I thank the hon. Gentleman, because he brings me on nicely to the next part of my speech, which is about the conditionality of the ESM and the bond buying that was announced last week.
The conditionality of the ESM requires further scrutiny. As with our Government’s economic failings, we are concerned that the ESM will impose harsh austerity on countries that receive its support, and thereby choke off economic growth and recovery. In the UK, the effect of such “austerity alone” economics is acutely felt by the 2.65 million people who are unemployed. The former US Treasury Secretary, Larry Summers, last week reflected on the Government’s economic mismanagement at a conference in London:
“We have avoided the prospect of a 1930s-like experience in the US. I cannot say the same with respect to Great Britain. The downturn in British output is more sustained than at any point in the twentieth century. In such an environment, to radically slash public investment is, I would suggest, to violate the Hippocratic Oath—first, do no harm.”
Although he was referring to the catastrophe of our Government’s economic policy, he could have been talking about other countries within the eurozone that have been the subjects of severe austerity.
Although it is true, as Geoffrey Clifton-Brown suggests, that the fiscal position of countries in the medium term must be looked at—the level of debt to GDP in Greece, which has been over 100% since the early 1990s, is certainly unsustainable—Greece and other countries must be allowed to get back to growth as a means of reducing their deficits and debts. As we are seeing in this country, without that growth, it is more difficult to bring down a country’s annual deficits and longer-term debt.
Thankfully, the debate in Europe is beginning to shift towards a focus on growth and job creation, rather than austerity alone. In particular, we welcome the growth measures agreed at the European summit in June. However, we note that the debate is ongoing in Europe between those who argue for growth and job creation, and those who believe in austerity. It is regrettable that our Government are still very much on the wrong side of that debate.
The Government try in vain to blame the eurozone for their own economic failure, but even their own Back Benchers are not convinced. Last week, Mr Davis told an audience in the City that it was wrong for the Government to blame the eurozone for their current economic failings. Before the summer recess, Mr Ruffley, a member of the Treasury Committee, said that the Government must not use the eurozone crisis as an alibi. The Opposition recognise the importance of the eurozone and of Britain’s place within the EU in building growth and prosperity. However, the Government’s failure to deliver growth two years ago and their continuing failure to focus on it have left us more vulnerable to the escalation of the eurozone crisis.
I will reflect briefly on the wider future of the eurozone and the role that the ESM will play. In contrast to the unequivocal statements of support for the euro from Mario Draghi and Francois Hollande that we have heard in recent days, some hon. Members have called today and throughout the Bill’s passage for the break-up of the euro and have argued against the establishment of the ESM. However, the break-up of the eurozone is not an easy, cost-free way out of the crisis.
If Greece were to leave the eurozone, the consequences could be disastrous for Greece and for the rest of the EU. If the euro were replaced by a new currency in Greece, the value of that currency would in all likelihood plummet, causing a further disaster in the Greek economy. Moreover, the contagion effect following that could be hugely damaging for the rest of Europe. Far from stabilising the eurozone, a Greek exit might serve only to deepen the sovereign debt crisis. International lenders, seeing Greece cut loose from the euro, may become wary of lending to other struggling states in the eurozone. Greece may become only the tip of the iceberg as investor panic drives up borrowing costs for Italy and Spain, the eurozone’s fourth and third largest economies.