Hansard - United Kingdom Parliament

31 Eurozone (Contingency Plans) 20 JUNE 2011 Eurozone (Contingency Plans) 32
[Mrs Anne Main]
that we are having to scrimp and save at home. My
constituents will not stand for it. I am disappointed to
hear the language of the Government at the moment,
which seems to imply that Greece is an economy that is
too big to fail. That is the same thing we had with the
banks. We should put Greece out of its misery—it is
flatlining—and no more of our public money should be
sent abroad to Greece, even through the IMF. There are
riots on its streets. Its people do not like the medicine
being offered to it, and we cannot expect it to take any
more. Let it depart peacefully from the euro. It cannot
be sustained as it is; it is just good money after bad.
Mr Hoban: My hon. Friend will be aware that these
are matters for the Greek Government, but I would say
this. When money has been lent to the IMF, that does
not reduce the amount of money available for public
spending. We get interest on the balances that we lend
to the IMF, and it has never defaulted on a programme
yet. We need to recognise the importance of support
provided through the IMF, although I do not really
think that my hon. Friend is suggesting that we should
withdraw from it. On fiscal consolidation, let me reiterate
to my hon. Friends and to the Opposition, who have
ignored this crucial fact, that if we had not taken the
tough action that we took a year ago in our emergency
Budget, it would be the UK, not Greece, in the firing
line.
Stewart Hosie (Dundee East) (SNP): Nobody wants
to see Greece default, but that is most certainly possible.
Were it to happen, there would be an immediate shock
to the eurozone and, more widely, to the EU, our largest
trading partner. That would have an impact on the UK.
I am glad that the Minister said that the situation was
being monitored, but the House and the public deserve
more detailed information. If he has not already done
so, will he ensure that the Treasury asks the Office for
Budget Responsibility to assess the impact on UK
growth of a potential Greek default, and publish that
assessment quickly, so that we can understand precisely
what the consequences might be?
Mr Hoban: The OBR will take into account the state
of the eurozone economy in its normal forecasting.
However, let me be clear to the House that the Treasury,
the Bank of England and the Financial Services Authority
work closely to monitor the strength of the financial
system, and the exposure of UK banks to the Greek
Government and the wider eurozone economy. The
actions taken to date have ensured that our banks are
well capitalised, have strong balance sheets and are less
exposed to the Greek economy than, say, French or
German banks. British banks can still access funding in
international markets, which is a sign of the UK banking
system’s strength.
Mr Bernard Jenkin (Harwich and North Essex) (Con):
May I urge my hon. Friend to bear it in mind that the
nearer we get to the inevitable break-up of the euro, the
faster the denials will be made that it is not going to
happen? Will he urge the European Union to design a
policy that creates a legal framework for an orderly
departure of Greece from the euro? Can he name a
single reputable economist who believes that the Greek
economy can recover without a devaluation?
Mr Hoban: We all recognise the challenges that the
Greek economy faces as a consequence of high levels of
debt. That is one reason why it has been proposed that
the banks take part in a voluntary initiative to roll over
their debt, to reduce some of the burden on the Greek
economy.
John Cryer (Leyton and Wanstead) (Lab): In answer
to one of his Back Benchers, the Minister said that if we
put money into the IMF or the EU, that does not affect
the rest of public spending. However, the rest of the
world would recognise that if we spend money on one
thing, that gives us less to spend on other things. Is that
right or is it wrong?
Mr Hoban: If that is the hon. Gentleman’s view, he
should talk to those on his Front Bench, who seem
happy to propose £51 billion of unfunded tax cuts.
Money that we lend to the IMF is money that is sitting
on the Government’s balance sheet; it does not affect
the spending decisions that we make. We are paid
interest on the amounts lent to the IMF, which do not
affect the amount of money that we can spend on
pensions, schools or health, and I made the same point
about how the EU funds the European financial stabilisation
mechanism.
Sajid Javid (Bromsgrove) (Con): Like Greece, we,
too, have an enormous national debt, which more than
doubled over the last 13 years, to more than £1 trillion,
with an interest bill of more than £40 billion this year.
Does the Minister agree that had we not had a change
in Government 13 months ago, we, too, could have been
facing the same sad fate?
Mr Hoban: My hon. Friend is absolutely spot on. We
can see from the reaction of the Labour party in opposition
that it has not learnt at all from its mistakes in government.
If we had not taken tough action, we would have seen
high market rates of interest, which would have increased
costs for families and businesses across the country. We
are now seeing the benefits of the tough decisions that
we took in last year’s emergency Budget.
Mike Gapes (Ilford South) (Lab/Co-op): Given that
the tough, sado-monetarist programme imposed on the
Greeks a year ago has not worked, how many more
sado-monetarist programmes will work?
Mr Hoban: When the Greek Government agreed last
year’s debt bail-out package, it was assumed that they
would be able to re-enter the markets in the spring of
next year. That is clearly not the case, given current
market pressures, which is why the Greek Government
had to seek a second round of refinancing. However,
they still need to take action to improve Greece’s
competitiveness, reduce the size of the state sector
through further privatisation and improve taxation, to
get the economy back on track.
Mr Peter Bone (Wellingborough) (Con): I congratulate
the hon. Member for Birmingham, Edgbaston (Ms Stuart)
on securing this urgent question, and I say gently to the
Minister that it is a shame that he did not volunteer to
make a statement on this matter first. What is Her
Majesty’s view on whether the euro can survive in its
current format?