Financial Crisis

Part of the debate – in the House of Commons at 3:56 pm on 20th January 2009.

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Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury 3:56 pm, 20th January 2009

I thank my hon. Friend for his comments. This is an international crisis and it needs to be dealt with in collaboration with Governments around the world, but it is obvious to me that it would be a mistake to have a regional focus on what is an international problem. Of course we need to work with Governments and major financial markets across the world, but we should not be sidetracked on to a regional agenda when an international response is needed.

On the broader issue of the global response, the Commission paper is, again, focused principally on establishing a role for itself. It seeks to identify national, regional and international dimensions to the solutions that will be needed, although most external commentators appear to see national and international dimensions only. In the paper, the Commission makes an unconcealed grab for the power to negotiate on behalf of the EU's G7 members. It says:

"The fragmented representation of the European countries and of the euro area addressed to increase the EU's overall effectiveness and influence."

Once again, I say to the Minister that the Government need to be clear on their view—they are not clear about it in their response—on the appropriate extent of any EU involvement in what is essentially a multilateral process between the world's major economies.

I want to turn to the section of the first paper dealing with the impact on the real economy and with the Commission's recovery plan—the most important part of the package. It identifies financial markets, instability and lack of credit as the root of the problem and urges, as we have done, monetary action, a cut in interest rates and support for lending. It then proposes two key further areas of action. One is what it calls priority short-term action grounded in the Lisbon strategy, designed to help alleviate the effects of the recession in a way that contributes to the long-term, supply-side improvements that the Lisbon process identified as necessary for the competitiveness of the European economies. That is exactly the approach that we have urged in our double test for interventions by the Government in a recession; such interventions must help families and businesses that are struggling in the short term, but must do so in a way that strengthens, rather than weakens, our economy for the recovery to come.

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