§ 3.4 p.m.
§ The Earl of Northeskasked Her Majesty's Government:
Whether they support the president of the European Central Bank in his concern about the impact of political decisions on the value of the euro.
§ Lord McIntosh of HaringeyMy Lords, it would not be appropriate for me to comment on developments in foreign exchange markets.
§ The Earl of NortheskMy Lords, notwithstanding that reply, in the context of the German Government giving £80 million-worth of state aid to the failing construction giant Holzmann, do the Government support the view of Willem Duisenberg that:
It does not enhance the image that we want to have of being an increasingly market-driven economy across the Euro area".or do they support Chancellor Schröder's position of bailing Holzmann out for what can only be perceived as domestic political reasons?
§ Lord McIntosh of HaringeyMy Lords, I noticed that the noble Earl carefully avoided the fact that Mr Duisenberg did not refer specifically to Holzmann or to any other German policy. Any disagreement between Mr Duisenberg and the German Government is a matter for them.
§ Lord TaverneMy Lords—
§ Lord Stoddart of SwindonMy Lords, since we are not members—
§ The Lord Privy Seal (Baroness Jay of Paddington)My Lords, there is plenty of time for this Question. Perhaps we should hear from the noble Lord, Lord Taverne, and then from my noble friend Lord Stoddart.
§ Lord TaverneMy Lords, will the Minister agree with three propositions: first, that forecasting the course of a currency in the short term is a black art rather than a rational activity; secondly, that most of the worries about the euro are misplaced since it is not having any inflationary effect inside the eurozone and is helping its exporters; thirdly, that those who have most to worry about in relation to the low value of the euro are British exporters who find themselves excluded from the eurozone?
§ Lord McIntosh of HaringeyMy Lords, the short answer is yes, yes and yes. On the noble Lord's second question, there seems to be a general misunderstanding, notably in the public prints, that if there is a low level of exchange rate that that is somehow a tragedy for the euro and that that is a measure of the lack of success for the euro. The same people seem to be able to say, without any sense of self-contradiction, that the high level of the pound is a tragedy for us.
§ Lord Stoddart of SwindonMy Lords, since we are not members of the eurozone, would it not be invidious for this Government, indeed, this House, to comment on the dealings of Mr Duisenberg in relation to countries that are within the eurozone? Should we not instead rejoice in the fact that we are not part of the eurozone; that the pound is doing so well; that our economy is thriving; and that unemployment is falling? That is in complete contradistinction to what is happening in countries in the eurozone itself.
§ Lord McIntosh of HaringeyMy Lords, I agree with my noble friend's first question and I agree with the conclusion of his first question, although not the premise on which it is based. It is certainly not because we are not in the euro or indeed in Europe that the Chancellor has been so successful in economic policy.
§ Lord MarshMy Lords, does the Minister not agree that the concern is not about the exchange rate at any particular given time? It will go up; it will go down. People are concerned about the unexpected volatility of the euro and the doubts that that must raise as to its long-term stability as a reserve currency?
§ Lord McIntosh of HaringeyMy Lords, I find myself agreeing with nearly every question that I am asked. Of course, the noble Lord is right. It is the stability, rather than the exchange rate at a particular time or short-term variations, which is important. But over the past year, experience has shown that we have not maintained a general stability of exchange rates and our economic performance has been a reflection of that.
§ Lord SaatchiMy Lords, does the Minister agree that my noble friend Lord Northesk makes a fundamental point about politics and the euro? The Government have put forward five economic tests to determine whether we should join the euro. Do we not need a sixth test; a political test which could assess Britain's convergence with the political philosophies of prospective partners in a single currency? How does the Minister think such a test would assess the statement of the German Chancellor that Britain should not place national interest above necessary European solidarity?
§ Lord McIntosh of HaringeyMy Lords, the five economic tests announced by the Chancellor in October 1997 are what they were announced to be; that is, economic tests. Clearly, both political and, as we have always said, constitutional questions arise as a result. When we are satisfied that the economic tests have been achieved, political questions will arise. That is why we have always said that before a decision is finally taken we will seek the opinion of Parliament and the people through a referendum. The point raised by the noble Lord will be a matter for debate at that time.
§ Lord BarnettMy Lords, does my noble friend not agree that some of the comments would have been made whether the euro goes up or down? It would be common sense not to get too excited about a particular level at a particular time. Has my noble friend noticed that a sophisticated financial market—that is, Hong Kong—is buying euros at present? Does he think that has any consequence?
§ Lord McIntosh of HaringeyMy Lords, I do not want to speculate on what gamblers are doing in Hong Kong any more than I want to speculate on foreign exchange markets as a whole. There is a point in what my noble friend says, in that a number of people are buying particular currencies as a hedge against possible difficulties at the time of the millennium. I do not know whether that applies also to Hong Kong.