Eurozone Crisis

My Lords, for some weeks now I have been pressing the Government to allow us to have a debate on the crisis in the eurozone. Therefore, I am delighted that we have finally got one. It is extraordinary that we have not had one before. I share the surprise that it is taking place in the Moses Room rather than on the Floor of the House, but on reflection I think the reason for that is apparent: business on the Floor of the House is under intense pressure because the Commons continues, despite assurances to the contrary, to programme everything in sight automatically and therefore we are doing the job which the Commons is not doing although it ought to. Having said that, it seems even more extraordinary, given that the pressure is this end rather than the other, that the Commons has not had a large-scale debate on this at all. My noble friend Lord Lawson has pointed out that many of us predicted right from the start that problems would arise in the single currency. However, it is important to remember that the problem has also been the fact that the area has got bigger and bigger, with more and more countries involved. Therefore, the stresses of having a one-size-fits-all exchange rate becomes greater and greater. With respect to my noble friend Lord Ashdown, if we had joined, I think it would have cracked up long since. I certainly do not think that that is something we should consider for one moment in present circumstances. The real trouble is also that, while it may have broken up because of the inability to devalue, we have had on top of that a debt crisis, with the failure of the European Union countries to restrict their debt. Those two issues have been mixed up. If countries begin to leave, there will be tremendous problems in revaluing those debts as a result of the change in the exchange rate. It is one thing to say that the banks may take a haircut, but if they find that there is a devaluation on top of that, they will be skew-whiff. We need to take that into account. The issue is whether it will now be possible to patch up the existing situation, or whether it will break up. There seems considerable resistance to having a European central bank acting as a central bank or issuing eurobonds, so we also have the prospect, if the eurozone does not break up, of countries such as Greece finding themselves locked into a perpetual series of austerity measures, perhaps ending up with total rejection on the streets of Athens, or wherever, and the increasing tendency for it to be dominated by Germany, which is becoming the paymaster for the rest of Europe. In terms of national sovereignty, that will cause great concern to the individual nation states involved. I say in passing that I think it is absolutely right that the Prime Minister should have expressed views to the European community on this, whatever Mr Sarkozy may think. They may have created the problem, but there is no reason why we should not suggest how to get out of it—simply because it will have a serious effect on both our exports and on banking. If the patch-up fails, we will have a very serious situation. I am mindful of time. I am only about one-third of the way through my remarks but it has passed half time. My message to the Minister is that it is crucial that we do all we can—our Government and elsewhere in Europe—to have proper contingency plans for the possibility that the eurozone breaks up. The people who created the eurozone were very careful to lock everyone in by the process of abolishing the currency. It is very important that countries which might leave should have available a stock of banknotes and coins which could be used in such a situation. Having said that, it is not simply a question of getting the banknotes and coins. Noble Lords opposite may smile, but no one is going to get out of the eurozone, however desperately they need to do so, if they do not have alternative notes and coins. The other trouble is that the complexity of breaking up a currency union is great. We will almost certainly need a transitional period where there is redenomination of a currency and, subsequently, a devaluation of the currency. That will inevitably involve the exchange control. The experience we had of the sterling area after the war may give us some useful indications. These problems are immense. The prize offered by the organisation of the noble Lord, Lord Wolfson, may provide a solution. I hope desperately that the Treasury is giving adequate thought to this and has examined the mechanics of a country getting out of a monetary union. It is very complex. Despite the lack of time, the one thing that I want get over is that it is important that we should have those transitional plans in place. Many of us have been involved in this area before. I was the Minister responsible for implementing decimalisation and my noble friend who moved this Motion had some problems with regard to leaving the ERM, but the problems involved in getting out of a currency union are vastly greater than either of those, so it is important that we do our homework on this issue. If there is one message that ought to go out from here, it is that we should do so. This has been a remarkable debate already. I feel bound to point out that I do not think that we could have had the same debate in another place, and that of course is because we are appointed, not elected. There is not the expertise in another place that we have had today. Even though we are having this debate in the Moses Room, I get the impression that we are being broadcast—or, if not broadcast, at least recorded. If that is so, I hope that it will have widespread distribution because many of the arguments put forward today are of great importance.