By Tim Montgomerie
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In the late 1990s the Tories became the anti-€uro party but in the Commons yesterday a Tory Treasury minister would not echo Boris Johnson's comments and say that it was time for Greece to leave the single currency and pursue an export-led recovery. The frontbench's reluctance contrasted with the anger of Jack Straw and a host of Tory backbenchers, who all called for Greece to quit the currency zone.
It was the Eurosceptic Labour MP, Gisela Stewart, who yesterday forced an emergency statement from the Treasury. Ms Stewart wanted to know what were the Treasury’s contingency plans in the event of a Greek default.
George Osborne was attending a finance ministers meeting and it was left to Mark Hoban, the Financial Secretary, to answer on behalf of the Treasury. He declined to detail any contingency plans but did assure the House that the UK would not participate in any European bailout of Greece:
"We did not participate directly in the May 2010 package of support for Greece, and there has been no formal suggestion of UK bilateral loans or use of the EFSM, which is backed by the EU budget. The UK participated in the May 2010 package for Greece only through its membership of the IMF. So the burden of providing finance to Greece is shared between the IMF and euro area member states, and we fully expect this to continue. Our position on that is well understood across the euro area."
Jack Straw, the former Foreign Secretary, was unimpressed by Mr Hoban's reticence and, enjoying his own backbench freedom, urged the Government to declare that the €uro was dead in its current form (video here):
"Will the Minister not recognise that there is now a mood change in Europe? Der Spiegel, the German magazine has had a cover story [image on right declaring "Sudden and Unexpected"] contemplating the end of the euro as we now know it, and Mr Charles Grant, the well known europhile, has done the same in The Times today. Instead of sheltering behind complacent language and weasel words that we should not speculate, the Government should recognise that this eurozone cannot last. It is the responsibility of the British Government to be open with the British people now about the alternative prospects. Since the euro in its current form is going to collapse, is it not better that that happens quickly rather than it dying a slow death?"
Mr Hoban responded by noting that Mr Straw once wanted to take Britain into the €uro but refused to join him in stating that the current arrangement was over. "We have a strong interest, though, in the continued stability of the eurozone, as it is our major trading partner," said Mr Hoban, "Continued instability in the eurozone could be a factor in holding back the recovery of the British economy."
A succession of Tory MPs then urged the Treasury to admit that the game was over and Greece didn't need another bailout.
- Greece is already bankrupt said John Redwood and good money shouldn't be sent after bad: "We need an urgent conference of all the interested parties to reschedule and re-profile Greek debt in an orderly way to avoid huge systemic damage, while accepting that the problem has already occurred. Greece went bankrupt more than a year ago, but the Ministers of certain countries cannot believe it and are wasting taxpayers’ money on trying to pretend that it has not happened."
- Douglas Carswell noted that Britain would bailout Greece as part of the IMF and he wanted the IMF to apply its normal standards of conditionality: "Most previous IMF rescue packages that I can think off have generally involved first a currency devaluation and secondly a debt default—or, should one prefer the term, a restructuring. Does the Minister agree that the IMF should be consistent with that approach in regard to Greece, and should not the IMF oversee a decoupling from the euro and a default on the debts, which would be consistent with its approach in other instances and rescue packages?"
- Julian Brazier agreed that devaluation was essential for Greece: "Does he accept that a country running a large balance of payments deficit can pay off foreign debts only if it is able to reverse that balance, and that to do that, it has to devalue? The man from Brussels cannot make water run uphill."
- Anne Main said that the Greek people had had enough of impossible auseterity and so had her constituents: "The next debate is about trying to cut back on pensions and save taxpayers’ money, yet we are still planning to put through the IMF—a third party—taxpayers’ money that we are having to scrimp and save at home. My constituents will not stand for it. I am disappointed to hear the language of the Government at the moment, which seems to imply that Greece is an economy that is too big to fail. That is the same thing we had with the banks. We should put Greece out of its misery—it is flatlining—and no more of our public money should be sent abroad to Greece, even through the IMF. There are riots on its streets. Its people do not like the medicine being offered to it, and we cannot expect it to take any more. Let it depart peacefully from the euro. It cannot be sustained as it is; it is just good money after bad."
And the final word to Labour veteran Dennis Skinner:
"Does the Minister recall that when the Tories and Liberals were in opposition and sat over here on the Opposition Benches, the Tories wanted to see the collapse of the eurozone, but the Liberal Democrats thought the opposite and wanted to prop it up? Here we are today with a great opportunity to see the back-end of the euro, and I can only reach the conclusion, based upon his complacent answers, that the Lib Dems are running the coalition."
It's a nice line but the reality is that the Tory frontbench doesn't fundamentally disagree with the Tory backbench. It does think Greece would be better off outside of the €uro. It does think it needs to devalue. It is, as Sajid Javid MP explained yesterday, happy to delay the almost inevitable Greek devaluation until the wider European economy and its banks are a little stronger. It doesn't want to be the government that precipitates what will be a very turbulent period in EU history. For the reasons Paul Goodman set out last week, Cameron and Osborne don't want to be the first European government to pull the finger out of the dyke.
> More in Hansard.