Hansard - United Kingdom Parliament

25 Eurozone (Contingency Plans) 20 JUNE 2011 Eurozone (Contingency Plans) 26
Mr Hoban indicated dissent.
Ms Stuart: The Minister shakes his head; I ask him to
take me seriously.
Thirdly, I ask the Minister to consider article 66 of
the treaty on the functioning of the European Union,
which states:
“Where, in exceptional circumstances, movements of capital to
or from third countries cause, or threaten to cause, serious difficulties
for the operation of economic and monetary union, the Council”,
after consultation, can impose
“for a period not exceeding six months”
measures to restrict capital flows between the EU and
the rest of the world. The UK would be affected by such
restrictions of capital flows. Has he discussed that with
the Commission? Has he made provision for how the
UK economy would deal with that if it was imposed?
Mr Hoban: The hon. Lady poses a series of very
good questions, to which I will respond.
The hon. Lady asked whether the authorities are
working together. I said in response to her initial question
that the Treasury, the Bank of England and the FSA
are working closely on this matter and monitoring the
situation. We are keen to ensure that the UK banking
system is resilient. The additional capital that the banks
hold now, compared with at the start of the crisis will
help with that. As I said, UK banks have not had
difficulty in sourcing funding in the market. There is a
concern about liquidity risk, but UK banks are continuing
to source funding.
I mentioned in my statement the exposure of UK
banks to the Greek Government. It is $4 billion, which
is less than our exposure to, for example, the Irish
banks. The hon. Lady should bear it in mind that
French banks’ exposure is about four times that amount
and that German banks’ exposure is about five times
that amount. We are taking the matter seriously and
considering it carefully, and the Chancellor is currently
at the ECOFIN meeting in Luxembourg, where I am
sure it will be discussed.
The hon. Lady talked about reversing the VAT increase.
The shadow Chancellor proposed last week a cut in
VAT that would cost £51 billion, which would put at
risk our credibility in international markets. We have
taken the difficult decisions to ensure that UK market
rates are in line with those of Germany. The proposal
that she put forward, and which her right hon. Friend
put forward last week, would mean interest rates rising
for families and businesses across this country, putting
the recovery at risk. I do not think that is a gamble that
we can afford to take.
Mr William Cash (Stone) (Con): Will the Minister
concede that it is crystal clear that the Greek situation,
like those of Ireland and Portugal, does affect us? Does
he also accept that the idea that is being put forward in
the European Union Bill of not having a referendum on
treaties that relate to the eurozone would mean that,
although we are affected by the situation, we would not
be allowed to have a referendum on it? Will he ensure
that when the Bill returns to the House of Commons,
there are amendments to ensure that there is a referendum
on this matter, which affects us, so that the British
people can vote on it?
Mr Hoban: My hon. Friend makes a couple of points
about our exposure to Greece and the Bill that is
currently going through the House of Lords. As I said,
the UK’s exposure to Greece is relatively small, with
bank exposure at $4 billion. He will recognise that we
have a big interest in ensuring the continued stability of
the eurozone. That is why the treaty changes are being
made—to put the European support mechanism for
eurozone countries on a permanent footing and replace
the EFSM, to which we have to contribute thanks to a
decision taken by the previous Government, with a
mechanism that is funded entirely by the euro area. We
do not believe that there is a transfer of sovereignty
from this Parliament to Brussels, so there is no need for
a referendum on those treaty changes.
Mr Jack Straw (Blackburn) (Lab): Will the Minister
first check his figures? Figures in the Financial Times,
citing Moody’s and Reuters, suggest that the exposure
of British public and private sector banks to Greek debt
is ¤13 billion, and that of Germany and France ¤34 billion
and ¤53 billion. Those figures are much bigger than the
ones that he gave.
Secondly, will the Minister not recognise that there is
now a mood change in Europe? Der Spiegel, the German
magazine has had a cover story contemplating the end
of the euro as we now know it, and Mr Charles Grant,
the well known europhile, has done the same in The
Times today. Instead of sheltering behind complacent
language and weasel words that we should not speculate,
the Government should recognise that this eurozone
cannot last. It is the responsibility of the British Government
to be open with the British people now about the
alternative prospects. Since the euro in its current form
is going to collapse, is it not better that that happens
quickly rather than it dying a slow death?
Mr Hoban: May I just deal with the right hon.
Gentleman’s factual questions? The figures about UK
banks’ exposure to Greek sovereign debt were provided
by the Bank of England, based on results at the end of
quarter one this year.
On the right hon. Gentleman’s second question, I
seem to remember that he was a member of a Government
who seemed committed to taking this country into the
euro. I do not know whether we have seen a damascene
or deathbed conversion from the Labour party. I think
it was right for this country to stay out of the euro, and
that is the policy of this Government. We have a strong
interest, though, in the continued stability of the eurozone,
as it is our major trading partner. Continued instability
in the eurozone could be a factor in holding back the
recovery of the British economy.
Mr John Redwood (Wokingham) (Con): Given that
Greece needs a work-out rather than another bail-out,
will the British Government go to the International
Monetary Fund and the EU and say the following?
First, a second bail-out would mean sending good
money after bad and should not be done; secondly, we
need an urgent conference of all the interested parties
to reschedule and re-profile Greek debt in an orderly
way to avoid huge systemic damage, while accepting
that the problem has already occurred. Greece went
bankrupt more than a year ago, but the Ministers of
certain countries cannot believe it and are wasting
taxpayers’ money on trying to pretend that it has not
happened.