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damage. In an intervention, I said that they had already destroyed the socialist Government of France. Soon they may destroy the socialist Government of Spain.There has been no detailed discussion of those criteria in the House. No one has said how wonderful they are, and the advocates of the treaty do not seek to justify them. The Opposition Front-Bench spokesmen said in effect that they did not need to take any notice of them, and seemed to be rather shame-faced about the criteria. If the Government had proposed these convergence criteria in domestic politics, our Front-Bench spokesmen would have recognised them for the monetarist nonsense they are and would have opposed them. However, the prefix "Euro" confers almost a religious sense that a proposal has to be accepted.
People have been silent about the criteria and only my right hon. Friend the Member for Llanelli has sought to debate them. However, they have been debated in the European Parliament, because the European Committee on Economic and Monetary Affairs and Industrial Policy has written to the Select Committee on Employment of which I am a member. That committee wrote to us because of "continuously rising unemployment" and a
"wish to inform the wider public of what is at stake if allowed to continue".
The committee said that it had been consulted by the Council of Ministers about the attainment of the progressive convergence of economic policies and performance during stage 1 of economic and monetary union, the ERM. It looked at how the ERM was faring not only in this country but in the rest of the Community. It said : "considering that the unemployment situation in the Community is becoming dramatic, with a rate of 11 per cent., or 17 million unemployed in 1993".
The situation is getting worse, because quite soon 20 million people in the Community will be unemployed. It continued : "considering that these official figures seriously underestimate the real unemployment situation in the Community, as many Member States have programmes that delay or restrict registration". That means that, under stage 1 of the ERM, there are 20 million unemployed in the Community. Western Europe is the world's unemployed black spot. The committee says that the Community
"risks sliding into recession, with growth forecasts being continually revised downward, most recently to 0.8 per cent. in 1993."
Matters have got worse since the committee told us that, because, under the ERM, western Europe faces zero growth.
The committee says that
"an average growth rate of 2.5 per cent. is necessary just to stabilise unemployment ;".
Unless that growth is attained, we cannot reduce unemployment, but it says that, even if that growth rate could be attained, it would take until 1996 to reduce unemployment to its 1990 level of 8.3 per cent.
Let us examine what happened at the Edinburgh conference. The committee says :
"considering that the Edinburgh growth package is already incorporated in the Commission's growth forecasts, so that, without any additional measures, growth will continue to falter, and unemployment will continue to rise alarmingly."
The committee's letter then says :
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"considering that Japan and the USA have already taken substantial steps to boost recovery".But what of the EC? It then touches upon a point made by my right hon. Friend the Member for Llanelli. It says :
"considering that the Community budget is so limited in size that it cannot serve to deliver the necessary growth stimulus". The Community is doing nothing.
The letter then says :
"considering Community industry is confronted with a continuing deterioration in competitiveness, due to relatively and absolutely high real interest rates, which cause European currencies to appreciate vis-a - vis our main competitors ; according to the Annual Economic Report, the nominal effective exchange rates appreciated 10 percentage points between 1989 and 1992, causing a substantial loss of competitiveness to Community producers both in domestic and world markets, and consequently a continuous loss of market share over these years".
In other words, the high interest rates demanded by the ERM are crippling the European Community.
The committee's letter goes on to note with concern that the globalisation of world trade requires monetary co-operation at a world level, so even if the ERM were to work, that would not be enough. It says :
"considering that extremely high real interest rates, combined with imminent recession, threaten to cause a deindustrialization of Europe, because it is difficult to find industrial investment that promises a return of more than 6 or 7 per cent.".
The committee is talking about the deindustrialisation of the whole continent because the European economy is being suffocated and strangled by the ERM.
The committee says :
"considering that inflation is relatively low, and that the rate of capacity utilisation is now below 80 per cent., meaning that stimulation of the economy by lower interest rates or by other means might be absorbed without much immediate risk of inflation". That is what should be done, but the ERM and the European Community treaty forbid that. The committee goes on to ask the Commission and the Council to recognise that unemployment and zero growth are a serious threat to the economic, social and political stability of the Community. That means that the convergence criteria, the ERM and stage 1 are crippling the Community, according to the Economic Committee of the European Parliament writing to the Select Committee on Employment.
That committee asks the Commission to draw up criteria for what it calls real convergence criteria. That means that the present convergence criteria are not real ones but only monetary criteria. They do not deal with wealth, output, labour costs, productivity, growth or investment. If the House agreed to the amendment spoken to by my right hon. Friend the Member for Llanelli, we would get real convergence.
The committee's letter asks
"Commission and Council to take urgent steps to enable interest rates to come down to levels comparable with those of our main competitors ; considers this necessary not only to reduce the costs of private borrowing and of public debt, but also to stop the deterioration in our international competitiveness Asks Commission and Council to consider reaching agreement with the US and Japanese authorities on target zones' for currency parities of the Dollar, Yen and ECU or DM in order to bring more monetary stability, fairer competition and better economic and monetary co-ordination between the major economic powers".
This shows that the ERM does not bring currency stability, because it does not bring stability to currencies outside Europe.
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The committee then talks about the excessive deficit criteria defined in the Maastricht treaty. It says that"increases in budget deficits resulting from economic recession should not in themselves lead to tax increases or public spending cuts which could damage long-term development and drive the European or national economy further into recession."
But that is exactly what is happening.
9.45 pm
The committee sent us an explanatory memorandum which states : "Governments are sticking to a narrow conception of the route to fulfilment of the convergence criteria of EMU, which could have been achieved in the high growth environment of the late eighties, but in the present environment of economic stagnation serves only to reinforce deflation, aggravate public finance problems and therefore threaten the goal of EMU. Changed circumstances demand a change in policy."
That is what we want--a change in policy. We want a change along the lines of the amendment of my right hon. Friend the Member for Llanelli. We know that we are not getting that, but a committee of the European Parliament tells us that that is necessary.
The central bank has one aim which is price stability. On that, the committee says :
"Economic policy solely directed at monetary stability at a time of stagnating growth and accelerating unemployment reinforces the economic downturn and increases unemployment still further unemployment will grow further, revenues will go down,
unemployment-related expenditure will go up, increasing the discrepancy with the core EMU variables (3 per cent. budget deficit and 60 per cent. Government debt)."that is exactly what is happening as a result of stage 1 of economic and monetary union.
Here is something for us to think about. The committee says : "Paradoxically, Germany with its relatively high inflation rate has the lowest real interest rate in Europe As a consequence of the monetary policy in the EMS framework, many Member States have lower inflation but consequently higher real interest-rates than the EMS-anchor currency, the Deutsch-Mark. France, for example, with a much healthier economic situation than Germany, has a prohibitive real interest rate of 7.7 per cent., while Germany has 4.6 per cent. The implication is clear : to have a lower inflation rate than Germany is no longer an advantage, and this perverse effect of monetary orthodoxy on the price of capital in Europe should provide food for thought for Europe's governments and economists." The committee is telling us that it is not wise to have a lower inflation rate than Germany because that means that real interest rates are higher.
The committee says :
"the French Franc is at serious risk not because the French Franc is not healthy, but because French industry would not survive the suffocating high interest rates."
That is what Mr. Beregovoy found. He supported the policy of the strong franc and the orthodox monetary policies and it lost him the election. I hope that some hon. Members will think about those things.
I come to the last point--an opinion of another committee on regional policy and regional planning. It says :
"It could reasonably be asked if the hardnecked insistence by the Commission and the official position of the Council to continue the policies prescribed by the convergence criteria required for the realization of EMU is the right policy."
The committee is asking that question of us.
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Mr. David Winnick (Walsall, North) : Like other hon. Members, I have listened with much interest to what my hon. Friend has been saying and quoting from the economic committee of the European Parliament. Its criticisms are valid, but I find it puzzling that while it makes a valid criticism of the treaty, convergence and the rest, time and again we are told that we should be supporting the Maastricht treaty. MEPs find it difficult to understand our criticisms. Why are they so keen on a treaty when their own economic committee rightly makes legitimate and valid criticisms of the whole nonsense and poisonous set-up that would result if the treaty is ratified?
Mr. Leighton : I suppose that the committees still support the treaty, but they are debating the real convergence criteria and getting down to the detail--which is something that we have not done. The committees are saying that the ERM, with the high interest rates that it brings, is suffocating and strangling the western Europe economy, bringing rising mass unemployment and zero growth. They are learning from experience and saying that is not the way forward. The committee adds :
"It could be reasonably asked if the hardnecked insistence by the Commission and the official position of the Council to continue the policies prescribed by the convergence criteria required for the realisation of EMU is the right policy."
That question ought to be asked. I do not know whether my right hon. and hon. Friends on the Front Bench are asking it. It seems that they are not, and that they are going along with all this uncritically. The people of western Europe, however, are beginning to question the right way forward.
The committee goes on :
"The great problems created by German Unification are a striking demonstration of economic realities and not just a theoretical case study of what is likely to happen if no structural measures are enacted."
It is saying that here is a laboratory experiment of monetary union. The idea seems to be that one can embrace monetary union without worrying about real convergence and examining productivity, labour and wage costs. The committee examined the situation in Germany and found that, at a stroke, the whole of east Germany's industry had been wiped out. All the east German workers are on strike. Our attention is being drawn to those matters.
The committee asks the Commission and the Council
"to recognise that the ERM discipline required for EMU necessitates greater economic sacrifices from the more peripheral economies." It is saying that Wales, Scotland and other peripheral areas will suffer--that monetary union helps the strong and efficient, but that the weak will go to the wall.
Mr. Winnick : I am grateful to my hon. Friend for allowing me to intervene again. If the European Parliament's economic committee is so critical, rightly, why are the majority of MEPs--unfortunately, Labour as well as Tory--almost begging the House to support a treaty that, apart from undermining the basic role of the House of Commons, would cause so much harm and injury to the British people? What possible logic is there in MEPs backing such a treaty?
Mr. Leighton : There seems to be hardly any logic in that, but I suppose that my hon. Friend's question should
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be put to the MEPs. I hope that they will pay some attention to the committee's words. It asks the Commission and the Council "to recognise that unemployment and zero growth are a serious threat to the economic, social and political stability of the Community".The ERM has brought zero growth, stagnation, and rising mass unemployment, and the committee points out that that puts at risk the Community's stability. That is the point to which present policies have brought western Europe.
The committee also asked the Commission
"to draw up criteria for real convergence in the EC."
That recognises that, at present, we have monetarist criteria, not the criteria for real convergence. The only mention of that was made by my right hon. Friend the Member for Llanelli.
Appalling damage is being done by the convergence criteria, and by stage 1 of economic and monetary union. We have escaped for the moment ; we have been able to secure a more competitive pound and to reduce interest rates by 4 per cent., and I am told that as a result the economy is looking up. Given, however, that the criteria have brought mass unemployment, stagnation and zero growth to western Europe, I do not see how we can possibly vote for them.
Mr. Austin Mitchell : I support the new clause and amendments. The Government have accepted new clause 1, subject to a certain amount of re- wording. My hon. Friend the Member for Oxford, East (Mr. Smith) commented on the triumph and the victory that we had achieved, with the Government quaking in fear of our votes. It must be said, however, that none of the reports received by Parliament or any other institution is of much use against the wording of the treaty. That wording is quite specific, especially in regard to the deficit and convergence questions that form the stuff of the amendments. The treaty spells out economic policies and strategies that are bound to be deeply deflationary, and particularly damaging to this country--to the weaker, more peripheral economy that will suffer most from the deflationary processes. The reason is clear. Those who have launched the drive for unity in Europe have found that, as they cannot gain support from the people in referendums and cannot secure agreement from Governments--that becomes a horse-trading procedure--the only possible route is via monetary union.
The logic is simple : monetary union leads inevitably to a single Government. That process started with the exchange rate mechanism and is continuing with economic and monetary union, which is the core of this treaty. Central banks, however, will agree to that being the driving, motive force--the dynamic of union--only if it is done on their terms. Those terms, being the terms of central bankers, are deflationary ; that is why deflationary proposals are written into the machinery of convergence. The criteria relating to low inflation, public-sector deficit and the ratio of debt to gross national product are the criteria that central bankers want, and the criteria that amendment No. 3 seeks to relax. The central bankers want them to be included because their approach is monetarist.
Mr. Shore : It is worth recalling that it was the central bankers' committee, under the chairmanship of Mr.
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Delors, that wrote the whole draft of economic and monetary union. This is indeed a bankers' charter. The most extraordinary thing of all is that it should have been presided over by a self-proclaimed socialist French former Minister. I find that amazing.Mr. Mitchell : I do not find the outcome amazing, given the central bankers, but I find it amazing that the process should have been presided over by a socialist, whose party has now reaped the inevitable reward of the consequences of those policies.
The terms set out in the treaty are simply not acceptable to the Labour party, or to anyone who believes in the policies advocated by the Opposition. We have made clear our reservations about the ERM, and our opposition to EMU, in a series of documents passed by the Labour party conference, starting with "Meet the Challenge, Make the Change". We also made our stance clear in a successor document, whose name I forget : such documents became a bit like Chinese meals at one time, as the policy was modified continually. It was also set out in a statement by the national executive in October 1991. This was before Group 4 took over as the custodian of Labour party policy and allowed it to wander off to Brussels-- before it was clause 4 rather than Group 4 policy.
That statement made it clear that monetary union was possible only on two firm bases. Those bases are, first, a convergence in the strength, power, industrial might, productivity, investment, and dynamics of the economies and, secondly, a fairly massive machinery for redistribution. I do not refer to a minimal distribution. Amendment No. 3 contains moderate and cautious proposals. Its redistribution proposals are far more modest than those suggested by the McDougall committee in 1970, which recommended that 7.5 per cent. of Europe's gross domestic product should be redistributed if there was to be monetary and economic union. The proposed proportion It being Ten o'clock, the debate stood adjourned.
Motion made, and Question put forthwith, pursuant to Standing Order No. 14 (Exempted business)
That, at this day's sitting, the European Communities (Amendment) Bill may be proceeded with, though opposed, until any hour.-- [Mr. Andrew Mitchell.]
The House divided : Ayes 314, Noes 279.
Division No. 255] [10 pm
AYES
Ainsworth, Peter (East Surrey)
Aitken, Jonathan
Alexander, Richard
Alison, Rt Hon Michael (Selby)
Allason, Rupert (Torbay)
Alton, David
Amess, David
Ancram, Michael
Arbuthnot, James
Arnold, Jacques (Gravesham)
Arnold, Sir Thomas (Hazel Grv)
Ashby, David
Ashdown, Rt Hon Paddy
Aspinwall, Jack
Atkins, Robert
Atkinson, David (Bour'mouth E)
Atkinson, Peter (Hexham)
Baker, Nicholas (Dorset North)
Baldry, Tony
Banks, Matthew (Southport)
Banks, Robert (Harrogate)
Bates, Michael
Batiste, Spencer
Beith, Rt Hon A. J.
Bellingham, Henry
Beresford, Sir Paul
Blackburn, Dr John G.
Booth, Hartley
Boswell, Tim
Bottomley, Peter (Eltham)
Bottomley, Rt Hon Virginia
Bowden, Andrew
Bowis, John
Boyson, Rt Hon Sir Rhodes
Brandreth, Gyles
Brazier, Julian
Bright, Graham
Brooke, Rt Hon Peter
Brown, M. (Brigg & Cl'thorpes)
Browning, Mrs. Angela
Bruce, Ian (S Dorset)
Bruce, Malcolm (Gordon)
Burns, Simon
Burt, Alistair
Butler, Peter
Butterfill, John
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