By Matthew Barrett
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Yesterday afternoon, David Cameron made a statement to the House on his recent G20 meetings. Given that the Prime Minister described the main topic of debate as "instability in the eurozone", one could have predicted Eurosceptic members would turn up in force – as indeed they did. Douglas Carswell, Bill Cash, and Peter Bone were amongst the MPs asking questions.
Bill Cash posed the first challenging question of the session:
"Mr William Cash (Stone) (Con): Given that the single market, including the City of London, is governed by qualified majority voting, how does the Prime Minister propose to achieve a majority to protect our interests in the context of the fiscal union that he advocates?
The Prime Minister: First, we need to disconnect the issues that my hon. Friend raises. The issue of the single market and the threat to the City of London and Britain’s financial services is a real threat. We have to work extremely hard to build alliances in the single market and in the European Council to stop directives that would damage our interests. I think it is extremely important that we do that work. Financial services matter hugely to this country, and this is one of the areas that I want to ensure we can better safeguard in future."
Edward Leigh put the current crisis in the context of historic British-European relations:
"Mr Edward Leigh (Gainsborough) (Con): Has not the avoidance of a concentration of political and economic power on the continent been a cardinal feature of British foreign policy for 300 years? How then is it in our interests to facilitate the creation of a single fiscal and monetary union that will have enormous power over us, but over which we will have very little influence?
The Prime Minister: My hon. Friend asks a question with a broad historical sweep. We are suffering at the moment from a single currency that we are not a member of, but that has some serious structural faults. It is in our interests that those faults are resolved, and one way of helping to do that would be to have a greater pooling of fiscal sovereignty among the members of the single currency. … I do not think that we can stick happily with the status quo when the single currency is having a chilling effect on our economy, through the crisis, and not seek some sort of resolution."
Douglas Carswell asked the Prime Minister for the government to "be absolutely straight" about British taxpayer funding for the IMF:
“We have an agreement to fund up to £20 billion, broadly speaking.”—[Official Report, Second Delegated Legislation Committee, 5 July 2011; c. 9.]
Pretty broad, it turns out. We now hear that the figure is closer to £40 billion. Does my right hon. Friend agree that it is vital to level with the British people, with no weasel words or sophistry, and that Ministers have an obligation to be absolutely straight about what they plan to do with other people’s money?
The Prime Minister: Let me be absolutely clear about this. There are two sorts of money that the UK provides to the IMF: money through our quota, which is effectively through our shareholding, and money through loans and other arrangements. There have been three votes in this House in the last three years on all the elements of the IMF money. As I have said, if it comes to giving extra support for the IMF, we want to do that within the headroom that has been set."
Bernard Jenkin asked the Prime Minister whether it wouldn't be better for the British economy if the Eurozone broke up, as suggested by a new report:
"Mr Bernard Jenkin (Harwich and North Essex) (Con): I agree with my right hon. Friend that Greece’s remaining in the eurozone is a matter for the Greek Government, and that there is no free hit for the break-up of the euro, but will he take time to read the Centre for Economics and Business Research paper, which points out that, for Europe as a whole and the United Kingdom in particular, our economy will be growing faster in two years’ time if the euro breaks up than it will if we try to keep the currency going?
The Prime Minister: I have seen reports of the piece of work that my hon. Friend speaks about, and perhaps I will have time this evening to read it at greater leisure. We can look at the economic experts and what they say, but there is quite a strong consensus that the consequences of a country falling out of a single currency zone, where banks and businesses are very interrelated, are very serious for all the members concerned."
Peter Bone wondered why Greece shouldn't be allowed to pull off the same economic recovery as Britain enjoyed after leaving the ERM in 1992:
"Mr Peter Bone (Wellingborough) (Con): I do not know whether the Prime Minister remembers 16 September 1992—golden Wednesday—when the United Kingdom came out of the exchange rate mechanism, which was the start of our economic recovery. Why are the political elite of Europe denying Greece and other euro countries the same mechanism to improve their currency: withdrawal from the euro so they can re-establish their national currency?
The Prime Minister: I learned a very important lesson from our experience in the exchange rate mechanism: never fix interest rates in a way like that because you may need a different interest rate in your economy from that applying elsewhere. That is why I am so completely opposed to Britain ever joining the euro. … We must allow other countries to make their own choices, and the choice of people in Greece—it is their business—seems to be that they want to stay in the euro. That is not the choice I would necessarily make—or that Mrs Bone, or even Mr Bone, would necessarily make—but that is the choice they seem to want to make and we have to support them in it."
David Nuttall wanted to know how Britain could be sure the IMF wouldn't use British money to bail out Eurozone countries when Britain has relatively small voting influence in the IMF:
"Mr David Nuttall (Bury North) (Con): I entirely agree with my right hon. Friend’s statement that the UK should not contribute to any further eurozone bail-out fund, but how can UK taxpayers be certain that our contributions to the IMF will not be used for such purposes when the UK has only 4.29% of the vote on the IMF governing body?
The Prime Minister: The IMF has extremely tough and clear rules about when it can and when it cannot lend money. That is why it cannot put, and nor would we support its putting, money into a euro bail-out fund or into a special purpose vehicle. That is not the role of the IMF—that must be the role of the European financial stability facility—but what the IMF can do is lend money and help countries that are in distress. As I said, no country has ever lost money on lending it to the IMF, because it is the senior creditor in all these arrangements."
Philip Hollobone suspected a country could not leave the Eurozone and stay an EU member:
The Prime Minister: I believe my hon. Friend is right that there is nothing in the treaties that allows a eurozone member to leave the eurozone yet stay in the European Union. My sense is that were that to happen, some allowance would be made. He is right to say that that would involve a treaty change at some stage to ensure that it was legal."
Sarah Wollaston advocated Greece's default and devaluation:
"Dr Sarah Wollaston (Totnes) (Con): The more a balloon is inflated, the more it hurts when it eventually explodes. Would it not be better for us to help the Greeks default and devalue now rather than later?
The Prime Minister: We have argued very consistently that part of any solution has to be a very decisive writing down of Greek debt, because it obviously cannot afford the level of debt that it currently has. That is the plan that it is being offered. Some would argue that even that is not enough, and that is my hon. Friend’s position, but our view has always been that unless the debts are written down significantly, there will not be a proper solution."
The full debate can be read on the Hansard website.