---

European Council

With permission, Mr. Speaker, I would like to make a statement on the European Council held in Brussels last Thursday and Friday. First, I am sure that the whole House will join me in paying tribute to Lance Corporal of Horse Jonathan Woodgate from the Household Cavalry Regiment and Rifleman Daniel Holkham from 3rd Battalion the Rifles. They lost their lives fighting in Afghanistan. We owe them the greatest debt of gratitude for their courage and their service. Their sacrifice reminds us that terrorism is an ever-present danger which requires vigilance and the willingness to take tough action in all areas where terrorist groups operate. So I know also that the thoughts of the House—and indeed our country—are with the Russian people today after this morning's terrorist attack on the Moscow transport network. I have written to President Medvedev this morning to send our condolences to the victims and their families. I pay tribute to the Russian emergency services and the people of Moscow as they have responded to this appalling attack. The focus of the European Council last Thursday and Friday was on actions needed to secure growth for the future and on Europe's determination to bring new impetus and momentum to the international negotiations on climate change. Last week's Budget set out our proposals for the next stage of economic recovery. It made it clear that the risks to recovery remain real and that we must avoid a premature withdrawal of stimulus measures, instead seeing through our commitment to halve the deficit over four years without choking off the recovery itself. The European Council agreed that"““The economic situation is improving, but the recovery is still fragile””." It concluded that while deficit reduction plans must go ahead, measures to reduce the stimulus should be taken only once recovery is secured. That is the position that we, like our European partners, will continue to follow. In our Budget, we also set out the actions that we must now take to secure jobs and growth by investing in the key growth sectors for the future. The Council's conclusions agreed that Europe needs"““to deliver more growth and jobs””" to boost European competitiveness and productivity. Before the financial crisis, the imbalances within Europe were at an all-time high. The Council agreed that"““The EU needs to focus on the pressing challenges of competitiveness and balance of payments developments””." It also agreed to develop a new strategy to deliver higher levels of long-term growth and recognised that the key elements of increasing productivity and growth include action on employment, on research and development, on reducing greenhouse gases to boost low-carbon industries and on education and social inclusion. The European Council will now, once a year through a leaders' annual economic summit, assess the progress achieved at both national and European level in delivering those objectives. The Council also discussed the economic situation in Greece. Agreement has now been reached by the euro area member states on a set of guidelines for Greece, and I am encouraged by the statement from the eurozone leaders that the eurozone will meet its responsibilities. There was no request for the United Kingdom to make any contribution to that programme, and none of the arrangements agreed by the European Council will see any powers being ceded from Britain to the European Union. One year on from the G20 summit in London, we also discussed Europe's plans for the next G20 summit, which is to be held in Toronto. The Council agreed that ““rapid progress”” is now required on strengthening financial regulation and supervision within both the EU and the G20, while we also need to ensure a level playing field for financial centres worldwide. In particular, we agreed that progress is needed on the issues of capital requirements, systemic institutions, financial instruments for crisis management, transparency on derivative markets and the implementation of internationally agreed principles for bonuses in the financial services sector. The Council agreed to make rapid progress on those issues, concluding work on the new European supervisory framework in time for the European systemic risk board and the three European supervisory authorities to begin work in early 2011. We must also agree in Toronto a co-ordinated approach to levies on the banks to deliver a fairer balance of risk and reward in the financial system. That is something that I have been advocating for some months, and the Council agreed that as part of the G20's work:"““The Commission will shortly present a report on possible innovative sources of financing such as a global levy on financial transactions…The Council and the Commission will report back on these issues to the June 2010 European Council, ahead of the Toronto summit.””" The Council also discussed climate change, ahead of the first meeting of the advisory group on climate change financing, established by the United Nations Secretary-General, which I am co-chairing with Prime Minister Meles of Ethiopia. Our pledge on climate change finance is a vital first test of the commitment of the developed countries to meet the promises made in Copenhagen. The Council concluded that Europe would rapidly and unconditionally implement its commitment to provide €2.4 billion annually for fast-track financing for developing countries, and to that end the EU"““will initiate consultations on practical ways””" to implement that in specific areas. There will be a presentation on those commitments at the Bonn summit. The Council confirmed that Europe's objective remains a"““global and comprehensive legal agreement””" and that Europe will ““strengthen its outreach”” to other countries to galvanise negotiations in the coming months. The euro area's economic growth is predicted to be just 0.7 per cent. this year and next, recovering to 1.5 per cent. in later years. By contrast, world growth is projected to be 3.5 per cent, so we need stronger European growth to help deliver stronger growth and new jobs here in Britain. Europe is the world's largest trading bloc and also the world's largest internal market. It offers 500 million consumers for British companies. With 3 million UK jobs linked to the EU, and still more than half our exports going to the EU, Britain's livelihood is inextricably linked to the success of the European economy. Distancing ourselves from Europe makes no sense and would hold back our economy, our companies and people in work. It is by working with, not against, our European partners to deliver jobs and growth for Europe that we will help to deliver jobs and growth for Britain. I commend this statement to the House.