Greece: Default Contingency

Lord Tugendhat Excerpts

Monday 20th June 2011 Lords Chamber

[Lord Sassoon]

My noble friend Lady Noakes asks a very good question. It is inevitable that people will ask: was the package appropriate? One should take comfort from the fact that the IMF has a long and successful record of implementing restructuring programmes. The IMF programme for Greece was put in place in market conditions and with a market outlook somewhat different from that which Greece and the eurozone subsequently encountered. The first requirement is for the Greek Government to be encouraged to get back on track, to stick to the agreed fiscal consolidation path. Beyond that, it is for the IMF to see what needs to be done. The key thing is for the original plan to be back on track. I therefore think that we should not at this point second-guess whether the plan is or is not appropriate.

I will not be drawn into whether the Greek situation would be better in one hypothetical scenario or another.

[Lord Tugendhat]

My Lords, does the noble Lord agree that, however brave the Greek Prime Minister is —he has shown extraordinary guts and determination—and however much a new Greek Government might wish to pursue the austerity programme and the conditions being laid down, there must be room for doubt whether any Greek Government can secure the degree of self-discipline within the country that would enable them to meet the conditions of the IMF and of the other European countries? That being the case, does the noble Lord not agree that the great interest of the United Kingdom Government lies in co-operating as closely as possible with our eurozone partners in putting together contingency plans to meet whatever eventuality may occur, because the Greek Government are extremely unlikely to be able to live up to their promises?

[Lord Sassoon]

My Lords, I am not going to be drawn by my noble friend Lord Tugendhat into giving a commentary on Greek politics, which I am not qualified, in any case, to do. However, the Greek Parliament will hold a vote of confidence on the new Government very soon—I believe that it may be tomorrow. Critically, the Greek Parliament will vote on a medium-term fiscal strategy consistent with the agreement into which they have entered. That vote in the Parliament is expected to be later this month. I think that it would be wrong to question the commitment of the Greek Government and Parliament to the package. On contingencies and close co-operation, I can only confirm that, either in terms of what is being done by the authorities in the UK or in co-operation with our European partners, we will certainly look at a wide range of contingency plans and scenarios.