10. What recent discussions he has had with his Irish counterpart on measures to reduce budget deficits. (31823)

The Government welcome Ireland’s effort to bring its fiscal deficit under control, and support the international assistance package currently being agreed to deliver stability.

The Chancellor used to speak of the Irish miracle as a shining example of economic policy making. Are there not, though, important lessons to learn from the misery that we are seeing in Ireland today? Is it not clear that simply increasing VAT, making large-scale public sector redundancies and cutting welfare does not add up to a successful path out of the global crisis?

Let me remind the right hon. Gentleman what he said about Ireland on 8 May 2007:

“The Irish economy has enjoyed a good deal of success over the past few years. The corporation tax regime has contributed to that, but there have been a number of other factors”.––[Official Report, Finance Public Bill Committee, 8 May 2007; c. 19.]

The truth is that the Irish economy, like our economy under the previous Government, had a banking sector that was poorly regulated and out of control. It is because we have tackled the legacy of the Labour Government that we are in a position to help Ireland.

Given the misery that economies on the periphery of Europe, such as Ireland, are suffering from the imposition of a single currency throughout Europe, will my hon. Friend advise his European partners that any future plan should be motivated by what the markets demand, and not what grandiose politicians want?

My hon. Friend makes an important point. He may have read the shadow Chancellor’s remarkable statement last week, that the euro had had no impact on the problems in Ireland. It is important that the right mechanisms are in place to tackle the problems in the eurozone, and that those solutions are owned by the eurozone. That is why the permanent mechanism that will replace the financial stability facility will be a eurozone-only body.