My Lords, the whole question of the economic governance of the EU is, in anybody's business, a very big topic, and our committee had to restrict itself somewhat. But it was a slight pity that we failed completely to address the whole question of the competitiveness of the EU, which is a subject that perhaps we should turn to at some stage. When you talk to people in Europe and in Brussels they rather like to feel that there is no global market out there at all and that the massive competitive forces building up in China and India can be ignored. The EU is incredibly introverted in the way that it looks at things. As it is, our report did look at the proposals produced by the Commission.
The Commission produced the stability and growth pact originally, and we are now armed with proposals for the stability and growth pact part 2. Of course, part 1 was a total, abject failure. The conditions were broken by the French and the Germans very early in its life. Have we really any confidence in this one? I suspect, although I cannot speak for all my fellow members of the committee, that we felt the chances of this second go from the Commission producing new stability and growth pact proposals was unlikely to be any more successful than the last lot.
We need to think slightly outside the box. I echo the words of the chairman of the committee, the noble Lord, Lord Harrison, that we should be very concerned about what happens in the eurozone. It would be nice if we could stand back and watch the whole thing implode, but if it did, such is the exposure of British banks and of the whole financial sector in Europe that the effect would be devastating. We would move into a serious banking crisis. We have to look to the success of the eurozone. We cannot stand back and watch Greece collapse either. That would have the effect of the collapse of Lehman Brothers, where the collateral damage was very serious indeed. It would have the effect of spreading all across the eurozone. Contagion is a big problem.
The eurozone has to address where it goes from here. I do not believe that there is any will among the nation states to see the eurozone collapse. But if they are not to see it collapse they must move forward into a much more federal structure. We have to see a much bigger role played by the European Central Bank and the eurozone reconciling itself to the fact that there will have to be fiscal transfers to some of these nations. A great date has been dreamt up of 2013. When that was originally dreamt up it seemed quite a long way away but it is getting nearer and nearer. Sovereign debt is guaranteed up until 2013 but one has to start asking now what will happen after 2013. Will places such as Greece and Portugal suddenly become competitive when they are not competitive today? The answer is no and there has to be a completely new construction of how the eurozone is managed. I am afraid that that all points to it becoming a much more federal organisation. Whether that means that the eurozone will succeed, I do not know. If it becomes federal, it will certainly survive for much longer than it otherwise would.