Croatia’s success points the way for the rest of the countries of the western Balkans, whose aspirations to join the European Union we have always strongly supported.

At this Council, Britain has achieved some important objectives: we have protected the interests of the British taxpayer; we have secured agreements to promote and safeguard economic growth; and we have protected Britain’s borders from uncontrolled migration. I commend this statement to the House.

[Edward Miliband (Doncaster North) (Lab)]

I start by expressing sympathy with the Prime Minister for the sense of shock and loss he must feel over the death of Christopher Shale. From whatever side we come from, we all know that it is unsung heroes such as him who are the backbone of our constituency associations. I am sure the whole House will join me in sending condolences to all of Mr Shale’s family and friends.

I thank the Prime Minister for his statement on the European Council. On immigration, we support the position he set out, including on the continuance of the Dublin regulation negotiated by the previous Government. We also support the Government’s position on Croatian accession to the European Union. Let me ask the Prime Minister questions about Libya, Syria, the eurozone and the wider economic situation in Europe.

On Libya, the Prime Minister will know that Opposition Members welcome the Council’s continuing commitment to implement UN Security Council resolutions 1970 and 1973. We are clear that we must keep up the pressure on Colonel Gaddafi and the Libyan regime. Those who are expressing doubts over the mission should remember that if we had not taken action this European Council would have been discussing not the conduct of our campaign, but, in all likelihood, our failure to prevent a slaughter in Benghazi. But beyond immediate military and diplomatic developments, experience of conflicts demonstrates that post-conflict planning is crucial to a successful long-term outcome. Will the Prime Minister take the opportunity to say something about this, and will he explain why it appears to be Britain and not the United Nations that is fulfilling this role? Will he update us on what progress is being made?

In the context of the Arab spring, will the Prime Minister take the opportunity to publish the review of the strategic defence and security review, which he told us at Prime Minister’s questions last week had been conducted? We are all interested in the outcome and look forward to seeing it.

Let me ask the Prime Minister about the situation in Syria, as he mentioned it in his statement. Will he tell us how we can continue to step up the pressure on Syria, including at the United Nations?

We have also consistently said—on both sides of the House, I believe—that Britain, as a supporter of Turkish membership of the EU should say to the Turks that the potential refugee crisis on their borders will only grow unless they help to put more pressure on the Syrian Government. Will the Prime Minister update us on conversations between this Government and the Turkish Government on that issue?

Turning to Greece, let me first say that we agree that the primary responsibility for addressing the situation lies with eurozone countries. As the Prime Minister will know, the UK made no direct contribution to the last Greek bail-out agreed on 2 May 2010 under the previous Government. I should like to congratulate the Prime Minister on sticking to our approach to these issues. Indeed, on the question of article 122, which the right hon. Gentleman raised, he did not mention the famous 15 July 2010 Greening memorandum on the European bail-out mechanism, which is of much interest to the Conservative Benches. That, of course, said that article 122 had been agreed “by cross-party consensus”. Every time the Prime Minister comes before the House and says that this is not something we supported, he needs to know that is not what the memorandum of his own Economic Secretary said in a submission to this House.

The truth is that we have an interest in the Greek situation that goes beyond the level of our direct contribution—because of the potential exposure of our banks; because we contribute indirectly through the International Monetary Fund; and because of our wider interest in growth and jobs in Europe. I understand issues of market sensitivity, but will the Prime Minister confirm that a full analysis is being done of the impact of any restructuring of Greek debt on UK taxpayer-owned banks?

Britain also clearly has an interest in the durability of the bail-out. The Governor of the Bank of England has said:

“Providing liquidity can only… buy time”

and

“will never be an answer to a problem”.

Will the Prime Minister tell us whether he has confidence that the right balance is being struck in demanding a further round of austerity against the need for growth in Greece?

After this European Council and after the Prime Minister’s statement, it remains unclear what the Council and the Prime Minister regard as a long-term and sustainable solution to the Greek crisis. Instead of boasting about being on the sidelines, should not the Prime Minister engage more with his colleagues to secure a solution to the crisis that will last, and will be in the interests of the eurozone and the United Kingdom?