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European Council

My Lords, could my noble friend help me with my memory of the Maastricht treaty, which set up the euro? I seem to remember that two of the conditions were that: first, no Government should run a budget deficit of more than 3 per cent of GDP; and, secondly, that there should be no bailouts? Is not the reason that the European Union—or the eurozone at least—is now having to breach the no-bailout clause is because Governments were allowed to breach the deficit clause? Will that change not create a huge moral hazard? They were getting away with breaking the deficit clause but they did not know that they were going to get bailed out. Now that they know they are going to get bailed out, that is creating a moral hazard that surely will encourage bad behaviour in the future. When my noble friend says that we are in favour of these arrangements, is that because we think that it will make the euro stronger or weaker?