My hon. Friend is absolutely right. The Social Democrats are in coalition with the Christian Democrats and are being dragged along. German working people and trade unionists face a choice: they can vote either for a collaborationist Social Democrat party, or for a Marxist party that is based on what is left of the East German Communist party. They find that a very difficult choice, and I suspect that many will not vote at all. If the Social Democrats came out with a strong, democratic socialist, Euro-critical position, I suspect that they would do much better in the elections than if they were just dragged along by a right-wing, deflationist Government.
There are many reasons why I think that Britain is better placed to weather the storm. The major one, of course, is that we are not members of the eurozone. One thing on which I congratulate my right hon. Friend the Prime Minister is having kept us out of the euro. For the past 12 years, we have had the advantage of having our own currency. There has been substantial sterling depreciation, which has been helpful. I know that there are costs and benefits to depreciation, but by and large it has been beneficial; there has been a slight improvement in our balance of trade in these difficult times, and it is right that there should have been. Unfortunately, we have had an overvalued currency for some years, but it is now coming into line. That is a necessary correction, and I hope that we sustain at least some of that depreciation for the longer term.
We also have control of our interest rates, and can adjust them monthly to benefit the economy. There was a massive drop in interest rates, and that was followed in other countries, too. It affects those with mortgages. Members of my family have had their disposable income increase by £300 in a month. That has put an enormous boost into the economy just when it was needed. That is another benefit. There has also been some printing of money to help us on the way.
The crisis in the eurozone is most interesting. There is speculation about whether it will survive at all. In May, the German Finance Ministry was drafting plans to prevent default by countries on the edge of the eurozone. Such a default could lead to a full-blown collapse of the EU's monetary system, yet years ago a solemn pledge was given to German voters that the German political elite would never leave German taxpayers exposed on the hook of the debts of half of Europe, which is what is happening. The countries involved have a dilemma: do they save the eurozone, or look to their own economies?
The eurozone's bail-out liabilities could be enormous. Italy is in serious difficulties. It has net debt of 111 per cent. of gross domestic product—that is more than twice our figure. Austria has loans to eastern Europe that are equivalent to 70 per cent. of GDP. Spain has serious problems, and we know about the position of Ireland. We should dwell on Ireland; if it had not joined the eurozone, it could have depreciated its currency in line with the depreciation of sterling and saved itself an awful lot of pain, as its major trading partner is, of course, Britain. It blames us for depreciating, but what were we to do? We could not sustain our currency at an overvaluation just to help the Irish; we have to do what we must to help our economy. I have even suggested to Irish politicians that they might re-introduce the punt and devalue to help their economy. They are rather shocked at the thought, but it is a practical proposition.
The eurozone is in a critical state, especially for Germany. In Germany, a mortgage lender, Hypo Real Estate, is imploding, despite the fact that it has been lent €87 billion of state money. The German Finance Minister, a Social Democrat, has said that nationalisation is inevitable. If Germany does not nationalise it, there could be a collapse with an impact similar to that of the collapse of Lehman Brothers. There are really serious problems inside the eurozone, and Germany has a dilemma: does it move towards an interventionist policy, in which it borrows and spends considerable amounts of money to save the German economy, or does it spend even vaster sums of money bailing out weaker members of the eurozone? It is a real question whether the eurozone can survive. If one or two members on the outside start seriously to default, and perhaps to withdraw, the whole shooting match could be over. As I have said in previous debates, there are those in Germany who, quietly behind the scenes, think that there is a possibility—or probability—that eventually Germany will withdraw and go back to the Deutschmark, and that national currencies will once again be created.
This year, 700,000 German workers will lose their jobs. They will not be at all pleased, to put it mildly, to see vast sums of what is effectively German money being used to bail out weaker members of the eurozone. I suspect that there will be a point at which some politician will be brave enough to say, "The eurozone has gone far enough, it does not work, and it does not benefit Germany or anyone in Europe."
Currencies are necessary as shock absorbers between economies. We are not one economy; we are an association of economies that trade with each other, and those economies must have a degree of independence to ensure that they are managed at a national level, not at a supranational level by bureaucrats in Brussels.
European Affairs
Proceeding contribution from
Kelvin Hopkins
(Labour)
in the House of Commons on Tuesday, 16 June 2009.
It occurred during Debate on European Affairs.
Type
Proceeding contribution
Reference
494 c259-60 
Session
2008-09
Chamber / Committee
House of Commons chamber
Subjects
Librarians' tools
Timestamp
2024-04-21 12:17:29 +0100
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