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Mr. Clarke: The European Union can legislate only for the convertibility of the currency inside the Union and the impact on contracts within our jurisdictions. When such a change takes place, other member states may have to address any legal problems arising in those countries, but that is not a matter for the European Union.
I should make it clear that the most important aspect of the regulation on the legal basis of the euro is to ensure continuity of contract. It will not make legal any contract that would otherwise be unlawful; what we seek to avoid is any question of people's trying to frustrate existing contracts by saying that circumstances have changed if the ecu becomes the euro, or if other currencies go into EMU.
I believe that my right hon. Friend, with his knowledge of such matters, will discover that many people in the City of London want us to get on with the regulation, because they want to avoid the litigation and uncertainty that might otherwise result.
Mr. Peter Shore (Bethnal Green and Stepney):
Is the Chancellor aware that, if we had been subjected to the stability pact and its penalties over the past four years, since he became Chancellor, Britain would have had to pay to the European central bank more than £11 billion? Does he consider that such a penalty would be a proper reflection of his incompetence as a Chancellor, or does he think that an £11 billion penalty would be excessive, and that there were circumstances to justify his excess borrowing requirement over the past four years?
Mr. Clarke:
We have not finally settled the level of penalties, but I am glad to say that yesterday everybody agreed that we should put a cap on them. We have not yet settled the circumstances in which penalties might arise if there were an economic downturn of an exceptional or temporary nature. In any event, everything will depend on a political decision to be taken by the Council of Ministers, if such a process is put in hand against any member state of the euro that starts to get into fiscal difficulties.
Looking back over the history of deficits in every other country does not help. If we look back over the 1980s, across the whole continent, we see that deficit financing was--
Mr. Nigel Spearing (Newham, South):
Yours?
Mr. Clarke:
We would find that practically every member state might have been subject to penalties, under some of the drafts now being produced.
What is happening is that all member states and all sensible Governments in the world are getting away from heavy deficit financing, and they are having to do so. If one compares this country with the continent, one can see that we are well ahead in getting our deficit properly
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Mr. Ray Whitney (Wycombe):
May I congratulate my right hon. and learned Friend on the constructive way in which he has projected and protected our national interest at the ECOFIN discussions? Will the Chancellor assure the House that, in the months before a decision must be taken about entering into the single currency, be it at Amsterdam in June or subsequently, he and the rest of the Government will make every effort to disperse the fog of misinformation on the single currency that has been deliberately created?
Mr. Clarke:
I agree with my hon. Friend. I am grateful for the opportunity to set out the stage that we have reached in a process of work that has been going on for some months. I trust that the more we debate the issue on the Floor of the House, the more the logic of that position will get across to those on both sides of the House, because it matters to us, as my shadow said a few moments ago, whether we eventually exercise our option to join or not. There are arguments on both sides of that option that we shall have to judge when the circumstances have made it the right time to make that judgment.
I have brought back a report on a meeting of ECOFIN of a kind that I previously reported by written answer because no one was interested in having a debate on the Floor of the House. I do not come back here to say that, yesterday, I discovered some dragons and slayed them--there were no dragons. I have, however, got on the front of more documents statements of the obvious truth, acknowledged by other Ministers and by the Commission. The only query that I had at one stage was from another Finance Minister who asked, "Why do we have to make the document longer by putting this into it when it is already obvious what it means?" I have done a bit of that, and I will do more of it.
Mr. Giles Radice (North Durham):
Could the Chancellor tell the House how many countries will qualify under the Maastricht criteria for the single currency when the time comes?
Mr. Clarke:
When I produce a Budget statement, I make many economic forecasts, but it is always wise not to add to them. At this stage, I would not like to say whether a sufficient number will qualify by what date. At the moment, a large number of member states expect to go into economic and monetary union before the turn of the century. That prospect exists as a real possibility behind all our discussions.
Mr. John Butterfill (Bournemouth, West):
Will my right hon. and learned Friend confirm that, whether or not the Government decide to join the euro in the first wave, it is vital to this country's interests that the euro should be a successful and robust currency? Does he agree that it is therefore essential that the terms under which the euro is managed are as robust as possible? Does he further agree that it would be entirely undesirable for countries
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Mr. Clarke:
Those countries are likely to comprise some of our most important customers in the world, and the single market remains our most important market for the export of goods and services. When it does well, we do well; when it does badly, we slow down. It is therefore important that, within a market that we shall share with those countries, whether we join the euro or not, stability and the right conditions are sustained, which lead to the growth of trade and investment. That is the whole basis on which we are taking part in the discussions at the moment. It would be folly to walk away from them.
It is also important to ensure that, when the new arrangements go ahead, and if there is a euro zone, it does not divide the Union in other ways. It is extremely important that the countries that do not join the euro zone are not put into a situation where the procedures make them second-class members, excluded from decision making. I have to say, however, that it is bound to be the case that those who join the euro zone will be the principal movers and shakers of most of the political developments in the Union.
Mr. Tony Benn (Chesterfield):
Did the Chancellor congratulate the French Minister on the constructive role played by the French Government in bringing about a settlement of the lorry drivers' dispute in France, which has led to higher wages, shorter hours, retirement at 55 and higher safety standards? Does he not accept that that is the sort of model for European co-operation that would be welcome across all the European Union?
Mr. Clarke:
Employment policy is not a European matter. There is no European Community competence in employment matters, which are entirely a matter for the nation state, and so they should remain; so I certainly do not comment on French industrial disputes.
I know an awful lot of French politicians and business men who agree that France must go through the process of reform and structural change, especially in its labour market, that the British so painfully went through in the 1980s. We are now benefiting from the changes that we have made, in rising employment, falling unemployment and healthy prospects. The French are going through the same process. I do not join the side of those in France who seek to resist it so far as to drive up industrial costs there to an unacceptable level.
Mr. Robert Jackson (Wantage):
Does my right hon. and learned Friend agree that the financial and economic policies that the stability pact is designed to sustain are all policies that a sensible and prudent Conservative Government would in any case wish to pursue?
Mr. Clarke:
Yes. Although those convergence programmes impose no binding recommendations on us, the recommendations come to us in a form that any sensible Conservative would say was the basis of a sound fiscal and economic policy. If anything, they are a bit generous. I believe that this country should move towards balance in the medium term and that our aspirations for inflation should be to match, if possible, the best of our competitors in western Europe.
Mr. George Stevenson (Stoke-on-Trent, South):
The Chancellor will know that, of the three proposed
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