Lib Dem Party Conference LIVE Event Blog – Will the euro crisis split the EU?
Business for New Europe and the Centre for European Reform in partnership with Citi and Linklaters brought together an eminent panel of experts to discuss the developing situation in the eurozone yesterday at the Liberal Democrat Party Conference in Birmingham. Michael Moore, Secretary of State for Scotland, Sharon Bowles MEP and chair of the European Parliament’s Economic and Monetary Affairs Committee, Baroness Shirley Williams and Jeremy Browne, Foreign and Commonwealth Office minister joined the discussion. The event was chaired by Simon Tilford, chief economist of the CER.
Months ago, when BNE and the CER initially decided to organise this panel discussion, we could not have predicted how timely this debate would actually be. The discourse within the EU, has progressed from bailouts of peripheral member states to the splitting of the eurozone or even worse, the full disintegration of the common currency. At the panel discussion, all speakers were eager to stress the implications of the crisis for the United Kingdom to a full room of around ninety delegates.
Sharon Bowles, who recently attended a meeting of finance ministers in Poland, said that if there were a disastrous event within the eurozone, the UK would be just as much dragged in as if we were not. Many have said that the UK’s exposure to Greece is manageable should Greece default, however, Bowles stressed that the crisis was no longer contained to Greece and that contagion was a real problem to the UK, citing the figure that the UK has a £2 trillion exposure to France. Bowles welcomed George Osborne’s intervention last week calling for greater integration within the eurozone as she believes that a banking crisis within the eurozone will undoubtedly lead to a banking crisis within the UK.
On the meeting in Poland, which was attended by Tim Geithner, US Secretary of the Treasury, Bowles said that European finance ministers had not lost an opportunity to make things worse with constant internal squabbling proving the point that politics rules over the markets. Bowles said that there needs to be greater integration within the eurozone, while dealing with moral hazard, and that there is no chance of the rescue fund being made larger as it would potentially put the German credit rating at risk.
Turning to the UK, Bowles said that closer integration within the eurozone could present big dangers for Britain. Bowles recognises that the actions of the 17 members of the eurozone in dealing with the crisis will have spill-over effects on the 10 countries outside. She predicts that there will be temptation to decide single market issues within the 17 therefore disenfranchising other member states, including the UK. In any new framework, France and Germany envision themselves as the core, based on a ‘markozy’ line. Bowles stressed that the EU ‘brand’ is based on the 27 together and many of the non-eurozone countries are very important globally.
Bowles points out that many of the non-eurozone members of the EU, including the UK, have been the biggest advocates of the single market’s advantages on a global level. Many of the eurozone countries, however, are more concerned with the internal market, looking inwards. In that context, it is useful to the UK that the euro plus pact referenced the single market.
Bowles also went on to say that the discussions amongst eurosceptic Conservatives about repatriation of powers from the EU in this time of crisis is the worst thing possible for the health of the City of London. With approximately forty legislative bills in front of Sharon Bowles in the European Parliament, all with incredible importance to the UK and the City of London, it was not helpful to have this talk in the backdrop. Bowles claims that this talk could lead to awful ramifications.
Jeremy Browne then continued by saying that in all three of the party conferences over the next few weeks, there will of course be discussions on important national issues but the shadow of the eurozone crisis may one day render these internal discussions redundant. He therefore told attendees that they had come to the ‘right’ fringe meeting.
Initially, Browne was sceptical of the UK joining the euro. Whilst seeing the benefits of a single currency to the Single Market, he was not fully convinced. Browne said that the loss of monetary policy was problematic for him and that many countries that did join the common currency were not ready and should not have been allowed to do so. Browne said that he can understand German worries of profligate Greeks and that governments of creditor countries, including Germany, must command the consent of their populations to take the necessary decisions.
Browne stressed that he does not want the euro to break up and that its success was in our national interest. He wants Britain to take an active part in the EU, despite being a non-eurozone country. The UK has always tried to avoid the prospect of a two speed Europe and should continue to do so despite it becoming extremely difficult with further economic governance emerging within the eurozone. As one of the ‘Big 3’ within the EU, the UK has an interest in demonstrating leadership. Examples of this can be seen in free trade discussions, most recently with the FTA with South Korea being an effective lever for a further FTA with Japan. If the UK were not in the EU, we would not have the same bargaining power on the global stage. He went on to say that the EU is a force for moral good, as an aid donor for example. He also said that the present Government has been keen to use the EU as a political device in foreign policy. This has been seen in Syria, for example, where the UK has pushed for a common EU position.
Browne concluded that the Europe which will emerge from this crisis will be a new Europe, and it is important that the UK takes a leading role in it.
Michael Moore started by saying that whether or not people agree with the Coalition on tackling the deficit, one just needs to look at Greece, Portugal and Ireland to see that they are necessary. The globe realises the importance of this crisis and Tim Geithner’s attendance in Poland was an example. Moore paid tribute to Sharon Bowles’ work in the European Parliament and was happy to see a Liberal Democrat at the heart of this.
Moore said that the euro crisis effects the UK terribly and we must be engaged and cannot enjoy the geographical luxury of being at the side of Europe. In addition to our banks and pensions being effected, our growth would also be compromised. While seeing the inevitability of fiscal integration in the eurozone and always being a proponent of the euro, the danger for the UK is that we may see internal cliques to emerge, where we will be excluded. Moore continued by stating that it would be bad for Europe and bad for the UK if we were marginalised. Our priorities are that we should engage, we should use the extensive financial expertise within the UK to assist eurozone countries, and we also lift our heads slightly looking at how we look at European growth. The EU needs to look at how we can get the single market working more effectively and the idea of repatriation of powers is very damaging.
Baroness Williams concluded the discussion by saying that the UK has hurt itself with the passage of the European Union Bill, calling the bill ‘micro-management to the utmost’. She continued by saying that Ministers within the government have been making some thoughtful remarks, but these do not have the same weight as acts of Parliament.
As to emerging from the crisis, Baroness Williams said that some sort of fiscal integration, where tax harmonisation takes effect and that there is a dangerous situation within the EU of a lack of real leadership. Baroness Williams was also critical of the Liberal Democrats’ sister party in Germany, the FDP, who have made it very tough for Chancellor Merket to find solutions.
Baroness Williams continued by saying that the UK could be just as damaging with its talk of repatriation of powers should a treaty change be required. For one of the ‘Big 3’ stepping in, stopping the other two from doing what is necessary to save the euro is unconscionable.
Williams concludes that Europhobe conservatives see this crisis as the greatest opportunity to repatriate powers from the EU, or even leave the EU altogether. She fears that the UK will be even more detached than we already are. For Liberal Democrats, this is extremely dangerous, when important issues such as climate change and human rights can only be effectively championed on the EU level.
Following the opening remarks by all four of the panellists, Simon Tilford from the CER moderated a question and answer session. Discussion topics included the need for an EU finance minister should there be a fiscal union; the need for detailed communication from governments was paramount when dealing with the markets; the unlikely prospect of a return to growth in Europe; the effects of the referendum lock in Parliament; the diminished role of the European Commission in an increasingly intergovernmental approach to the crisis; lack of leadership throughout Europe; the importance of the EU safeguarding peace in Europe following the Second World War; and that the crisis is not just a crisis of the eurozone, but a crisis of capitalism.