Euro

Part of the debate – in the House of Lords at 11:47 am on 23rd June 2005.

Alert me about debates like this

Photo of Lord Harrison Lord Harrison Labour 11:47 am, 23rd June 2005

My Lords, I thank the noble Lord, Lord Roper, for that excellent introduction to the debate. I send our very best wishes to the noble Lord, Lord Dykes, who I know will very much regret not being here today. I, too, look forward to the maiden speech of my noble friend Lady McDonagh.

I shall confine my remarks more to the British view of what is happening about our attitude towards the euro. I start with a story of small change in Britain today. My wife and I recently visited the Blackburn Museum and Art Gallery, where we found the Robert Edward Hart collection of ancient coins. The first part was devoted to the history of British coins—the chequered past, leading eventually to the pound from the groat, the mark and other variations—to that imperfect single currency we still have in the United Kingdom. In England, we still refuse to accept Scottish or Northern Irish notes—the ones that do not have the Queen's head on them.

The second part of Hart's collection was devoted to Roman and foreign coins. The Roman coins represented a single currency throughout the then Europe; it was very successful throughout Europe and in Britain.

My wife and I then passed out of the Blackburn Art Gallery and went to have a cup of tea at the coffee shop outside. By mistake, I gave some small change, in euros, to the waitress. She pointed this out to me and I forked out the pennies that were needed, but the owner of the café came up to me and said, "Don't worry about that at all. I'm very familiar with euros. Indeed, I have a euro account". He said that he was a familiar visitor to the Continent and found it advisable to keep euros.

I give this example of "small change" in British life because it is important to draw some parallels between the Roman Empire and now. The Roman Empire needed a single currency to facilitate the business of being a Roman road-builder; the business of being a centurion or a foot-soldier; or the business of being a wine merchant or a corn contractor. And so in modern Europe's single market, it is the euro which facilitates the business of being an entrepreneur; the business of being a small businessperson; the business of being a student; the business of being a tourist or a financier or, indeed, a construction engineer. We fail to say and repeat that the main task of a single currency is to reinforce the single European market. It is that which leads us to the wealth of nations about which Adam Smith would have been so pleased.

But the small change in Britain is happening. If you go to the British Museum today, where there is another magnificent coin collection, you are asked at the door to contribute $5, €5 or £3. The wealth of nations is coming into the British Museum. If you go outside to communicate with a friend on the other side of the European Union, you can now do so in the euro-friendly telephone kiosks. This is another "small change" in British history.

But it is not all small change. I have been interested to read that "the tectonic plates are beginning to move", which is a favourite phrase of the Deputy Leader in another place. I learn, for instance, that Barclays's 700 branches—doubtlessly one of them is in Blackburn—now lend in euros, especially to people who are buying in the main holiday and retirement areas in southern Europe. This change has been brought about by the low-cost airlines, which too have been fostered by the single European market—another success. Barclays lends in euros, whether or not you have an income expressed in euros. Susan Clay, the European business director of Barclays, says that £57 billion of equity was taken out of the UK property market in 2003, most of which was tied up in homes in southern Europe. That is no wonder with a mortgage repayment rate of around 3.4 per cent.

The noble Lord, Lord Roper, is right that joining the euro is not necessarily on the agenda for the United Kingdom today. I have not checked whether the Chancellor reiterated his five reasons for saying "no in thunder" in his Mansion House speech last night. I will do so later today. Nevertheless, the United Kingdom must be ready for the task of preparing for a time when the euro will be embraced in this country. Is the Treasury still actively preparing the reports, industry by industry, to make sure that we will be ready should that call come and the ensuing referendum results in a "Yes" vote? I ask the Minister whether we are making the proper preparations for the tourism, leisure and travel industries in particular.

I reiterate that the tectonic plates are moving. Will the Minister discuss the creation of the new G4, which threatens to replace the G7 and the G8, of which our own Prime Minister is shortly to take up the reins? The G4 comprises the four countries of principal currency unions – the dollar, the yen, the euro-zone and the renminbi. Indeed, in my discussions this week with the Chinese officials from the People's Republic, they told me that the G4 is beginning to operate. It is not surprising that the leaders of its currency unions, who want to speak to each other authoritatively, are now meeting to discuss these important issues. It will be a shame if the United Kingdom is excluded from this conversation.

In our debate in this country, we must avoid the kind of debilitating Euroscepticism which has punctuated the debate too often in this House. From the moment when the euro and the single currency were first conceived, those gainsayers and "painsayers" have always said that the United Kingdom should not be interested in what is happening in the European Union and our euro-zone border. They have always portrayed Europe in one way or another as a basket case. It is interesting that whenever the euro and its predecessors have moved one way or the other against the dollar, it was somehow always the euro that was depreciating out of control; it was never the dollar. There was never a proper analysis of some of the difficulties that the dollar experiences.

We must reject the association of the single currency with failure. The recent "No" votes by the Dutch and the French should not lead us to equate the difficulties surrounding the constitution with those of the euro. The euro is strong and continues to be strong.

I draw noble Lords' attention to a very interesting confirmation of what I have just said. Is the euro in its last throes? According to that noted Eurosceptic, Roger Bootle, apparently it is not. In February, he wrote an article entitled, "Should The Euro Be The Reserve Currency?" which is a matter to which the noble Lord, Lord Roper, has already turned. Mr Bootle pointed out that there was a rumour that South Korea's central bank might consider taking euros to denominate some of its reserves. He wrote:

"Euro financial markets are broad and deep, the currency is fully convertible, the financial system and its institutions are well-known and trusted and the euro-zone is politically stable (at least for now). Moreover, the euro-zone is about the same size as the US in the world economy and just as important in world trade".

That seems to me to be a confirmation that the euro is here to stay.

Indeed, we must not say that the current crisis in Europe is a currency crisis, but we should look at what has been reduced to a contest between this country and France. A new and different vision of Europe has been articulated today by the Prime Minister in the European Parliament. Surely the Prime Minister is right to lay emphasis on the Lisbon agenda and on the importance of Europe spending money on research and development, education and training, and less on the CAP. We in this Chamber and in the polity in Britain really ought to have a common view that it is the Lisbon agenda and the single market that produce the wealth of nations, and that the single currency reinforces that single market.

Before I finish, there is one other area that I would like to tackle—the European Central Bank. When, 10 years ago, I was a Member of the European Parliament and sat on its monetary sub-committee, we had the task of interviewing and talking to the proposed central bank people, including Mr Lamfalusi, when he was appointed as the head of the European Monetary Institute, as well as Mr Duesenberg and Mr Trichet. We were always at pains to remind them that while price stability was the main objective of the future European Central Bank, there was latitude in the Maastricht Treaty, which said that provided that price stability was ensured, interest rates could be used to facilitate and improve the workings of the single market and to encourage and stimulate investment.

I am not sure that that message has always been understood—although it has been well understood in the American Federal Reserve, whose statute says that price stability and recognition of employment conditions are part and parcel of what it needs to do. What we have done in this country with the MPC may be a very helpful model for the future. But we understood that the European Central Bank needed to establish price stability to get the kind of encomium that it got from Roger Bootle, which I read out.

I conclude by saying that this is a hugely important issue, which may currently be on the back burner but which will return increasingly as small change accelerates into greater change in this country, with the advent of the euro not only as a reserve currency but as one that is used in the streets of this country. It may not be everyone's cup of tea, but in the end we will drink it.