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European Affairs

The right hon. Member for Richmond, Yorks (Mr. Hague) began his remarks by reminding the House that, in the past six months, the world has changed in dramatic and serious ways. He rightly talked about the changes in the economy and the changes in the security debate, particularly after the crisis in South Ossetia. He could have added the election of President-elect Barack Obama, which significantly changes the nature of the world's debate on foreign policy. Those three big forces—the economy, the security debate and President-elect Obama—push the case for greater co-operation within Europe and a strengthened European Union. The speeches of President-elect Obama show that he is absolutely clear that a strong, well co-ordinated Europe is in the interests of the United States and is what it wants to see, particularly as regards security and defence policy. The process of economic co-ordination whereby European nations can work together is incredibly important. It is only through the European Union that Britain can exercise genuine influence as strongly as possible. I have to tell the right hon. Member for Richmond, Yorks that his party's position on many of these issues, including the Lisbon treaty, puts it in great difficulty in meeting the challenges ahead. When the Conservatives leave the European People's party, presumably later this year, their ability to influence the debate in Europe and engage with—[Interruption.] I am told that it will be next year, but it is clearly coming; I am glad that the Conservatives have confirmed that that is their intention. When that happens, their ability to influence the debate in Europe, and thus the debate in Washington, will be significantly reduced. The Conservatives must sort that out because if they do not, their position as a putative Government will be reduced. The summit later this week will focus, quite rightly, on the financial and economic crisis; the question is how well the EU is doing now, and how well it will do in future, in responding to this urgent crisis. One thing is absolutely clear: we are much better placed than in previous serious downturns because of the single market. Indeed, we are much better placed than we were in the 1930s—parallel economic times to the ones in which we are living. If we did not have the single market, the calls for protectionism and trade barriers across Europe would be loud and potentially devastating. It is fantastic that we have that single market. There is no room for complacency, of course. When one listens to some of the remarks of Prime Minister Berlusconi, for example, one worries slightly about the commitment of some of Europe's leaders. Nevertheless, the fact that the European Union is there and has tight rules prevents people such as the Italian Prime Minister from undermining the importance of open and free markets, which will be critical if we are to escape from the current economic downturn. I was pleased to see in the Foreign Secretary's statement on Monday, ahead of his meeting, that the Doha round will be re-engaged later this month. That is absolutely critical and backs up the importance of the single market. That vital background notwithstanding, I do not think that Europe has necessarily covered itself in glory in the past few months. It had a shaky start once the banking collapses were well known. There was a summit on 4 October in Paris, where Germany gave certain commitments that it reneged on a few days later. It was a pretty shaky start, but I am pleased to say that since then there has been a lot more agreement, and that the EU has worked pretty impressively. Through the EU's proposals on the stimulus package a few weeks ago and at a number of subsequent meetings, the EU has co-ordinated its policy ideas far more effectively than it could otherwise have done. Arguably, it has done that better than the United States, which is quite remarkable. There is no single treasury in the EU, and nor should there be—and nor will there be one before colleagues on the Conservative Benches start raising ghosts—but what the EU has done in the last two months has shown how well policy can be co-ordinated. The theory of international policy co-ordination makes absolutely clear the importance of co-ordinated fiscal policy boosts in this sort of economic climate. The multiplier effects are much greater. The Prime Minister was quite right to say that if Britain and France have fiscal stimuli and other countries do not, there is a danger that the benefits to Britain of our fiscal stimulus will be reduced because some of it will leak into extra imports. That is why the Government are right to put pressure on the Germans, the Irish and those in other member states and to argue that they should join in the policy co-ordination on fiscal stimulus. We will all benefit if they do so.