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EU: Financial and Monetary Co-ordination

Volume 728: debated on Monday 6 June 2011


Asked By

To ask Her Majesty’s Government whether they will consider making proposals to their European Union partners to strengthen economic, financial and monetary co-ordination within the Union.

My Lords, six legislative proposals aimed at strengthening co-ordination on financial and economic matters across the EU have already been agreed by the ECOFIN Council. These are currently the subject of discussion and negotiation with the European Parliament. The measures would strengthen the stability and growth pact and formalise the monitoring of economic imbalances. The Government recognise the importance of strengthening co-operation and co-ordination, and fully support the package agreed by ECOFIN.

My Lords, I thank the Minister for the way in which the British Government have strongly supported in ECOFIN the various measures that are being taken by both the ECB and the member Governments. Does he agree that advanced countries like the United States and other leading countries like Britain were already heavily indebted before the financial crisis and are even more so now, and that it is important for this country to stand in support of the eurozone countries and the ECB to defeat the ruthless international speculators wherever they may be, especially as—you never know—we might need their help in the future?

My Lords, I am grateful to my noble friend for what he says about the Government’s approach to these matters. It is indeed in the country’s interest to ensure that the eurozone is strong—it is, after all, where more than 40 per cent of our exports go—and we will continue to work constructively on ideas to strengthen the framework. At the same time, we want to make absolutely sure that it is understood, as the Council has recognised, that the UK stands in a special relationship to the eurozone and that we will not have the fiscal sovereignty of Parliament in any way infringed on these matters.

I agree with my noble friend that fiscal discipline is key to ensuring that we do not get into problems like this again, whether within the eurozone or without it, which is why it is gratifying to see that the IMF, in its assessment today, has stressed this very point in relation to the UK’s deficit reduction programme.

What information have the Government given under their obligation in the broad economic guidelines about sharing information with the 26 other EU members? Under the European semester, which concludes this month, what activity have the Government shared with their partners, again in terms of providing further information on economic and financial matters?

I preface my answer by thanking the noble Lord and other noble Lords for their participation in the recent report of your Lordships’ European Union Committee on the future of economic governance in the EU, which provides an excellent commentary and analysis on these matters. The UK has submitted what we were required to submit as part of our national reform programme, and that will be the subject of the next round of debate along with all the other members of the EU 27. Critical to the whole construct and its various strands is ensuring that there is much greater transparency throughout the fiscal architecture. The UK will play its full part in ensuring that we not only contribute to getting the architecture right and submitting the data that are required but, equally, are clear that any budgetary information that we submit comes here to Parliament first and that we are not held to sanction, as are members of the eurozone.

Does my noble friend agree that, as well as greater co-ordination, greater observation of the existing rules would also be welcome? Does he agree with the statement by Christine Lagarde, the French Finance Minister, that the first bail-out mechanism violated the rules of the EU treaties and, if so, that this would mean that Britain was dragged into supporting the euro by an illegal mechanism? Does he also agree that if the rules had been observed in the first place, Greece would never have joined the euro?

My Lords, the Government have secured a very clear agreement with the European Council. Whatever the analysis of Article 122 has been in the past, the Council of Ministers has been completely clear that Article 122 will not be used in the future. That is the critical thing. It is probably not right to go on raking over decisions about who was not in the eurozone in the first place. We have to make it work now, and one way of doing that is to get a proper interpretation of all the relevant articles in the treaty.

My Lords, does the noble Lord agree that the previous Government made a very expensive mistake two years ago when they failed to veto the overall supervision of our financial services passing through Brussels? Is it not grotesque that an outfit that has not been able to get its own accounts signed off for 16 years should now be in a position to dictate to the City of London, and thus cause lasting damage to its profitability and tax revenues?

My Lords, we have had a number of opportunities in recent weeks and months, and I am sure that we will again. We have to get the EU budget under control. The rules of accountability and audit need considerable improvement. The Government are actively working on the case. Drawing a connection between that and the regulatory architecture of the financial institutions is somewhat tenuous. We are cleaning up the whole mess left behind on financial regulation, which starts at home. That is why, very shortly, the Government will publish a next round of consultation and a draft Bill to show how we are putting in place a proper system of financial regulation for the UK.

My Lords, I would have called the noble Lord, Lord Eatwell. However, this happens from time to time as we approach 30 minutes. We have now reached 30 minutes and ought to move on to the next business.