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European Council

My Lords, it may be a convenient moment to repeat a Statement that has been made in another place by my right honourable friend the Prime Minister. The Statement is as follows. ““With permission, Mr Speaker, I would like to make a Statement on last week's European Council. Britain had three objectives at this Council. First, to bring stability to the eurozone, which is in Britain's interests; secondly, to make sure that Britain is not liable for bailing out the eurozone when the new permanent arrangements come into effect; and, thirdly, to build on the progress we made with the 2011 EU budget, with tougher settlements in the years to follow. Let me address each objective in turn—first, stability in the eurozone. No one can doubt this is in our interests. Nearly half our trade is with the eurozone, London is Europe's international financial centre, and no one can deny that the eurozone faces very real challenges at the moment. We see that in the Irish situation and with Spain and Portugal paying interest rate penalties in the financial markets. Britain's approach should not be simply to say, ‘We told you monetary union would require fiscal union’, and leave it at that. We want to help the eurozone to deal with the issues it faces. The fact that we have set out a path to deal with our deficit and seen our interest rates come down is helpful. Following the dinner at which leaders of all the EU countries had a wide-ranging discussion on the state of the eurozone, eurozone leaders issued a statement saying they, "‘stand ready to do whatever is required’," to return the eurozone to stability. Part of that is a permanent mechanism for assisting eurozone countries that get into financial difficulty. Enabling eurozone countries to establish such a mechanism is in our interests, but how this mechanism is brought about is equally important. After the October Council I made it very clear to the House that any possible future treaty change would not affect the UK, and that I would not agree to it if it did. I also said clearly that no powers would be transferred from Westminster to Brussels. At this Council we agreed the establishment of a permanent mechanism with a very limited treaty change. This change does not affect the United Kingdom and it does not transfer any powers from Britain to the European Union. Secondly, on the issue of liability for any potential bailout of the eurozone in future, Britain is not in the euro, and we are not going to join the euro. That is why we should not have any liability for bailing out the eurozone when the new permanent arrangements come into effect in 2013. With the current emergency arrangements, established under Article 122, we do. This was a decision taken by the previous Government. It is a decision we disagreed with at the time and we are stuck with it for the duration of the emergency mechanism, but I have been determined to ensure that, when the permanent mechanism starts, Britain's liability should end. That is exactly what we agreed. The Council conclusions state that this will be a, "‘stability mechanism for member states whose currency is the euro’." This means it is a mechanism established by eurozone countries for eurozone countries, and Britain will not be a part of it. Crucially, we have also ensured that the current emergency arrangements are closed off when the new mechanism comes into effect in 2013. Both the Council conclusions and the introduction to the actual decision to change the treaty itself—the actual document that will be presented to this Parliament for its assent—are clear that Article 122, "‘will no longer be needed for such purposes’," and that, "‘Heads of State or Government therefore agreed that it should not be used for such purposes’." So both the Council conclusions and the decision that introduces the treaty change state in black and white the clear and unanimous agreement that from 2013 Britain will not be dragged into bailing out the eurozone. Before the Government agree to this treaty change, Parliament must first, of course, give its approval, and if this treaty change is agreed by all member states then its ratification in this country will be subject to the terms of our EU Bill and so will be subject to primary legislation. Thirdly, let me turn to the issue of the EU budget. Securing a tight budget for the future remains my highest priority for the EU. I believe it is a priority shared by the vast majority of the country. At the last Council, we managed to do something we have not done in previous years. We were faced with a situation where the Council had agreed a 2.91 per cent increase. This was not the UK's position. We had wanted a tougher settlement, but were outvoted, yet the Parliament went on and called for 6 per cent increase, but instead of just splitting the difference between what the Council asked for and what the Parliament called for—which is what happened last year—Britain led an alliance of member states to decisively reject the European Parliament's request. We insisted on no more than the 2.91 per cent increase the Council had previously agreed. Many predicted this would be impossible and that Britain would be defeated, but this will save the British taxpayer several hundred million pounds. We also agreed a new principle that from now on the EU budget must be in line with what we are doing in our countries. We did this by taking the initiative and galvanising others to join us, and we sent a clear message that when we are making cuts at home, with tough decisions on pensions, welfare and pay, it is simply not acceptable to go on spending more and more and more through the European Union. At this Council, I wanted to keep up the momentum on the EU budget by forging an alliance with like-minded partners and starting to work towards securing a tougher settlement for future budgets. At the weekend, Chancellor Merkel, President Sarkozy and I, together with the Prime Ministers of Finland and the Netherlands, sent a letter to the President of the European Commission. This letter sets out our goals for the budgets for 2012 and 2013 and the longer-term financial perspective covering the rest of this decade. It states clearly our collective view that, "‘the action taken in 2011 to curb annual growth’," in European spending should be ““stepped up”” in 2012 and 2013, and we call for a real-terms freeze in the period from 2014 to 2020. I want to achieve a decade of spending restraint in Europe, and the three biggest powers in Europe, the three biggest net contributors to the budget, have committed to that. This is an important step forward. There are two problems that Europe must urgently address. First, the eurozone is not working properly. It needs major reform, and it is in our interests not to stand in the way of that. Indeed, as I have argued, we should be actively helping the eurozone to deal with its issues. Secondly, Europe as a whole needs to be much more competitive. Collectively we must press ahead with measures which will help European countries pay their way in a world where economic competition internationally is becoming ever fiercer. We must expand the single market in areas such as services, press forward on free trade and, crucially, avoid burdening businesses with costly red tape. We must promote stability, jobs and growth. That is the agenda this Government are pursuing in Europe, and I commend this Statement to the House””. My Lords, that concludes the Statement.