§ 11.9 a.m.
§ Baroness Noakes asked Her Majesty's Government:
§ Whether they support the legal action taken by the European Commission to enforce the budgetary rules underpinning the euro.
§ The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord McIntosh of Haringey)My Lords, it would be inappropriate to comment on either the Commission's decision or the possible or likely outcomes of the case.
§ Baroness NoakesMy Lords, I thank the Minister for that unsurprising Answer. I am sure that he will not want to comment on the results of the case. However, if the case were decided in the Commission's favour, would the Government then back the enforcement of fines against France and Germany?
§ Lord McIntosh of HaringeyMy Lords, that is a hypothetical question.
§ Lord TaverneMy Lords, does the Minister agree that it is sensible to have rules providing for a balanced budget over the cycle; that it is counter-productive to apply those rules rigidly; and that the key to a sensible 1140 system would be to apply much stronger moral pressure on states that fail to run a healthy budget surplus at a time of boom?
§ Lord McIntosh of HaringeyMy Lords, I can respond to that best by citing the conclusion of the Economic and Finance Council of 25 November, which states:
The Council…undertakes to strengthen the implementation of the Pact by reinforcing budgetary discipline over the cycle and fostering structural reforms aimed at increasing growth potential".We agree with that conclusion.
§ Lord BarnettMy Lords, but is it not a fact that the Government, including the Chancellor, would prefer the stability and growth pact to be replaced by the Chancellor's golden rules?
§ Lord McIntosh of HaringeyMy Lords, the Chancellor has always made it clear that we believe in a prudent interpretation of the stability and growth pact. Our prudent interpretation, like the golden rule, would allow for those matters to be considered over the economic cycle.
§ Lord Lamont of LerwickMy Lords, does not the Commission deserve our deepest sympathy, because either it enforces what Mr Prodi called a stupid law or it acquiesces in the breaking of the rule of law? What does one make of a pact which, once it is broken wide open, causes the euro to go through the roof? Could it possibly be that Mr Prodi was right?
§ Lord McIntosh of HaringeyMy Lords, I do not think that I should express a view on why the euro should, as the noble Lord describes it, go through the roof. I am not even sure that that is an accurate representation of what happened after the ECOFIN meeting and the Commission's decision to undertake legal action.
§ Lord Hannay of ChiswickMy Lords, does not the noble Lord agree that the case being brought by the Commission is a bit of a sideshow? Far more important than addressing—or failing to address, as he has done—our views on that, ECOFIN should be concentrating on making the growth and stability pact more flexible and, above all, making it work during a period of upswing in the economies, which is just beginning to show signs of starting. Its failure to work during the previous upswing was the reason why, when the downswing came, it worked even worse.
§ Lord McIntosh of HaringeyMy Lords, I largely agree with that. I have indeed resisted answering questions about the legal action, partly because I do not think that it is the most important issue facing Europe. The Commission has published three pillars for reform of the stability and growth pact, as the noble Lord well knows. The member states will need time to reflect on them, but our first reaction is that 1141 some of them, at least, move in the direction of the prudent interpretation that the Chancellor has always supported.
§ Lord Howell of GuildfordMy Lords—
§ Lord HarrisonMy Lords—
§ Lord Howell of GuildfordMy Lords, I think it is the turn of our side.
Does the Minister agree that when it comes to law-breaking, it is not just a question of the euro and the stability pact? France is far the biggest breaker of EU laws and far the biggest offender in failing to implement them. Indeed, the cases against it add up to more than those of all the other member states put together. Should we not be careful before siding with those who break EU law? Is it not in our interest to support a law-based European Union, instead of one run by bureaucratic whim or political considerations?
§ Lord McIntosh of HaringeyMy Lords, that question is not only wide but very wide of the original Question. I must respond to the extent of saying that no one could accuse us of siding with those who break European laws.
§ Lord HarrisonMy Lords, is my noble friend as amused as I am that those on the Conservative Benches used to complain about the weakness of the euro and now complain about its strength? Can he clarify the basis of the European Commission's proposal? As I understand the Maastricht criteria and rules, where a country breaks either the budget debt or GDP debt of 3 per cent or 60 per cent respectively, it is wholly within the Council of Ministers' discretion to decide not to exact fines. That is playing by the rules as set down.
§ Lord McIntosh of HaringeyMy Lords, on my noble friend's first question, it is not for me to defend or attack the Opposition's ducking and weaving on those matters. On his second question, I refer him to Article 104 of the treaty, which sets out the progressive steps to be taken in circumstances where there is a risk or actuality of breach of the stability and growth pact. In particular, Article 104c.7, 104.8, 104.9, 104.10 and 104.11 sets out a progressive process that he summarised rather accurately.