EU: Financial Stability and Economic Growth

Lord Hannay of Chiswick Excerpts

Thursday 3rd November 2011 Lords Chamber

[Lord Hannay of Chiswick]

My Lords, this debate could hardly be more timely and topical, and for that I thank the noble Lord, Lord Newby. The temptation to pronounce on the turmoil in Athens, and on the prospects for a Greek referendum and what might follow from its outcome, or indeed from a decision not to hold a referendum, is strong. But I believe that for those like us in this House who are not directly involved in the decisions being made, a period of silence on those issues would be the best contribution we can make.

It is a matter for regret and concern that so little of the debate on European issues in this country in recent weeks has been about the Government’s role in supporting financial stability and growth across Europe and that so much of it has been in denigration of the efforts of the 17 eurozone countries to put their house in order and in angry demands that we should have nothing whatever to do with those efforts. Yet, there surely have been few truer words spoken by a member of the coalition Government than those by the Chancellor of the Exchequer when he said:

“We are all in this together”.

I know that those words were spoken in a different context but they apply every bit as much to Britain’s strong national interest in the success of our European partners’ latest package of decisions. I welcome the fact that the Prime Minister and the Chancellor have made our national interest in that emphatically clear. I wish only that I thought that their Back-Benchers were listening to them but there is little sign of that, including, I notice, in this House.

I confess I was a little puzzled—indeed, baffled—by the elaborate detail which the Chancellor’s Statement of 27 October on the European Council went into in trying to block hypothetical ways in which the IMF might be involved in supporting the European package of decisions. It is surely rather unwise to express such firm views on ideas which have not yet even seen the light of day. Should we really be trying to tie the managing director’s hands? I thought we were enthusiastically in favour of her appointment. Do we have no confidence that she will act in all respects within the powers that she has? I fear that the suspicion crosses my mind that that cold shower of disapproval directed towards the IMF was merely offered to placate the critics on the Benches behind the Chancellor. I hope that I was wrong and that the Minister can say a little in a positive turn today about how the rest of the international community, including this country and the IMF, can help the eurozone countries achieve their objectives.

That thought brings me to the role in all this of the single market. Far too often the single market is portrayed as a kind of alternative to the policies being pursued by the eurozone countries. That is surely wrong. If you look at the prescriptions being given by the Commission, the European Central Bank and IMF to the countries being bailed out—Greece, Portugal and Ireland—and the advice being given ever more forcefully to Spain and Italy, those prescriptions and that advice are replete with issues which are at the heart of the single market programme, which is at yet incomplete, such as removing restrictive practices in the professions, breaking up state monopolies or quasi-monopolies and freeing up labour markets. All 27 member states together need, if they are to compete effectively with the great emerging countries—China, Brazil, India and others—to complete the single market measures in the fields of services and energy. Only thus will they achieve the sort of growth and competitiveness that will enable the whole of Europe to hold its own in the new multipolar world. It is often said that whenever the eurozone’s problems are discussed there is a need for “more Europe”. What should equally be being said is that there is a need for “more single market”.

That approach will not be everyone’s cup of tea. There are plenty of voices being raised calling for more protection and deglobalisation—an appalling phrase. Just look at the recent debates within the French Socialist Party. If we are to carry the EU with us, we must engage that discussion now and try to lead it. We must do so in a credibly positive spirit. It is no good proposing an à la carte single market with each country applying only the bits it likes. That will lead to 27 policies and no single market at all. That is why the whole repatriation debate is not only a futile displacement activity but actually inimical to the achievement of Britain’s and Europe’s objectives.

However, we will need more than just warm words if such a positive approach is to be seen by our partners as a credible contribution to supporting Europe’s financial stability. That is why I would like to hear from the noble Lord again some response about the euro-plus pact and the possibility, particularly if it could be renamed, of us being associated with it. I hope he will say something when he winds up.

In conclusion I have a point of tactics. We are in some cases going to have to say a firm “no” to ideas coming forward in Brussels. In my view the proposed financial transaction tax is one such. I cannot anyway for the life of me see how such a tax, at least if it is not applied worldwide, could possibly contribute to Europe’s financial stability and growth. However, if our “noes” are not to be seen as single wrecking manoeuvres, we are going to need to have a wider positive agenda to accompany them.