Financial Crisis

Part of the debate – in the House of Commons at 3:36 pm on 20 January 2009.

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Photo of Stephen Timms Stephen Timms Financial Secretary (HM Treasury) (also in the Department for Business, Innovation and Skills) 3:36, 20 January 2009

I can reassure the hon. Gentleman that we are closely in touch with the European Union on these matters and therefore we do not expect unpleasant surprises in that department.

It may also be necessary to help countries that have been hit particularly hard by the financial crisis and to support their domestic economies and to prevent cross-border contagion. The G20 summit in Washington affirmed international commitment to supporting emerging market economies through this crisis, and it has been necessary for the Community to provide financial assistance to two of its members in conjunction with the International Monetary Fund. As has been the case in respect of many financial institutions in the current crisis, the member states are fundamentally sound, but the pressure of market conditions and exposure to the advanced economies of the euro area, and elsewhere in the EU, have been severe.

The EU medium-term balance of payments finance facility provides the opportunity for external financing from the Community. The facility allows the Commission to borrow on international markets and to lend the money on to member states in difficulty, often with support from the IMF. The Commission has worked closely with IMF staff in assessing situations in member states looking for assistance in producing programmes aligned to economic policy conditions and seeking financing for those packages. The Commission and IMF staff will also work closely together in monitoring the implementation with a view to stabilising the situation as soon as possible. Such financing is very important in the current climate. We need EU member states in positions such as those that a couple have encountered to be able to seek support to restore confidence and protect financial stability in order to prevent contagion and protect the functioning of the single market. We welcome the recent decision to raise the ceiling on the EU financial assistance facility.

This is an extraordinary time in the UK and abroad. We have taken bold action in the UK to stabilise the financial system and restore confidence, and the UK's lead was followed swiftly by our European partners.