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European Council

Volume 520: debated on Monday 20 December 2010

With permission, Mr Speaker, I should like to make a statement on last week’s European Council. Britain had three objectives at this Council: first, to help bring stability to the eurozone, which is in Britain’s interests; secondly, to make sure that Britain is not liable for bailing out the eurozone when the new permanent arrangements come into effect; and thirdly, to build on the progress we made with the 2011 EU budget, with tougher settlements in the years to follow.

Let me address each of the three objectives in turn. First, no one should doubt that stability in the eurozone is in our interests. Nearly half our trade is with the eurozone, London is Europe’s international financial centre, and no one can deny that the eurozone faces very real challenges at the moment. We see that in the Irish situation, and with Spain and Portugal paying interest rate penalties in the financial markets. Britain’s approach should not be simply to say, “Well, we told you monetary union would require fiscal union,” and leave it at that. We want to help the eurozone to deal with the issues it faces. We have a clear interest in other member states taking fiscal and structural action and in the cleaning up of banks’ balance sheets. The fact that we have set out a path to deal with our own deficit and seen our own interest rates come down lends weight to our argument.

Following the dinner, at which leaders of all the EU countries had a wide-ranging discussion on the state of the eurozone, eurozone leaders issued a statement saying that they

“stand ready to do whatever is required”

to return the eurozone to stability. Part of that is the new permanent mechanism for assisting eurozone countries that get into financial difficulty. Enabling eurozone countries to establish such a mechanism is in our interests, but how that mechanism is brought about is equally important. After the October Council I made it very clear to the House that any possible future treaty change would not affect the UK, and that I would not agree to it if it did. I also said that no powers would be transferred from Westminster to Brussels. At the Council we agreed the establishment of a permanent mechanism with a proposed very limited treaty change. This change does not affect the UK, and it does not transfer any powers from Britain to the European Union.

Secondly, on the issue of liability for any potential bail-out of the eurozone in future, Britain is not in the euro and we are not going to join the euro, and that is why we should not have any liability for bailing out the eurozone when the new permanent arrangements come into effect in 2013. In the current emergency arrangements established under article 122 of the treaty, we do have such a liability. That was a decision taken by the previous Government, and it is a decision that we disagreed with at the time. We are stuck with it for the duration of the emergency mechanism, but I have been determined to ensure that when the permanent mechanism starts, Britain’s liability should end, and that is exactly what we agreed at the European Council.

The Council conclusions state that this will be a “stability mechanism” for

“member States whose currency is the euro”.

This means it is a mechanism established by eurozone countries for eurozone countries.

Britain will not be part of it. Crucially, we have also ensured that the current emergency arrangements are closed off when the new mechanism comes into effect in 2013. Both the Council conclusions and the introduction to the decision to change the treaty itself—the actual document that will be presented to this Parliament for its assent—are clear that article 122

“will no longer be needed for such purposes”

and that

“Heads of State or Government therefore agreed that it should not be used for such purposes.”

Both the Council conclusions and the decision that introduces the treaty change state in black and white the clear and unanimous agreement that from 2013 Britain will not be dragged into bailing out the eurozone. Before the Government agree to this treaty change, Parliament must, of course, give its approval—and if this treaty change is agreed by all member states, its ratification in this country will be subject to the terms of our EU Bill, and so will be subject to primary legislation.

Thirdly, let me turn to the issue of the EU budget. Securing a tight budget for the future remains my highest priority for the European Union. I believe that it is a priority shared by the vast majority of people in this country. At the last Council, we managed to do something that we have not done in previous years. We were faced with a situation where the Council had agreed a 2.91% increase—that was not the UK’s position; we had wanted a tougher settlement, but we were outvoted—yet the European Parliament went on and called for a 6% increase. Instead of just splitting the difference between what the Council asked for and what the Parliament called for, which is what happened last year, Britain led an alliance of member states to reject decisively the European Parliament’s request. We insisted on no more than the 2.91% increase that the Council had previously agreed. Many predicted that this would be impossible and that Britain would be defeated, but we succeeded, which will save the British taxpayer several hundred million pounds compared with what could have happened.

We also agreed a new principle that from now on, the EU budget must be in line with what we are doing in our own countries. We did this by taking the initiative and galvanising others to join us. We sent a clear message that when we are making cuts at home, with tough decisions on pensions, welfare and pay, it is simply not acceptable to go on spending more and more and more through the European Union. At this Council, I wanted to keep up the momentum on the EU budget by forging an alliance with like-minded partners and starting to work towards securing a tougher settlement for future budgets.

At the weekend Chancellor Merkel, President Sarkozy and I, together with the Prime Ministers of Finland and the Netherlands, sent a letter to the President—[Hon. Members: “That’s an alliance?”] Well, it involves the three largest countries in Europe. We sent a letter to the President of the European Commission setting out our goals for the 2012 and 2013 budgets and the longer-term financial perspective, which covers the rest of this decade right up until 2020. It states clearly our collective view that

“the action taken in 2011 to curb annual growth”

in European spending should be “stepped up” in 2012 and 2013. Together, we say that there must be a real-terms freeze in the period 2014 to 2020. I want us to achieve a decade of spending restraint in Europe, and the three biggest powers in Europe—the three biggest net contributors to the budget—have committed to that. I believe that this is an important step forward.

There are two problems that Europe must urgently address. The first is that the eurozone is not working properly. It needs major reform, and it is in our interests not to stand in the way of that. Indeed, as I have argued, we should be actively helping the eurozone to deal with its issues. Secondly, Europe as a whole needs to be much more competitive. Collectively, we must press ahead with measures that will help European countries pay their way in a world where economic competition internationally is becoming ever fiercer. We must expand the single market in areas such as services, press forward on free trade and, crucially, avoid burdening businesses with costly red tape. We must promote stability, jobs and growth. That is the agenda that this Government are pursuing in Europe, and I commend this statement to the House.

I thank the Prime Minister for his statement. I want to ask him about three issues: the agreement on the European budget, the treaty change, and the wider but perhaps most fundamental question of all, European growth.

First, on the budget, I welcome the call for restraint in the European budget in the years ahead. On the budget for this year, we heard from the Prime Minister after this Council, in his own modest way, rather what we heard after the previous Council: he applauded the outcome because he said that it avoided the ultimate sin of European negotiations—simply “splitting the difference” between positions. But that rather depends on whose positions we are talking about.

Let me remind the Prime Minister of some rather inconvenient facts. He originally wanted a freeze in the budget, whereas the European Parliament wanted a 5.9% increase. He did not just want a freeze back in August; he was still arguing for one days before the previous European Council in October. Perhaps he can tell the House what figure splits the difference between 0 and 5.9%. By my reckoning it is about 2.9%, which is the outcome we ended up with after his negotiations. So after all his rhetoric, his grandstanding and his description of this as a “victory for common sense”, we have ended up splitting the difference. I congratulate him on his heroic achievement.

We welcome the Prime Minister’s support for the treaty change agreed at the Council. It is right that the eurozone should replace its ad hoc arrangements with a more permanent mechanism, but we have to ask why the Prime Minister has to fall over himself to try to justify accepting a fairly minor change. He is simply showing—I congratulate him on this—a sensible piece of what might be called “Europragmatism”. Of course, his problem is that, before the election, he claimed to be not the Europragmatist but the great Eurosceptic. We all remember his cast-iron guarantee, and his promise that if there was any chance at all of a reopening of the treaty and a referendum on Lisbon he personally would make it happen. The Foreign Secretary admitted in November that this treaty change offers a pretext for a referendum, but it would clearly be absurd to use it to try to derail the whole of Lisbon. That is the problem—the Prime Minister’s absurd position before the election, and the fact that he was believed.

The Prime Minister also used to say that he would take the first opportunity to repatriate powers over employment and social legislation to Britain, but we heard nothing of that in his statement. It is no wonder that his Back Benchers are not very happy with him on Europe, because he led them up the garden path. He said, “I am one of you. I feel your pain. I am the great Eurosceptic.” Can he explain, most of all for the benefit of his Back Benchers, why he has abandoned those pre-election commitments? We know that he has broken his promise to parents on child benefit and to young people on education maintenance allowance, but things have got so bad that he is even breaking his promises to his own Eurosceptics.

Let me turn to the economy. The agreement on a permanent crisis mechanism for the eurozone after 2013 does not address the challenges faced by Europe’s economy right now. I think that he and I would agree on that. Does he agree that eurozone members should do more to promote stability in the eurozone before 2013? Does he also agree that we need European action to promote growth for there to be any chance of serious export growth in the United Kingdom? The Prime Minister’s plans, with VAT set to rise and spending cuts kicking in, rely on an extra £100 billion of exports to the UK over five years. More than 50% of exports, as he said, are to Europe, but the European Commission forecasts slowing growth next year.

In our view, the Prime Minister should be doing more to work with colleagues in Europe to improve prospects for growth. He should do three things in particular: first, he should argue that all countries engaging in fiscal consolidation, including Germany and the UK, should do so at a pace that supports economic growth domestically and across Europe as a whole; secondly, he should ensure that those countries facing problems, including Ireland, are not locked into repeated rounds of austerity measures, with higher taxes and lower spending hitting the growth those countries need to pay down their debts and recover; and, thirdly, he should ensure that Europe’s voice in the G20 argues for a growth-oriented strategy. Given the nature of his statement, people will wonder whether he sees the connection between his optimistic forecast about exports and growth and the summit he attended this weekend.

The Prime Minister’s problems on Europe reflect his wider domestic approach. He breaks his promises and thinks one can reduce an economic policy to a pure deficit reduction policy with no focus on growth and jobs. In 2011, he needs to stop spending his time in Europe trying to grandstand and start engaging on a growth agenda for Europe and Britain that can help us here at home.

The right hon. Gentleman talks about grandstanding, but for the past couple of years we were told endlessly that we were going to be isolated in Europe, that we would have no allies in Europe and no friends in Europe, but when we put together an alliance of the three biggest countries in Europe for budget restraint, the first thing he ought to do is stand up and congratulate us.

Let me take the right hon. Gentleman’s three questions in turn. First, on the budget, he talked about some inconvenient facts. Let me give him some inconvenient facts from last year. Last year, when we had a Labour Government, a 3.8% increase was proposed by the European Council and supported by that Government. The European Parliament then came forward with a 9.8% proposed increase, and they split the difference so the budget went up by 6%. That is what happened last year, supported by Labour. The difference between that and what we achieved is hundreds of millions of pounds. That is what this Government’s actions have saved. When it comes to changing positions, I note that in her statement after the European Council the shadow Foreign Secretary said that “Labour voted against” this budget rise “from the beginning”. That is simply not true—Labour MEPs opposed our call for a freeze in the European Parliament.

Secondly, on treaty change, the right hon. Gentleman does not seem to understand that this very limited treaty change is in our interests so we should support it. We should use this opportunity to get rid of the risks of Britain being drawn further into eurozone support in the future. We are liable to that because of the weak actions of his Government before the last election. It is absolutely right that we use our negotiating capital to make sure that Britain is not liable when the new mechanism comes in. What we are doing, once again, is clearing up the mess left by Labour.

The third issue that the right hon. Gentleman raised was the economy. He says that we should call for measures that will achieve greater stability in Europe, but that is exactly what we are doing. Just imagine what stability we would get in Europe if he were sitting at the Council table saying that we should not be bothering with deficit reduction. We would be putting ourselves in the same camp as Ireland, Portugal and other countries.

Finally, the right hon. Gentleman tells me how unhappy my Back Benchers are, but I would swap their unhappiness for that of his Back Benchers any day of the week. I am sure that they will want to remember that important thing at Christmas time—always keep your receipts in case you want to exchange for something bigger.

As a happy Back Bencher, I congratulate the Prime Minister on winning the budget battle with the European Parliament, where there was clearly no splitting the difference. Enlargement was also on the agenda. On Turkey, does he agree that the problems that many predicted would have occurred by now do not seem to have materialised? However, we still seem to have deadlock, with no new chapters being opened and no progress being made on the Ankara protocol. The General Affairs and External Relations Council said last week that progress is now expected without further delay: how does he see that materialising?

My hon. Friend is right that we should push for progress with Turkish accession—and we are. I raised this with the Hungarian Prime Minister when he came to Downing street last week, because Hungary is going to hold the future presidency of the European Union. We have to win the argument in Europe—too many are opposed to Turkish membership. I think that all the arguments are in favour and that we should push this as hard as we can and keep opening those chapters to show that we are doing so in good faith.

Before the Prime Minister boasts so much about freezing the budget, he might reflect on the fact that although that will save the British rebate, it means the common agricultural policy will not be reformed for several years. It also means that there will be no money for our new partners in east Europe. From Margaret Thatcher to Tony Blair, British leadership was based on acts of solidarity with poor, incoming members of the EU. The Prime Minister is the first one to sign up to the Sarkozy-Merkel agenda of being as mean as possible to our new friends and allies in east Europe.

I do not accept that the only way we can make progress with helping partners in eastern Europe is by having an ever-rising EU budget. Indeed, there are countries in eastern Europe that support the position we take that the budget should not go up and that we should spend the money better. As I have argued before, we should be making more progress on transparency and using it as a weapon to shine a light on the EU budget and some of the disastrous ways in which it is spent. It is an absolute counsel of despair to say that the only way we can help other countries in Europe is with an ever-rising budget: it is not.

Whilst the new bail-out mechanism has thankfully comforted the markets, do not many of our EU partners need to rein in their public spending, follow Britain’s example and introduce some meaningful financial austerity measures?

To be fair to other countries in Europe, the conversation around the Council table is very much about the action that everyone is having to take. Britain has set quite a pace in setting out a five-year programme about how we are going to do this and what we have seen in Britain is market interest rates coming down since the election, whereas in other European countries they have sometimes gone up. What is required is some credible fiscal plans. Fiscal consolidation alone will not settle down the eurozone but that has to be a part of it.

It is clear that, despite everything the European Union has done, the euro is still in crisis—and that crisis will not end any time soon. Has the Prime Minister been aware of or involved in any private discussions about how the euro might be deconstructed in a controlled way?

We had a very good discussion at the dinner, which involved all EU members, not just eurozone members. As someone who has never supported Britain’s joining the euro and who has always had concerns that the currency area was not optimal—as I said in my statement, I would make the argument that with a single currency, a move towards a single fiscal policy was needed, but that was never done—I must say it is profoundly not in Britain’s interest to see the break-up of the eurozone. If that happened, there would be very bad consequences not just for eurozone countries, but for Britain. We should take a hard-headed, practical view and recognise that 44% of our exports go to eurozone countries. If that broke up, it would be bad for Britain. We should be making positive suggestions about what eurozone countries can do to make sure that they get the stability and growth that we all need. There is fiscal consolidation, active monetary policy, cleaning up bank balance sheets, getting ahead of the markets and showing that we want this to be a success. That is what needs to happen and, as I say, standing on the sidelines and saying, “Well, we told you this wasn’t a great idea” is not the right approach.

Order. Although it is not my normal practice to call a Member who was not present at the very start of the statement, I note that the hon. Member for Stone (Mr Cash) chairs the European Scrutiny Committee and therefore, exceptionally, I shall call the hon. Gentleman on this occasion.

I am extremely grateful, Mr Speaker. I really only came here to wish the Prime Minister a happy Christmas. Does the Prime Minister share the concern of many of us that the present financial mechanism is unlawful, and that Britain is exposed until 2013 while the black hole of Portugal and Spain opens up before us? Does he therefore think there are serious grounds for challenging the unlawfulness of it and not exposing the British electorate to the prospect of having to contribute to that while suffering such severe austerity cuts?

I thank you, Mr Speaker, for your leniency. No European statement would be complete without a question from my hon. Friend the Member for Stone (Mr Cash). He may have a good point. Article 122 of the treaty refers to help in the case of natural disasters and other emergencies. There are some people who question whether it should have been used in this way to support eurozone countries.

That argument was had and was conceded under the previous Government in two ways. First, they agreed the establishment of the mechanism. Secondly, if we go back to the Nice treaty, it was the then Europe Minister, the right hon. Member for Leicester East (Keith Vaz), who is in his place, who argued from the Dispatch Box that it was perfectly okay for article 122 to go to qualified majority voting, which is where we are today. So in two ways the previous Government made a bad mistake. As I say, we are clearing up the mess and we will certainly do that from 2013, but the mechanism remains in place till then.

Was there any discussion at the Council of the case of Sergei Magnitsky, who was working on behalf of a British investment firm in Russia and was tortured and murdered a little over a year ago? I am sure the Prime Minister is aware that there was a vote in the European Parliament last week, supported by MEPs from all parties in this House, to say that those who took part in his murder, who have not faced any criminal prosecution at all, and those whose corruption he unveiled should be banned from the European Union, and that Senator McCain in the United States of America is supporting a similar ban. Will he support a ban?

The Government continue to raise all these cases and issues around them with the Russian authorities. Our embassy in Moscow is closely watching developments in the cases of Mr Khordorkovsky and Mr Lebedev, and we remain very concerned about Mr Magnitsky’s case, as raised by the hon. Gentleman. We await with interest the conclusion of the official investigation into the case, which was announced by President Medvedev in November 2009.

I congratulate the Prime Minister on a robust performance in Brussels. Resisting the Parliament’s demand for an extravagant budget was absolutely the right thing to do. As he looks ahead towards the justified freeze on the budget post-2014—and not just because of the weather—can he assure us that it does not mean that the budget will be frozen, but that subsidies that are not justified and expenditure that is wasted will be replaced by, for example, expenditure on energy and climate change issues, which are both the priority of this Government and ought to be the priority of the European Union as well?

My hon. Friend makes a good point, which goes to the point made by the former Europe Minister, the right hon. Member for Rotherham (Mr MacShane), which is that we must do better at trying to re-order the priorities of the European budget, but I do not accept that we can do that only by allowing an increase. I accept that we are taking a tough position, because we are trying to get a freeze with major partners for 2014 to 2020, but we also want budget reform and reform of the CAP. We are in the vanguard of arguing for that because we want to see the money better spent. It is right to set out down this path and try to achieve those goals.

The Prime Minister will recall that six months ago he and other EU leaders set out the Europe 2020 strategy as a successor to the Lisbon agenda, which was agreed in 2000. Is he confident that nothing discussed at the weekend will affect the benchmarks that were set in June? With the European Union, what is important is not just getting an agreement, but making sure that countries meet benchmarks on jobs and growth.

The right hon. Gentleman makes a good point, which is that we should not amend those benchmarks, but the Europe 2020 document is slightly disappointing, because Europe’s real problem is that it has become uncompetitive, has expensive welfare systems and overbearing pension systems and is not complete as a single market. We need a more robust conversation in Europe about how we get growth—how we reform and improve the structure of our economies to get growth. Europe 2020 is only part of that, and we should be more ambitious for next year.

As another happy Back Bencher, may I convey the thanks of the British taxpayer for the hundreds of millions of pounds that the Prime Minister saved us over the weekend? However, I should be interested in the clarification of an issue. The problems in the eurozone are likely to occur between now and 2013. What is the extent of Britain’s liability under the emergency arrangements signed up to by the previous Labour Chancellor?

I am glad to hear that my hon. Friend is a happy Back Bencher. The answer to her question is that a mechanism was established under article 122 of the Lisbon treaty, allowing the European Union to spend the headroom between its budget and the money it can spend under the previous financial deal on such bail-outs. The headroom was €60 billion, some of which has been used with respect to Ireland, and the mechanism is established under qualified majority voting. That is the problem we face, so we are dealing with that in the fastest way we can by saying that, when the new mechanism comes in, it will rule out action under the old mechanism. Of course, as they like to say in Limerick, we shouldn’t have started from here.

Why is the Prime Minister so besotted with the idea that he wants Turkey in the European Union and, possibly, the eurozone? Eighty million Turks will be on the move, and it will not be two-way traffic. How can that improve financial stability?

I know lots of people in Turkey I would willingly swap with the hon. Gentleman. Maybe we could have a transfer. I would make a serious argument, however, which is that, if we want the European Union to be a force for stability in our world, we should try to include a country that wants to look to the west, is a democracy and wants to be part of the European economy. All those would be great advantages for the European Union.

Will the Prime Minister clarify whether the minor treaty amendment will specifically exclude Britain from any liability, or whether that will merely be implied? Will he also ensure that article 122 is never used again for that purpose under the treaty? The reason I ask so specifically is that the previous practice of Europe has not always been to do precisely what it has implied it might do, and we really want to have that nailed down.

I think my hon. Friend asks absolutely the right question, because there is a history in Europe of such agreements not always being stuck to, and of there being a rather federalist ratchet. That was why I was very clear that we needed language, not just in the European Council conclusions, about article 122 not being used in future. I actually wanted it in the article that will be presented to this House for us to look at as a treaty amendment, so, in what is called the recitals—don’t worry, I’m not going to start singing—or the introduction to the article, it says:

“As this mechanism”—

the new mechanism—

“is designed to safeguard the financial stability of the euro area as whole…Article 122…of the TFEU”—

the treaty on the functioning of the European Union—

“will no longer be needed for such purposes. Heads of State or Government therefore agreed that it should not be used for such purposes.”

That seems to me to be quite a good belt and braces—no need, no use; and it is not just in the Council conclusions, but in the introduction to the treaty article itself.

This seems to have been a pretty significant Council, as a result of which we will have treaty changes that will involve legislation here. Treaties cannot be amended, so we will have a debate but not be able to amend them. Is the Prime Minister aware that, for this Council, the House did not have a pre-Council debate in the Chamber, on the basis that the Leader of the House said—and the Foreign Secretary will whisper to the Prime Minister—that it is Back-Bench business? If the Prime Minister takes Europe seriously, how on earth can he defend a discussion on something as significant as that being Back-Bench business?

The hon. Lady is so astute about this House she even knows when I am being whispered to while sitting down. I am hugely impressed because she is absolutely right. I answer her in two ways. First, the new Backbench Business Committee—some of its members are in the Chamber—has 30 days a year in which to discuss such matters. Secondly,—this is the important thing—at this Council, we agreed the type of treaty change and gave some clarity about what needs to be done. However, there is now a proper process, which means that this Parliament has to be formally consulted, which it will be, before the treaty change goes through and there will then be a proper process of parliamentary approval. It is all very well the shadow Chief Whip chuntering from the Front Bench, but I do not remember the previous Government being anything like as generous as to give 30 days for the consideration of Back-Bench business. We just dreamed of such things in those days.

May I say that I agree with the hon. Member for Birmingham, Edgbaston (Ms Stuart): it is extraordinary that we did not have a pre-Council debate. I also wish to press my right hon. Friend on the question raised by my hon. Friend the Member for West Worcestershire (Harriett Baldwin). The Prime Minister said that we will not have liability for the eurozone after 2013, and we very much hope that that is correct. However, the European stabilisation mechanism seems to be an open-ended liability. On 22 November, the Chancellor said:

“we would certainly not be in favour of somehow replenishing it”.—[Official Report, 22 November 2010; Vol. 519, c. 43.]

Are we going to refuse to replenish the European stabilisation mechanism while it continues to exist?

As I have said, the stabilisation mechanism is based on the difference between the European budget and its headroom. That is a fact set out in the decision made by the right hon. Member for Edinburgh South West (Mr Darling). The debate in Europe at the moment is about replenishing the other facility. That is known as the facility rather than the mechanism, which, of course, Britain is not in. That is a eurozone facility, and there is a debate in Europe about whether that should be topped up and increased. Obviously, from our perspective, we are keen on Europe using the facility rather than the mechanism.

The permanent mechanism will not be introduced until June 2013. Meanwhile, we are left with this temporary mechanism, which is widely viewed as inadequate to the task. That is likely to mean repeated austerity measures on behalf of Spain, Portugal and perhaps others who are caught in this contagion. That cannot be good for the United Kingdom and its export performance. What is the Prime Minister doing to raise our case at a European level?

I would make two points to the hon. Gentleman. First, as I have described, there is the mechanism, which has that headroom. However, eurozone countries should be using the eurozone facility. We do not have a say over eurozone member states’ financial and fiscal policies, so it makes much more sense for eurozone countries to raise that money and subsidise each other if that is what they choose to do. That is what the eurozone facility, which is hundreds of billions of euros, rather than €60 billion, is there to do. I make one other point to the hon. Gentleman: only a limited amount can be done to help countries just by making these transfers. There must be fundamental reforms in those countries, whether that involves cleaning up banks, dealing with labour markets, having more active monetary policies or making their fiscal policies real. All those things will make a difference.

In noting the Prime Minister’s considerable achievements in the European Council, does he agree that it is critical that Britain plays an important role in creating a vibrant, dynamic European economy, so that we can get on with the job of being competitive with the far east and other growing economies?

My hon. Friend is entirely right, and this also relates to the previous question. Of course, everyone in Europe wants to see higher growth rates. That is one of the ways we will get deficits down and ensure that we have more jobs in our countries. However, Europe needs to ask itself, “How can we get higher growth?” That should be done by completing the single market, extending it to services, taking a more forward position on the Doha round and, frankly, stopping some of the things that the European Union is currently doing that add massive costs and burdens to business. At the European Council dinner, I pressed the point very strongly that unless Europe starts making those decisions, people will not take its growth strategy very seriously.

The Prime Minister has not referred to one of the most important issues that is currently going on internationally, and I would be grateful to know whether it was considered and discussed in the European Council—that is, the deteriorating situation in west Africa, specifically the fact that the former defeated President of Côte d’Ivoire, with the support of the military and brutal thugs, is clinging on to power and threatening to expel the United Nations from that country. What is the European Union, with its common security and defence policy, going to do to assist the African Union and the UN to restore democratic government in Côte d’Ivoire?

The hon. Gentleman is entirely right. We did discuss at the European Council the problems in Côte d’Ivoire, and we took a very clear view, which is that everyone there should accept the result of the election and support the United Nations, as we support the United Nations and its continued presence in that country.

What progress did my right hon. Friend make in persuading other countries in the European Union of the merits of a single market in services, not just for their companies here but for our companies there?

This is an argument that we can win and have got to win in Europe. We now have like-minded Governments who want to see completion of the internal market, progress on services and progress on Doha, with countries like the Netherlands, Finland and Germany all wanting to see a more open-market Europe. We have to push this very hard, because it is the growth agenda. Clearly, fiscal stimulus is not available to Europe because everyone has such large budget deficits. The best stimulus that we could give to the European economy and our economy is to make these structural changes.

Do I take it from the Prime Minister’s statement and the facility that he has shown in his answers for using Euro-jargon that he has gone native on Europe?

I am very sorry—I will do my best. It is extremely difficult when there is a mechanism, a facility, and article 122, which used to be article 100 before it was changed by QMV in the Nice treaty. [Interruption.] There is also the recital, and as I said earlier, I am not going to sing. There is a lot of junk that you have to mug up on, but the basic principles are simple—get in there, stand up for your country, and do a good deal.

A structural lack of competitiveness is one of the fundamental problems underlying the current crisis. Can the Prime Minister say whether there was any discussion of the Lisbon 2020 agenda and how it will differ from the original Lisbon agenda in 2000, which failed dismally to make Europe the most competitive and dynamic economy in the world by 2010?

We did discuss the 2020 agenda. I think there is a feeling among a number of other Heads of Government that it is all very well—it has some good targets and a lot of sensible things about investing in skills and education and the rest of it—but it does not really do the hard things that we need to do in Europe to make our economies more competitive with those in the far east. That is the agenda that we need now—not just easy-to-agree targets and headlines but the tough things we need to do to make us more competitive.

In opposition, the Prime Minister spoke regularly about the need for radical reform of the common agricultural policy, but there is no reference to it in the statement he made today. Can he assure the House that, in pursuit of this alliance with France and Germany over the budget, he is not abandoning the principles of CAP reform that are shared across this House?

I can absolutely give the hon. Gentleman that assurance. There has been no back-stairs deal between us and the French. What has happened is that the French and the Germans have agreed with us that, with all the difficult things we are doing in our own countries, it is a real priority to stop the endless rise in the EU budget. That has been done without any guarantees about what happens or does not happen to CAP reform. I remain passionately committed to reforming the CAP. That is right for Europe and for Europe’s farmers, and it would leave room in the European budget to spend the money in a more sensible way.

May I just put it on record that I am a very jolly Back Bencher, particularly as I received the Prime Minister’s Christmas card this morning? Along with the vast majority of my constituents, I would very much have welcomed a cut to the EU budget. However, back in the real world, will the Prime Minister confirm that the decisions and arguments he has made in the past few weeks are good for the long-term future of the United Kingdom?

I thank my hon. Friend; I am glad that Royal Mail is working effectively. [Interruption.] Opposition Members are shouting, “Where are ours?” Any unhappy Back Benchers who do not feel that they are getting enough love from their Front Benchers can join the love train and get a “Happy Christmas” card from me.

Bankers’ bonus payments rankle with ordinary hard-working families. Did the Prime Minister discuss—formally or informally—with his colleagues at the summit making a collective EU agreement to limit bankers’ bonus payments?

Normally, there are long discussions about banks and bonuses. We had a lot of discussion about the need to improve the performance of banks, their balance sheets and their lending practices, but there was no long discussion about bank bonuses. There have been good international agreements on bank bonuses, and we have added to them in this country through the bank levy, which will raise more in every year than the previous Government’s bonus tax raised in just one year.

Does my right hon. Friend agree that what is best for the poorer countries of eastern Europe, which were mentioned earlier, is best for people in this country? That is economic recovery in Europe. Although he rightly says that fiscal changes alone will not deliver that, without fiscal changes and restraint not only by Governments but by the EU, there will be no sustained economic recovery.

My hon. Friend is right. Some Labour Members talk as if there were a choice between going for growth and dealing with the deficit. The truth is that the deficit must be dealt with to get the confidence that is needed for growth. If Labour Members sat in the European Council and argued that deficits were not a problem, their fellow socialists in Portugal, Spain and Greece, who are in difficult circumstances, would think that they had gone completely and utterly mad.

During the summit, did the Prime Minister talk to Government leaders about the growing levels of unemployment in some European countries, the increasing severity of public spending cuts and the impoverishment of working-class families, which is growing as a result? Did they discuss the danger of the whole of Europe tipping into recession because of the drive to cut public expenditure and lay off public sector workers, whereas the socially just thing to do would be to maintain social levels of expenditure?

Yes—of course we had that conversation. We had a conversation about how we can create growth and jobs in Europe. However, if one listens to the left-wing leaders of Portugal, Greece and Spain talk about the problems in their economies, they say that they know that they must deal with their deficits and show that they have a plan to get their deficits down. At the moment, their interest rates are rising higher and higher, making growth more difficult. The idea that there is an alternative socialist wonderland where one can forget about how much money one is borrowing is for the birds.

I am the happiest of Back Benchers now that we have a Prime Minister who stands up for British interests in Europe—although I have not received a Christmas card. Does the Prime Minister agree that the biggest scandal of the previous Labour Government was their surrender of Mrs Thatcher’s rebate, the result of which is that we will pay £41 billion to the EU in the next five years, which is twice what we paid in the previous five years?

The card is in the post. I want to make my hon. Friend not just happy, but ecstatic. He is right about the rebate. We now get lectures from the Labour party, saying that we were not tough enough on the European budget. That is from the people who gave away the rebate and in return got absolutely nothing.

The eurozone economy is vital to manufacturing and defence firms in Pendle, which export products across Europe and the globe. Alongside currency fluctuations and economic uncertainty, many businesses say that red tape and bureaucracy is the main challenge that they face. Was that issue addressed at the European Council?

I am glad that my hon. Friend asked that, because it is exactly the point that I made at the dinner of the 27 member states. We have to go through what would make a difference in creating more growth in the European Union. Of course, there are positive things that we have to do, such as completing the single market and extending it to services. However, there are also things that we should stop doing. There is a problem of endless directives coming through that add to the cost of business. There are some things that Europe must stop doing to give businesses the chance to invest and expand.