I beg to move, That the clause be read a Second time.
New clause 3 would require the Government annually to update the House on their assessment of the impact of the ESM on the economic performance of the EU. Our economy and those of the member states of the eurozone, as well as those of the wider EU, are closely entwined through trade and our financial sectors. We also use the collective weight of the EU to negotiate free trade agreements with both developed and emerging economies. We therefore believe that it is reasonable to require a regular update from the Chancellor on how the ESM arrangements are affecting our major trading partners in the EU.
We welcome last week’s decision by the European Central Bank to set out its approach to outright monetary transactions, which is an example of the lender-of-last-resort role that such a eurozone central bank ought to have reached many months ago. However, the operation of OMTs will be tied to the operation of the ESM. It is therefore imperative that the operation of the ESM is undertaken appropriately and that any strict conditionality does not harm the delicate path back to economic growth.
As we explained on Second Reading, we are in favour of the Bill, which provides for the treaty change necessary to enable the establishment of the ESM by the eurozone, but we have concerns about the conditionality of the ESM. We will continue to argue that ESM and ECB support needs to avoid the punitive austerity that undercuts confidence and demand in an economy, pushes an economy back into recession, reverses the generation of tax receipts and increases welfare costs. Regrettably, that is exactly what has happened in the UK due to the severe austerity that our Government have chosen to impose, despite the fact that the Business Secretary admitted yesterday that there is a problem of demand in the economy and despite the fact that he and his party agreed with us before the general election that cuts that went too far and too fast would choke off the recovery.
The question of ESM conditionality is at the heart of the divisions between right-wing and centre-left Governments across Europe. Germany holds a veto on the operation of the ESM, because its share of contributions converts to a blocking vote share. Germany’s representative on the ECB board was the only dissenter to the new ECB policy on OMTs that was announced last week and, incidentally, this week its constitutional court is expected to rule on whether the ESM is constitutional according to German law.
Although the ECB policy has been adopted, there remains the prospect that it cannot be implemented without stringent austerity conditions because of the tie-in to the operation of the ESM. It is therefore imperative that the ESM remains under close scrutiny by our Government and by Members of this House and the other place. With more than 50% of our export trade going to the wider European Union, we are affected significantly by decisions taken on the ESM. For that reason, we believe that a routine annual process for monitoring developments in the EU economy is of great importance. We believe that new clause 3 would allow that to happen.