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European Council

Volume 530: debated on Monday 27 June 2011

With permission, Mr Speaker, I would like to make a statement on last week’s European Council.

The main focus of the Council was, quite rightly, Europe’s economy. In advancing Britain’s national interest, I had two objectives: first to ensure that Britain did not have to contribute to any new Greek bail-out through the European financial stability mechanism; and, secondly to support efforts to bring stability to the eurozone and growth to Europe as a whole, while fully protecting Britain’s position. Let me take each in turn.

I turn first to the situation in Greece. As I have always said, Britain is not in the euro—and while I am Prime Minister it never will be—so we should not be involved in the euro area’s internal arrangements. Only eurozone countries were involved, alongside the IMF, in the first Greek bail-out, and only eurozone countries have been involved in discussions about potential further bail-outs. It is absolutely right therefore not to use the EU-wide EFSM for future support to Greece—that is what I asked for an assurance about at the Council, and that is what I got.

That was not a simple matter because, as the House knows, article 122 of the European treaty is being used to provide aid to eurozone countries that have mismanaged their economies. That was not our choice; it was agreed before the Government took office. We have dealt with it for the future, however, because when the new permanent arrangements replacing the EFSM come in—from 2013—we will not be part of them, and article 122 will no longer be used for eurozone bail-outs. That was the deal that I secured last December. However, we still had to deal with the prospect of a bail-out under the existing arrangements. Under qualified majority voting, that required real negotiating effort, but the Government have consistently stood up for the interests of British taxpayers, and as a result the British taxpayer will avoid a potential liability of billions of pounds.

My second objective was to support efforts to bring stability to the eurozone and to promote growth across Europe. Although we are not in the eurozone, we would be badly affected by a disorderly outcome to this crisis. Why? First, banks across the world, including in the UK, hold Government debt of all eurozone countries, including Greece; and, secondly, the effect on other countries far more exposed to these debts would have a knock-on effect on us. As Sir Mervyn King made clear when unveiling last week’s financial stability report, the present difficulties in the eurozone are:

“The most serious and immediate risk to the UK financial system”.

It has always been a long-standing principle that the British Government do not comment publicly on market-sensitive issues, and I am not going to depart from that very wise approach. What is important is that a solution be found quickly that is credible in the markets and that will address over time Greece’s fundamental problems and contribute to providing stability in global markets and the world economy.

One element of that solution must, in my view, be using the time that we now have to ensure that banks and banks’ balance sheets are strong enough to withstand any problems and difficulties, and that there is full transparency across the financial system. In the UK, we are stepping up efforts to ensure that our banking system is resilient to risks originating from the eurozone. That needs to be done right across Europe, it needs to be done now, and it needs to be done properly. I argued for that very strongly at the Council, and it is reflected in the language in the communiqué. As a first step, that means that the current stress tests being conducted in the banking sector must be conducted properly and transparently, unlike last time, and that Europe must implement in full—rather than water down, as some have suggested—the new detailed Basel capital and liquidity standards.

A key way in which we can help all economies in Europe, including the eurozone, is to promote sustainable economic growth. The best stimulus available for European economies is to ensure that we are promoting competition, deregulation, supply-side reform, the single market, innovation and structural changes, and also using the EU to advance the cause of free trade, both via Doha and, where appropriate, through bilateral deals. Following the proposals that Britain set out at the last Council, which many member states now support, I pressed in particular for concrete steps to reduce the burdens on small businesses and micro-enterprises, which are vital to promoting innovation, jobs and growth. The Council agreed that

“the regulatory burden on SMEs needs to be further reduced,”

and that the European Commission would now assess the impact of new regulations on micro-enterprises and identify existing regulations from which micro-enterprises should be excluded altogether. That mirrors what we are doing in Britain, and it is the right thing to do. For too long, European Council conclusions have focused only on what member states should do, rather than on what the European Commission needs to do; and when we think of the quantity of regulation that comes from Brussels, we realise that that must be the right approach.

Let me briefly turn to other issues raised at the Council, of which there were three of significance: migration, the Arab spring and the accession of Croatia. First, on migration, Britain does not participate in the Schengen border area, and we are not going to weaken our border controls. As an island, Britain has an important geographical advantage in preventing uncontrolled immigration. At the same time, practical measures to strengthen our external borders in Europe are in Britain’s interests too. However, there was a proposal ahead of the Council to suspend the measures in the Dublin regulation that allow us to return asylum seekers to the first safe country that they arrive in. Together with Chancellor Merkel, I ensured that those proposals were rejected, and they are not referred to in any way in the Council conclusions. We will not have our border controls compromised in that way.

Next, the Arab spring. On Libya, the Council agreed a declaration confirming its full support for UN Security Council resolutions 1970 and 1973, and the efforts that our brave servicemen and women are undertaking to implement them. There is now, I believe, real unity of purpose and political will across the European Union on this issue. The wider world is turning against Gaddafi too, recognising that the transitional national council is the only credible diplomatic body that can represent the people of Libya right now. The Russians and the Chinese have accepted the importance of the transitional national council, and Premier Wen made this point to me in our meeting this morning. Gaddafi is increasingly isolated; indeed, today the International Criminal Court has issued a warrant for his arrest. Gaddafi is now a fugitive from international justice. The pressure and the time are telling on Gaddafi, and we will not let up until the job is done.

On Syria, the Council condemned in the strongest possible terms the ongoing repression, and the unacceptable and shocking violence of the Syrian regime against its own people. At my instigation, we expressed particularly grave concern about what Syrian troops are doing close to the Turkish border. On the middle east more generally, the Council called on all parties to engage urgently in negotiations, and, on the fifth anniversary of his capture, demanded the immediate release of Gilad Shalit.

Finally, on Croatia, earlier this month I met Prime Minister Kosor and welcomed her country’s progress towards completing European membership negotiations. At the European Council we agreed that the negotiations would be concluded at the end of this month. Croatia’s success points the way for the rest of the countries of the western Balkans, whose aspirations to join the European Union we have always strongly supported.

At this Council, Britain has achieved some important objectives: we have protected the interests of the British taxpayer; we have secured agreements to promote and safeguard economic growth; and we have protected Britain’s borders from uncontrolled migration. I commend this statement to the House.

I start by expressing sympathy with the Prime Minister for the sense of shock and loss he must feel over the death of Christopher Shale. From whatever side we come from, we all know that it is unsung heroes such as him who are the backbone of our constituency associations. I am sure the whole House will join me in sending condolences to all of Mr Shale’s family and friends.

I thank the Prime Minister for his statement on the European Council. On immigration, we support the position he set out, including on the continuance of the Dublin regulation negotiated by the previous Government. We also support the Government’s position on Croatian accession to the European Union. Let me ask the Prime Minister questions about Libya, Syria, the eurozone and the wider economic situation in Europe.

On Libya, the Prime Minister will know that Opposition Members welcome the Council’s continuing commitment to implement UN Security Council resolutions 1970 and 1973. We are clear that we must keep up the pressure on Colonel Gaddafi and the Libyan regime. Those who are expressing doubts over the mission should remember that if we had not taken action this European Council would have been discussing not the conduct of our campaign, but, in all likelihood, our failure to prevent a slaughter in Benghazi. But beyond immediate military and diplomatic developments, experience of conflicts demonstrates that post-conflict planning is crucial to a successful long-term outcome. Will the Prime Minister take the opportunity to say something about this, and will he explain why it appears to be Britain and not the United Nations that is fulfilling this role? Will he update us on what progress is being made?

In the context of the Arab spring, will the Prime Minister take the opportunity to publish the review of the strategic defence and security review, which he told us at Prime Minister’s questions last week had been conducted? We are all interested in the outcome and look forward to seeing it.

Let me ask the Prime Minister about the situation in Syria, as he mentioned it in his statement. Will he tell us how we can continue to step up the pressure on Syria, including at the United Nations?

We have also consistently said—on both sides of the House, I believe—that Britain, as a supporter of Turkish membership of the EU should say to the Turks that the potential refugee crisis on their borders will only grow unless they help to put more pressure on the Syrian Government. Will the Prime Minister update us on conversations between this Government and the Turkish Government on that issue?

Turning to Greece, let me first say that we agree that the primary responsibility for addressing the situation lies with eurozone countries. As the Prime Minister will know, the UK made no direct contribution to the last Greek bail-out agreed on 2 May 2010 under the previous Government. I should like to congratulate the Prime Minister on sticking to our approach to these issues. Indeed, on the question of article 122, which the right hon. Gentleman raised, he did not mention the famous 15 July 2010 Greening memorandum on the European bail-out mechanism, which is of much interest to the Conservative Benches. That, of course, said that article 122 had been agreed “by cross-party consensus”. Every time the Prime Minister comes before the House and says that this is not something we supported, he needs to know that is not what the memorandum of his own Economic Secretary said in a submission to this House.

The truth is that we have an interest in the Greek situation that goes beyond the level of our direct contribution—because of the potential exposure of our banks; because we contribute indirectly through the International Monetary Fund; and because of our wider interest in growth and jobs in Europe. I understand issues of market sensitivity, but will the Prime Minister confirm that a full analysis is being done of the impact of any restructuring of Greek debt on UK taxpayer-owned banks?

Britain also clearly has an interest in the durability of the bail-out. The Governor of the Bank of England has said:

“Providing liquidity can only… buy time”


“will never be an answer to a problem”.

Will the Prime Minister tell us whether he has confidence that the right balance is being struck in demanding a further round of austerity against the need for growth in Greece?

After this European Council and after the Prime Minister’s statement, it remains unclear what the Council and the Prime Minister regard as a long-term and sustainable solution to the Greek crisis. Instead of boasting about being on the sidelines, should not the Prime Minister engage more with his colleagues to secure a solution to the crisis that will last, and will be in the interests of the eurozone and the United Kingdom?

Let me first thank the right hon. Gentleman for what he said about my constituency chairman, Christopher Shale. Some people say that in politics there are no real friendships, but I think that that is completely untrue. Many of us in the House become extremely close to people who work very hard in our constituencies to help us. Christopher was one of those people, and he will be missed by my family and me and by many, many people in west Oxfordshire. As the right hon. Gentleman said, this might be a moment for us to reflect on the fact that, while we all consider what we are doing in this place to be public service, the work done by people who toil very hard in political parties up and down the country is also a form of public service, which I think should be recognised and praised as well.

I thank the right hon. Gentleman for his support in regard to Libya. He asked about post-conflict planning. We are doing a huge amount of work there, not least by the stabilisation team that we sent to Benghazi. The right hon. Gentleman asked how we would be working with the United Nations. We are working closely with the UN, but I believe that when our constituents think about post-conflict stabilisation, as well as the longer-term stabilisation work that they expect the UN to be doing, they also want to know what will happen the day after: what will happen immediately after the departure of Gaddafi. We need to work very hard on that as well. There are clearly timing issues when the UN becomes involved, if I can put it that way.

As for the strategic defence and security review, I tried to explain that the National Security Council regularly reviews the implementation of the SDSR, and asks profound questions about it. If the right hon. Gentleman has complaints to make, he should be a bit more specific. I have found, looking at the SDSR—[Hon. Members: “More detail?”] Yes, the right hon. Gentleman should be a bit more specific. What we are seeing in Libya is that we need to move faster to an area where we have the flexibility, the ISTAR—intelligence, surveillance, target acquisition and reconnaissance—and the new assets that the SDSR is all about.

I entirely share the right hon. Gentleman’s frustration over Syria. Britain and France are leading the way at the UN, wanting a strong resolution, but we are meeting objections from many. We should push ahead as far as we can, because what is happening in Syria is completely unacceptable. I think that the UN has done well in establishing asset freezes, travel bans and the like, but we need to go further.

The right hon. Gentleman asked about working with the Turks. We were side by side with them on this issue, and my right hon. Friend the Foreign Secretary is in permanent contact with their Foreign Minister, Mr Davutoglu.

When it came to Greece, I thought that the right hon. Gentleman gave brass neck a whole new definition. If he wants a brief description of the history of article 122, he should remember that it was subject to unanimity until the Nice treaty. It was in this House that my former right hon. and learned Friend Michael Howard objected to article 122 going to qualified majority voting, and warned of the dangers of bail-outs. He was told at the time, “Don’t worry, it will all be fine.” This is a hopeless line of argument for Labour Members, given that it was their party that got us into this mechanism, and this party and this Prime Minister who got us out of it.

The right hon. Gentleman asked for a full analysis of the Council. Of course the Bank of England and our banks are working hard to calculate our potential liabilities. I thought that the dog that did not bark in the right hon. Gentleman’s response was his failure to mention his proposed £51 billion cut in VAT. That, of course, is what the Labour party suggests that everyone should be doing in Europe. As one of those who sat around a table in the European Council representing countries with budget deficits—including our own at 8%—I think that in suggesting that VAT cut the right hon. Gentleman has achieved what I thought was impossible, and ensured that he will be taken even less seriously in Europe than he is in Britain.

Order. There is extensive interest in this statement, but there is another statement to follow, and a heavily subscribed debate thereafter. What is required, I say hopefully, is brevity.

Will the Prime Minister be good enough to put on record his appreciation of the support and encouragement of the British people and Members of Parliament in securing the terms from the negotiations on the Greek bail-out, and will he now take that further and do whatever is necessary to take the lead in both the United Kingdom and Europe to get us out of the mess the existing treaties got us into?

I am grateful for my hon. Friend’s support, and for his question. I have got us out of the mechanism from 2013, because Britain is excluded from the treaty change that is going through putting in place the new permanent bail-out mechanism. It took negotiation to get that deal, because we were in a mess beforehand.

I have two brief questions. The Prime Minister mentioned Sir Mervyn King’s remarks of last week. Does the Prime Minister agree with Sir Mervyn that the combination of austerity plus bail-out will never bring Greece to solvency? Secondly, the Prime Minister mentioned the stability of the banking system in advance of what I believe is an inevitable Greek default. In that context, is it not the case that future European Councils will be discussing whether to use the European financial stability facility or the European stability mechanism to shore up and recapitalise the banking system, rather than throwing good bail-out money after bad?

Of course the Greeks have a debt and solvency problem as well as a liquidity problem, but they have decided that they want to use liquidity to give themselves some time to deal with their debt problem. That is the choice they have made—and that is the choice the eurozone members are supporting—and I can quite see why they want to do it in that way. Let me also just make the following point, as I think a number of colleagues will ask similar questions: we must be very careful not to speculate about the financial situation faced by a fellow member state of the European Union.

Does my right hon. Friend agree that the worst outcome for the British economy from the Greek crisis would be a disorderly and chaotic default by Greece and subsequent departure from the euro? What discussions did he therefore have with colleagues about preparing for that default, which is inevitable, and that departure, which is desirable, and in particular with President Václav Klaus, who has said that neither departure from the euro nor the dissolution of a monetary union need be disorderly? He dissolved the monetary union of the Czechs and Slovaks over a weekend without too much disruption.

As on many previous occasions, I had a very interesting meeting with President Klaus in Prague, at which he made that interesting point. However, dissolving a monetary union between the Czech Republic and Slovakia is very different from changing arrangements within Europe, where there are some very serious issues of equilibrium. The other point I would make is about those of us who do not want to join the euro, would never join the euro, and think that countries should maintain their own flexibilities. I have always held that view, but those of us who do hold that view should not misunderstand the fact that there would clearly be very big consequences for Britain were there to be a disorderly situation in Europe. To put it another way, it is much easier to stay out of the euro than to leave it.

Many of us worry about not only the direct consequences for Britain, but the possible indirect consequences, such as for the people of Cyprus, with which many British people have a direct connection. What analysis have the Government done of what the effects for the people of Cyprus would be, and is there any opportunity of reinvigorating the peace process so that there might no longer be a divided capital city of Nicosia?

The hon. Gentleman makes the good point that disorder in the eurozone will have knock-on consequences for other countries—he mentioned Cyprus—as well as for the country that is directly affected. Obviously, we are looking at all potential eventualities and all possible problems, and doing contingency planning for them. That is what we would expect the Treasury to do, and that is exactly what the Treasury—and the Bank of England and others—are doing. On getting the Cyprus peace process started, Alexander Downer, the special representative, worked extremely hard, but we have a lot more hard work to do to convince both sides that there needs to be a deal, and a deal soon.

I am delighted that the Government seem to be listening to this House and seeking to minimise eurozone debt liabilities. It is very encouraging that Ministers are no longer in thrall to the Europhile Whitehall mandarins who negotiated us into this mess. Will the Prime Minister assure us that he will not use the European financial stabilisation mechanism for any further eurozone bail-outs—and not just those for Greece—between now and 2013?

The first part of my hon. Friend’s question was a slight dig at the mandarins, but it is important to blame Ministers rather than officials for decisions that one does not like. I would place the blame squarely on those who sit on the Opposition Front Bench rather than on officials. I cannot really give him satisfaction on the second part of his question, because the EFSM is in place, it is subject to qualified majority voting and it will not go until 2013. Although I cannot give him that satisfaction, we have done the best we can by getting us out of that situation from 2013, when the treaty changes. In the meantime, we have kept ourselves out of the Greek situation.

Are not Italy and the Arab League now putting far more emphasis on trying to bring about a genuine ceasefire in Libya and would it not be better to do that instead of going for regime change? On the question of the nature of the Gaddafi regime, is it not a fact that we were selling arms to Gaddafi right up until the uprising?

On the hon. Gentleman’s final point, our approach to Gaddafi and Libya is clear. The Government have been utterly consistent and I do not agree with those who believe there should be a ceasefire now. There could be a ceasefire if Gaddafi agrees to do what he has to, which is to withdraw his troops from the towns and cities he occupied and to stop butchering his own people. For us unilaterally to declare a ceasefire, which was what the hon. Gentleman hinted at, would be a mistake. We have turned up the pressure on Gaddafi and we should keep it up, because it is beginning to tell.

May I join the expressions of condolence to the Prime Minister and the family and friends of Mr Shale?

Is it not right that although it is not the UK’s duty to intervene to bail out the Greeks, it is absolutely in the United Kingdom’s interest that the European Union and the wider community took decisions to support the economies of Ireland, Portugal and Greece this year to prevent them from collapse? Is not the lesson from the history of those countries over the past year that they should follow the example of this country and take tough measures early to deal with the economic legacy? We should support the three new Governments in those countries as they deal with the failures of the past five years, just as this Government have sought to do.

First, I thank the right hon. Gentleman for what he said about my constituency chairman, Christopher Shale.

The right hon. Gentleman is right that if one is in a debt situation, one has to deal with one’s deficit and debts and show a path back to solvency. That is what the Government have done. We have had to take some tough measures to show how we will pay down our deficit and debt and that is what other countries must do, too. The right hon. Gentleman is right that it is in Britain’s interest that we should do that and it is also in Britain’s interest that there should not be a disorderly outcome to what we are seeing in Europe.

May I suggest that the next EU summit takes place on Filakio on the Greek-Turkish border, where members of the Select Committee on Home Affairs were told that 100,000 people crossed the border between Greece and Turkey last year? Their destination is not Athens but London, Paris or Stockholm. What further steps can we take to encourage our EU colleagues to help countries such as Greece, rather than letting Greece export its problem, and to get Frontex to do the job it is supposed to do?

The right hon. Gentleman is entirely right that we should support Frontex in its work and that we should support the action that Schengen members are taking to secure Europe’s external borders. That is vital because, as he says, many of those people do not stay in Greece but come to Paris or London. I do not think it is any contradiction to say that we should support that action while at the same time maintaining our own border controls and arrangements, particularly with the French, that have done us proud in recent years.

The Prime Minister will have spoken for the overwhelming majority in this country when he expressed his anger at the proposed £280 million new European headquarters. Was any progress made at this Council meeting in implementing the coalition agreement’s aspiration to end the obscenity of the European Parliament moving between Brussels and Strasbourg, wasting a huge amount of money? Does he agree that anybody who does not agree with those points is, to use a phrase coined at that Dispatch Box, living in cloud-cuckoo land?

I am afraid that I cannot give my hon. Friend much satisfaction because the fact that the European Parliament moves between those two cities was not discussed at the European Council. Indeed, the problem that I have referred to in relation to the new building rather shows that there are too many people in Brussels who do not understand the need to cut their cloth according to what is available—by passing around a very expensive brochure to a very expensive new building.

What are the dramatic consequences, as the Prime Minister just called them, on Britain and the rest of Europe of a Greek default and the break-up of the euro?

As I described in my statement, the consequences would be twofold. First, British banks, like banks around the world, hold a debt of other eurozone countries, including Greek debt. Clearly, there would be a consequence either if there were a default or if Greece were to leave the eurozone. That is self-evident.

Secondly, there is the knock-on effect from the countries that are more exposed than we are to Greek debt. As I have said, those of us who do not want Britain to join the euro should not use that as an excuse to say that this does not affect us—it does and that is why it is important that we help to encourage eurozone countries to take the right steps to sort out their issues. That is the very constructive approach that the Government have taken. I see no contradiction between that—making sure that we do not stand in the way of the eurozone’s sorting out its issues and helping with that—and at the same time keeping Britain out of the euro.

Further to the question of the Chairman of the Select Committee on Home Affairs, the right hon. Member for Leicester East (Keith Vaz), will my right hon. Friend confirm that it is important that we retain the Dublin regulation so that we do not simply have asylum shopping all over the European Union?

I think that my hon. Friend is entirely right. The Dublin regulation has been effective at allowing us to return people who seek asylum in this country but who have come from another European country. One of the reasons it was suggested that the Dublin regulation had to change was because of repeated court cases against the Greeks regarding their asylum policy. It seems to me that the answer is for the Greeks to sort out their asylum arrangements rather than for the rest of Europe to have to give up the Dublin regulation.

Did the Prime Minister have a chance, in the many bilateral conversations he will have had at the European Council, to discuss the Chinese Premier Wen Jiabao’s visit to Europe at the moment—currently in London? Why will not the Prime Minister mention the name of Liu Xiaobo, the Nobel peace laureate who is in the Chinese gulag? Mrs Thatcher also raised the position of Sakharov in public and said, “Get him out of the gulag.” Will the Prime Minister take the opportunity now to say, “Liu Xiaobo should be out, not in prison”?

That is absolutely the Government’s view. I had very good meetings with Premier Wen this morning and a lunch with him and there has never been anything in the Britain-China dialogue that is off limits, including individual cases. Nothing is off limits, but it is right to have the dialogue at both the leader-to-leader level and the human rights level. As I said, nothing is off limits and we have a very frank relationship.

May I thank the Prime Minister for standing up for the important principle concerning the Dublin process? Does he share my concern about the people traffickers who are stuffing unseaworthy boats full of people and casting them adrift in the Mediterranean? Does he agree that more needs to be done to patrol that area? Were there any discussions about positive moves to attack that problem?

There were long discussions about this issue because the Mediterranean countries in particular feel extremely strongly that we have got to do more to strengthen borders and Frontex, which can help to secure Britain’s perimeter. Britain is fully supportive of that, and we are not in the Schengen area, which means that we are protected from some of the problems that Schengen countries are suffering from. I think we have the best of both worlds—backing the action taken at Europe’s perimeter while at the same time being able to maintain tough and strict border controls for our own country.

In the midst of all the other pressing issues on which the Prime Minister has reported from the European Council, was there any acknowledgement of the gathering ravages of conflict in parts of Sudan, the humanitarian crisis facing people there yet again and the plight of aid workers and journalists from Europe in that situation? Does the duty to protect extend to them?

The issues of Sudan were not discussed at the European Council itself, but they will be discussed at the Foreign Affairs Council that is coming up soon. I raised the issue of Sudan with Premier Wen today, because of the close relationship between China and northern Sudan. It is important that the terms of the comprehensive peace agreement are properly stuck to and that we deliver that and the two-state solution that is being put in place, in which Britain has played a constructive part.

May I welcome the commitment to exclude micro-businesses from EU regulations and urge the Prime Minister to continue his campaign to free up British risk-takers from Brussels’ red tape?

I thank my hon. Friend for his question. As I said in my statement, so often at European Councils the Commission comes along with a list of things that countries should do, but does not ask enough, “What can we, the Commission, do to encourage deregulation and growth?” From 1998 to 2010, I think that 69% of new regulations came from Brussels. Clearly, Brussels needs to play its part in trying to exempt small businesses from at least some of those regulations. I shall keep pushing this agenda and I find growing support for it around the table at the Council of Ministers.

May I draw the Prime Minister’s attention to the conclusions of the European Council that there is recovery within the European zone, that that recovery is long and sustainable and that the Heads of State and the leaders of Governments will commit themselves, and have committed themselves, to do all that is necessary to ensure financial stability within the euro? Is that not in the interests of the United Kingdom?

Yes, it is in the interests of the United Kingdom. Fifty per cent. of our exports go to the EU and 40% go to eurozone countries. We want the eurozone to be sustainable and strong, and it has issues that it needs to sort out, so we do not stand in the way when eurozone countries want to do more together, as they are doing through the euro-plus pact. I still think that there is a big question mark about whether they are really gripping some of the issues that they need to resolve, but none the less it is in our interests, and that is why we are playing such a constructive role in it.

Following the Prime Minister’s interesting and welcome answer to the hon. Member for Walsall North (Mr Winnick) on the subject of Libya, will my right hon. Friend confirm that our mission is entirely humanitarian and there is the genesis of a deal here? If Gaddafi is prepared just to hold what he has in Tripoli, we could then achieve a compromise and the end to this war.

Britain’s role is clearly set out in UN resolution 1973, which is to work with others to stop the attacks on civilians. It is not about regime change; it is for the people of Libya to decide who governs them and how they are governed. We have also always been clear that if Gaddafi declared a ceasefire and removed his troops from the towns and cities that he has invaded, that would be playing his part in resolving resolution 1973. Where I have always gone on and said that I cannot see a future for Libya where Gaddafi is still in place for the simple reason that if one looks at what this man has done during the last 100 days—although he has had every opportunity to pull back and put in place a ceasefire—all he has done to his own citizens is more shelling, attacking, murdering and sniping. So it is inconceivable to think of a future for Libya where he is still in a position of authority.

Given the significance of the European Council, it is a great shame that the Leader of the House still thinks that this is Back-Bench business and therefore we did not have a debate ahead of the Council meeting. Has the Prime Minister instructed his officials to demand that the Commission starts to prepare a legal framework for a country to leave the euro rather than just wait for the bad day and then have chaos?

On the extent of parliamentary debate, we have one of these statements every time there is a European Council, and we seem to be clocking up those at a rate of knots. We have also put in place the recommendations of the Wright Committee to ensure that Back Benchers have proper time for debate.

In terms of what happens next in the eurozone, I have set out the Government’s position. We do not want a disorderly breakdown in Europe. We are playing our full part in making sure that the eurozone sorts out its problems, and we are protecting Britain’s interests by ensuring that we are not contributing as a European country to a Greek bail-out. The Greeks have chosen their path and they will be voting in Parliament shortly. They have chosen the path where they want to put in place further measures so that they can stay inside the eurozone and find their way back to solvency in dealing with their debt problems. That is the choice they have made; it is the choice that is being supported by eurozone members. We are not in favour of disorder in the eurozone for the very good reasons that we have given.

Will my right hon. Friend tell the House, in view of the increasing number of European summits, whether he managed to save any taxpayers’ money en route to the recent European Council summit?

As I am sure my hon. Friend knows, I use a variety of transport means. On this occasion, I flew by a scheduled plane to Prague for my meetings with the Czech Prime Minister and President and shared the Prime Minister’s aeroplane from Prague to Brussels, although I have to admit that the RAF kindly flew me home. I seem to remember in previous years different Ministers flying in different planes to the same summit. I think that sharing an aeroplane with another Prime Minister is a good way forward.

Will the Prime Minister tell the House the amount of British taxpayers’ money being made available to Greece indirectly through loans from the International Monetary Fund and confirm that, should a default occur that ultimately causes further defaults in Europe, that money might also be at risk?

Let me make two points to the hon. Gentleman. First, our share of the IMF is a little over 4%, so that is our contingent liability share of what the IMF dispenses. Secondly, the point about the IMF—this might also be of some reassurance to my Back-Bench colleagues—is that it will lend money only if it is confident that it is part of a programme that a country can repay, and that is important to consider. I say to those who are sceptical about our role in the IMF that Britain, as a leading economic power in the world, has an important role to play as a shareholder and board member of the IMF, and the idea that we should somehow be seeking to reduce that is wrong.

Seventy-two top businesses, including Google, Centrica and Unilever, have made a joint declaration saying:

“Moving to a 30% emissions reduction target is a win-win-win for Europe”

that will

“boost economic growth and create new jobs”.

Does the Prime Minister agree with those companies, and if so, is there anything he can do to ensure that his MEPs vote accordingly next week?

We do agree with those companies and want Europe to move to that target. We have supported that and put it in our own carbon budget in this country. I think that that is the right way ahead.

Recent press reports indicate that 15 member states are questioning the wisdom of Schengen. Indeed, Denmark has reintroduced passport controls with Germany and Sweden. Were there any further discussions on the issue over the weekend, and is there any possibility of moving away from Schengen over the next few years?

There was a very lengthy discussion on the Schengen issues, and clearly there is some unhappiness among Schengen members about some of the pressures they face. There was a particularly long discussion about the fact that Romania and Bulgaria feel that they have now qualified for membership of Schengen and want to see that membership advanced. There are pressures within the Schengen area that clearly do not apply to the UK, but it is clear that some of the northern members feel that Schengen has not been operating in their interests in the same way in recent years, but the Council’s conclusions were pretty clear that Schengen is working and will continue.

Does the Prime Minister agree that in the event of any breakdown in the eurozone, in assessing the potential banking liabilities in this country and abroad, by far and away the best thing we can do is ensure that there is, first, transparency in the banking system and, secondly, a proper set of stress tests in place so that we know what the potential liability for UK banks might be in future?

I think my hon. Friend is entirely right. The Governor of the Bank of England spoke powerfully about this and has set out what the liabilities of British banks are in terms of Greece. We need the stress tests to be transparent, and we then need them to be acted on by making sure that those banks that need to build up their reserves do so. One of the things I wanted to secure at the European Council was to ensure that the conclusions were very tough on this, because at the same time as they are operating these stress tests and arguing for more capital to go into the banks, some European powers are trying to water down the Basel requirements. It seems to me to be completely illogical to try, on the one hand, to strengthen a banking system to withstand pressure in the eurozone, and then to start weakening it on the other. I am thankful that the conclusions are pretty clear on that point.

I welcome what the Prime Minister said about Croatia coming closer to the European union, but was there any reference to Turkey?

In terms of future membership of the EU, I think I am right in saying that the conclusions referred only to Croatia, which is completing its negotiations. There was a reference to Serbia’s European perspective, because with the arrest of Ratko Mladic I think that it has taken another step towards European membership. There was no specific mention of Turkey, but as the hon. Gentleman knows, I strongly support Turkey’s membership of the European Union.

May I congratulate the Prime Minister on the most successful defence of British interests at a European summit since the halcyon days of the noble Baroness Thatcher? Will he turn his negotiating firepower on the Commission’s proposal to increase its own resources tax base?

I am very grateful to my hon. Friend, although I would not put my efforts in the same class as the famous Fontainebleau negotiation, because the British rebate still benefits Britain to a huge extent—even after the Labour party signed a large portion of it away. But I do hope people agree that they were a good step forward to keep us out of the situation.

On the budget, we have secured a very strong letter to the European Commission about future financial perspectives, saying that effectively there should be nothing worse than a real-terms freeze. That is what we got other countries to commit to, and I am sure that Government Members, like me, would wish to go further, but we are laying down the baseline of a freeze going into a negotiation, and that is a pretty good start.

What is causing disorder and instability in Europe is the fact that Greece is bankrupt. The whole world knows that, and nothing said in this Chamber will alter it or create greater instability in the world markets. If Greece can neither withdraw nor default, good money—our money—via the IMF, or European Union money via other mechanisms, will be wasted bailing it out. Why does not the Prime Minister discover his Eurosceptic self and lead an orderly withdrawal of Greece from the euro?

First, as I said earlier, the IMF cannot lend money unless it believes that a country can undertake a programme that will lead it to pay back that money. Secondly, Britain’s interests are protected, because we will not contribute via the financial mechanism to Greece. Thirdly—I have said this before but I do think it important—the Greeks want some time, via some extra liquidity, so that they can take steps to get themselves back on a path to fiscal sanity. Of course, people can doubt whether that can happen, but the Greeks want to be able to get people to pay their taxes, to reduce spending programmes and to privatise assets so that they can get back to a position of financial sanity. That is the decision they have taken; that is the decision taken by members of the eurozone; and that is what the eurozone members themselves will support.

With the Greece situation showing what happens if a country does not control its deficit, does my right hon. Friend the Prime Minister agree that the actions of Labour’s paymasters this Thursday show that they and the Opposition are more interested in dogmatic cobblers than harsh reality?

Order. I have explained the point on innumerable occasions to Members that questions are to be about the policy of the Government, not that of the Opposition, so we will now move on.

The Bank for International Settlements, in its annual report published yesterday, identifies two solutions to the Greek sovereign debt crisis: either mutualising Greece’s debts through further eurozone bail-outs, or restructuring them. Does the Prime Minister agree with that analysis, and if so, which option does he favour?

Of course, everyone is free to speculate about the different paths that Greece might take or might like to take, but it is not for the Government of the UK to speculate about another country’s finances. The Greek Government have made their decision, backed by the eurozone and the European Council, to seek further austerity measures so that they can deal with their deficit. That is the decision they have taken, that is what is supported by eurozone money, and the IMF will lend money only if it believes that it can be paid back.

On deficits, let me just make the point before people get too over-confident that if we look at 2011, we find that the UK’s deficit is 8.6% compared with Greece at 7.4%. That to me underlines the importance of our domestic programme of dealing with our debts and our deficit—[Interruption]—and not of charging around, as the most annoying man in British politics is currently doing, and suggesting a £51 billion VAT cut.

My right hon. Friend rightly acknowledges the tension between, on the one hand, the need to rebuild capital ratios in order to achieve resilience in the banking sector and, on the other, the crying domestic need to get banks lending again. Does he agree that part of the solution lies in tackling the barriers to entry for potential new lenders, and that that could start with Brussels looking again at the uneven regulation on overdrafts, on how banks are allowed to market them and on how other lenders handle short-term lending?

My hon. Friend makes a very important point. Of course, if we are asking banks to rebuild their balance sheets and their reserves, there is a tension with that compared with asking them to lend. One of the solutions, as he says, is to make sure that there are new entrants into the banking sector, and that is something we are keen to secure.

The Prime Minister said that the IMF would not have made the loan to Greece if it did not think it could be repaid. The Governor of the Bank of England seems to disagree about the likelihood of that loan being repaid. I think that what the people of this country want to know is how much British taxpayers will be liable for if Greece defaults.

The point I made is that Britain’s share of the IMF is a little over 4%. It is a broad requirement of the IMF to consider whether the money can be paid back before it makes the loan. That is not something that it has decided to do on this occasion; it is something that it has to do.

I welcome the Prime Minister’s statement. On Libya, did the European Council discuss the position of Qatar and the United Arab Emirates in continuing to support the mission the longer it continues? As the Prime Minister will know, those two countries provide the largest Arab support to the mission at the moment.

We did not discuss that specific issue at the European Council, but I speak regularly to the leaders of both those countries. I praise them for the huge commitment they have made—not just in men and matériel, as it were, but in the political commitment to garnering support in the Arab world for keeping up pressure on Gaddafi. I think that what the Qataris and Emiratis have done has been absolutely superb.

My constituents will warmly welcome what the Prime Minister said about asylum, given that anyone who wants to claim asylum in the UK has to do so in person in my constituency. Is it not true that under this Government the trend of applications to the UK is going down while in other countries it is going up, and that if we allowed people to choose where in the EU to apply, that trend would reverse overnight?

My hon. Friend is absolutely right. That is why the Dublin regulation is so important, because it enables us to return people who claim asylum in the UK to another safe country. As the right hon. Member for Leicester East (Keith Vaz) said, many of the people breaking into Europe’s borders do not want to stay in the first country they get to—they are trying to come to the UK. We need to be wise about this.

May I congratulate the Prime Minister on his very significant success in largely keeping Britain out of this Greek bail-out, despite what the previous Chancellor agreed? Could he tell the House what has changed given that he was able to keep us out of this Greek bail-out when that did not prove possible with regard to Portugal?

I think that what changed was that because we were not involved in the first Greek bail-out, we were able to make the argument that we should not be involved in subsequent bail-outs—particularly because, as we are not members of the eurozone, we were not involved in the design of the new package. None the less, we were at risk, because there were countries that wanted to push the EFSM and its use for Greece, but we ran a very strong diplomatic campaign, using every lever at our disposal to persuade our good friends and allies in Europe that it would not be fair for Britain to pay, and we achieved that. It was not an insignificant achievement, because it took quite a lot of negotiating heft to get it done.

I welcome the Prime Minister’s statement. With an estimated cost to UK taxpayers of £25 million for the new £280 million home for European Union summits, which represents an unnecessary expense at a time of cuts and deficit reduction across Europe, will he assure us that further spending by the European Union will match the manner of spending currently seen in member states?

I can certainly give that assurance. We have actually managed to write into Council conclusions that Europe’s spending should mirror what is happening in member states. The decision about the new building was taken, I think, in 2003, when the Labour party was in power. All I can say is that it seems to me that the building in which we hold the European Council has got plenty of space for all of us, and indeed for new members. I think they need to get real in Brussels and in the European Union about recognising the sacrifices that many countries are making in terms of spending restraint, and they need to start showing a bit of spending restraint themselves.

I want to add my congratulations to the Prime Minister on standing up for Britain and British interests. On the answer he gave to the Chairman of the Home Affairs Committee about Greece paying attention to its asylum reception centres, I hope my right hon. Friend agrees that perhaps the people of Greece have other things on their minds. Is not this an opportunity for the European Commission, through Frontex, to spend its money and resources appropriately on helping member states rather than on some grandiose white elephant?

Frontex has an important role to play and it must be invested in for the reasons that my hon. Friend gives. My understanding is that one reason why there was pressure to get rid of the Dublin regulation was that Athens’ arrangements for dealing with asylum seekers have been judged insufficient by the courts. We need to speak to our friends in Greece to get them to sort out their problems, so that the asylum system can work better throughout Europe.

Further to the Prime Minister’s answer to my hon. Friend the Member for Skipton and Ripon (Julian Smith), I congratulate my right hon. Friend on getting the European Commission to identify regulations from which small businesses should be exempt. What does he expect to be the time scale in which that task is completed? Will he give an assurance that he will follow this matter through ruthlessly to ensure that the Commission delivers on the promise?

My hon. Friend makes the good point that getting these things to appear once in a set of European Council conclusions is a good start, but that we have to ensure that the European Commission follows through on that. That is why I am trying to build an alliance in Europe on this issue. The fact that several consecutive Council conclusions have mentioned it means that a programme will have to be put in place to get it done.

The Prime Minister’s statement rightly said that the transitional national council is the only credible body in Libya and that there is now unity of purpose in the EU. Will he tell the House what the EU is doing in practical terms to support that body?

Cathy Ashton, the EU High Representative, has been to Benghazi, which I think was extremely worth while, and the EU has opened an office in Benghazi. We are trying to reposition the EU’s plan for engaging with its southern neighbourhood to ensure that it puts resources, of which it has lots, into countries that are reforming in a democratic direction. In the past, we have handed out far too much money without questions being asked and without proper conditionality. We are now ensuring that there is a conditional programme that rewards countries that are heading in a democratic direction.

I thank my right hon. Friend the Prime Minister for his statement. Would the accession of Croatia be likely to increase or decrease the burden of our contribution to the EU budget?

We are very hopeful that it would not have an impact. That has been one of our negotiating stances with regard to Croatia. I remind my hon. Friend that the letter to the European Commission that I signed, along with the German Chancellor, the French President, the Dutch Prime Minister and the Finnish Prime Minister, said:

“The action taken in 2011 to curb annual growth in European payment appropriations should therefore be stepped up progressively over the remaining years of this financial perspective and payment appropriations should increase, at most, by no more than inflation over the next financial perspectives.”

I know that my hon. Friend and many other Government Members would like us to go further, but to have lined up five countries behind an effective real-terms freeze over the next period is a very good start.

Yesterday, I had a meeting with a constituent who I know can be very difficult at times. She was exceptionally happy and was singing the praises of the Prime Minister because we will not be involved in the Greek bail-out, and because after 2013 we will not be involved in any bail-outs. However, Mrs Bone wanted to know whether, if a bail-out came before 2013, Britain would vote no in any case, despite qualified majority voting. She would be very happy if the Prime Minister gave that undertaking, and it would be really helpful for the Bone household if he could.

I feel that a very big part of my life is spent trying to give pleasure to Mrs Bone. On this occasion, I can go only so far.

We note the admirable self-restraint that the Prime Minister has demonstrated and we are grateful for it.