With the leaders of the G20 meeting in Cannes, France, against a backdrop of continued confusion and uncertainty in the Eurozone, the House of Lords will today debate the matter of financial stability and economic growth in the EU. The Bishop of Bath and Wells, the Rt Revd Peter Price, is down as one of the speakers. A copy of his intervention is set out below but probably best to check against delivery. Enjoy!
“I am grateful to the Noble Lord Newby and the Nobel Lord Sasson for initiating this timely debate and by inviting this House to look more broadly at the pressing question of financial stability and economic growth in the EU.
Constraining public spending and securing financial stability can only be one part of the equation. Europe also needs to embrace structural reform of its economic model to encourage growth. This means tackling the imbalances that currently exist within Europe. Unless we do so we are likely to see a damaging outbreak of protectionism across Europe.
There is no need for me to repeat the arresting headline figures that other Noble Peers have rightly drawn attention to. The situation across Europe looks grim indeed. There is no other way of putting it.
European economies are for the most part shrinking while unemployment is rising, in some case alarmingly so. Austerity measures introduced in response to the financial crisis are biting.
The soaring rate of interest on the sovereign debt of some countries underlines the worry that much of the existing debt – even if partly written off – is unaffordable. The threat of contagion from defaults looks real with all that this might entail for further economic and financial dislocation both within and outside the Eurozone. It is a depressing picture.
Our public and political debate is understandably fixed on the latest saga within the Eurozone, but we conveniently overlook the pressing question of where growth will come from. This isn’t just a Eurozone problem but a problem for the whole of Europe.
As other Noble Lords more expert than I have noted, in the long run, a stable euro requires more balanced trade and growth among its members. We forget that the financial markets worry not only about the southern countries’ budget deficits but also their inability to grow.
The prevailing economic orthodoxy holds that tough austerity and structural reform will ultimately lead to growth. The last two years suggest that this orthodoxy may be wanting.
Economists will of course point to examples of fiscal austerity preceding economic growth, but they all include currency devaluation and/or big cuts in interest rates. Neither option is open to Euro zone economies.
It is hardly surprisingly, therefore, that household and business confidence is crumbling rapidly across the currency union, depressing economic activity across Europe as a whole. On current trends a series of sovereign and banking defaults looks unavoidable.
A crisis that started on Europe’s periphery has been allowed to grow into a threat to the core of the Eurozone and the future of the European project itself. Measures taken across Europe appear to invite economic stagnation and political dislocation, the effects of which can be seen even on the marbled steps of St Paul’s.
My Lords, there are of course dissenting voices to this orthodoxy.
Some talk of a “Marshall Plan” for Greece, to stimulate investment in infrastructure and solar power. In Brussels, the European Commission is working on schemes to speed up the disbursement of EU regional-aid funds to foster growth in the southern countries. And if EU governments had implemented last year’s report on the single market drawn up by former commissioner Mario Monti, particularly its proposals to liberalize services and the digital economy, Europe’s growth potential may have increased.
But at the moment too little is being done to boost growth across Europe.
As other Noble Lords have noted the question of Europe’s competitiveness predates the current crisis affecting the Eurozone and is in many ways one of its underlying causes. For decades Europe has grown more slowly than other continents. It will not then be resolved overnight.
Given the scale of the damage inflicted by the financial crisis, it is not unreasonable to question what now remains of the agenda to make “Europe the most dynamic and competitive knowledge-based economy in the world capable of sustainable economic growth with more and better jobs and greater social cohesion, and respect for the environment.”
European governments have always found it easier to sell the promise of this agenda than its content. Luxembourg’s Prime Minister, Jean Claude Junker, famously remarked that Europe’s leaders know what reforms are needed; they just don’t know how to win elections on the basis of these policies.
Populism, nationalism and euroskeptism are on the rise throughout the EU. Even if Europe’s politicians can agree the right policies to stabilise Europe’s finances and stimulate economic growth there is no guarantee that public opinion will be sufficiently benevolent to allow them to carry them out.
My Lords one of the greatest achievements of the European Union’s has been to scrap non-tariff barriers to trade in goods and services. The biggest danger however is that the euro crisis will lead to a two-speed Europe that fractures this single market.
We need to be wary then that the new bailout mechanisms agreed at least week’s Eurozone summit do not sideline the European Commission or for that matter the European Parliament. The weaker the European Commission becomes in these arrangements, the easier it will be for national capitals to flout EU rules on, say, state aid, cartels or liberalisation of energy markets.
A flawed single market that encourages protectionist measures cannot be in Britain’s best interest or in the best interest of Europe. A more protectionist Europe will result in slower growth, so fuelling the electoral fortunes of populist parties. A more fractured single market will see Britain disengage yet further from Europe, a retrograde step in the hard-fought movement towards peace and prosperity for our region.”