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5.2 pm

Mr. Peter Mandelson (Hartlepool): One area of policy in which we are patently not all Thatcherites now—along with almost every other—is Europe. Today's debate gives us a chance to take stock of the topical challenges that face the European Union.

In terms of the EU's current achievements, I think the smooth and efficient introduction of notes and coins in Europe's single currency suggests that that arm of European integration is on track for success—which is not to say that I think Britain should rush in and join other eurozone countries; I happen to think that Britain's caution, and the Government's caution, is right. I think that the Chancellor of the Exchequer's tests are the right tests to apply to any decision by this country, and I strongly believe that, whenever it takes place, the economic assessment of those tests must be absolutely objective. I for one would not want any other political consideration to intervene and to influence the undertaking of the assessment that will take place some time in the next year.

Mr. Ian Davidson (Glasgow, Pollok): Does my right hon. Friend believe that joining the euro is an essential condition of Britain's being a leader in Europe, and that the question for the Government is when, not if? If he does not agree that that is the question facing the Government, why does he have it on his website?

Mr. Mandelson: That happens to be the view of the Government. I supported that policy when I was a member of the Government, and I still support it. In principle, the Government are committed to joining the single currency. That is a matter of when and not if. The timing will be determined by economic tests and considerations, not political ones.

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On the subject of the economic considerations, I cannot resist commenting on what has been happening in the foreign exchange markets in recent weeks. The euro has strengthened somewhat against sterling, which is welcome to British manufacturers, but the financial press has contained much comment that the mighty dollar is set for a steady fall against the euro. If that trend continues, one of the most awkward economic obstacles to Britain joining the euro would be on course to be overcome. The significant point is that, if we were to choose finally to lock sterling into the euro, we would no longer be at risk of doing so at too high a rate. The danger is that, if the rate were too high, and if the euro were then to appreciate sharply against the dollar, that would render us uncompetitive in the US just at the time when we faced a tough task in holding our own in European markets.

Mr. Hopkins: Does my right hon. Friend not agree that the supposed strengthening of the euro is merely another facet of the weakening of the dollar? Are not both the American and eurozone economies in difficulties, with the result that the British economy looks rather strong?

Mr. Mandelson: I do not deny for a moment that the performance and underlying condition of the British economy are very strong. That could strengthen the argument that we should join the eurozone and not stay out of it. However, two things may be happening: the value of the dollar may be reflecting the underlying strength of the US economy, but the market's judgment about the underlying strength and performance of the eurozone economy may be catching up with its evaluation of the euro. Both factors are significant, but the Government's economic assessment must take account of a number of others, and I do not presume to anticipate the outcome of that assessment, or when it will happen.

The value of the single market—and a single currency, which is the sensible and logical extension of the single market—together with the consolidation of peace and individual freedom in a united Europe is the reason why I believe that we should remain on course to admit 10 additional members to the EU in 2004. My right hon. Friend the Foreign Secretary has said that negotiations should be finalised in Copenhagen in December, and I am encouraged to hear of his commitment to achieving that.

In the context of those negotiations, Britain is right to press now for a political commitment to reform the common agricultural policy at a future date. If the EU is to make a success of enlargement, deal with the many very serious strategic challenges that it faces and ensure that resources are used properly and for the real benefit of its citizens, reform of the CAP is long overdue. That tough decision must be faced sooner rather than later. However, I am not suggesting that reform can feasibly precede enlargement, nor be a binding condition of whether enlargement goes ahead.

The other week I was speaking in Poland, arguing for a strong commitment to a constructive social dimension in the European Union. It was clear in my discussions with Polish leaders and Government members that this is a decisive moment in Europe's history, not just for Poland but for all candidate countries. If we miss this chance to reunite Europe, it may not come again. I suspect that

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opposition to membership would be bound to grow in all the candidate countries that we would so badly let down were we to funk this challenge.

Much could be said about the many issues facing the European Union, but I should like to touch on just three—the work of the convention on the future of Europe and the need to strengthen the political legitimacy of the EU; the difficulties created by mass migration, how we deal with asylum and the need to police the EU's border; and Europe's attitude to the rest of the world, particularly its relationship with the United States, which I do not think is being handled in an entirely constructive and happy way.

First, I very much admire the way in which the convention is going about its job. Recently I have had the opportunity, on two occasions, of hearing lengthy presentations from members of the convention, including one of its vice-presidents, Giulliano Amato, the former Prime Minister of Italy. I believe that the convention is asking the right questions and seems to be establishing the right parameters in strengthening the role of national Parliaments and Governments in securing greater transparency and accountability in the EU's operation, without damaging the Commission's essential stewardship of the EU and its ability to work in the interests of all. The Commission has an indispensable role to play and I do not need to rehearse the arguments for that. Strengthening the hand of national Governments and Parliaments should not and need not be done at the expense of the indispensable role that the Commission plays.

There are two key points of which the convention should not lose sight in developing its plans. First, we will not achieve the popular consent that is required for Europe to contemplate further integration if we do not devise new mechanisms against unnecessary centralisation in the European Union. Many people talk a great game when it comes to subsidiarity and make a huge rhetorical commitment to it without demonstrating equal commitment to the machinery that is needed to make it a reality. Subsidiarity, and a new political mechanism to enforce it, is not a technical issue. It goes to the heart of Europe's political problems. I am not arguing against centralisation in certain respects where it is appropriate and properly agreed. Indeed, healthier and stronger subsidiarity would do a great deal to legitimise that centralisation which everyone has agreed should go ahead.

Secondly, I strongly agree with my right hon. Friend the Foreign Secretary that we must find ways to ensure that decision making in Brussels is not only more visible but more political. That is the essence of the case for abolishing the obscurity of the six-month rotating presidency and for having an elected president of the European Council for a significant period. It is not to find a resting home for some, no doubt distinguished, elder statesman—[Hon. Members: "Name him!"]—who may or may not be emerging from first-rate public service in his own country, from whatever part of the continent and at whatever time in the future.

The case is that there should be politicians on the Council who are clearly identifiable and who can take responsibility. People could hear directly from those politicians and would know what they were dealing with, and there would thus be a measure of the politics that are going on in Brussels, instead of the foggy, hazy miasma of bureaucracy that people sometimes have the impression substitutes for effective political working in and around

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the Commission. That is also the argument for more open voting in the Council of Ministers, even with all the limitations that the Foreign Secretary described, and for rationalising the present bureaucratic paradise of councils, committees and working groups that is as opaque as it is slow moving in bringing the European Union to proper and expeditious decisions and agreements on many and pressing matters.

Behind the reforms is the idea that directly accountable politicians should be in charge of Europe's direction and that they should be seen to be in charge, working in tandem with the motor of the European Commission. As I said, I do not want the Commission to be weakened. It could be strengthened—it could certainly be legitimised—if it were seen to be working in a clearer political framework in the EU.

On migration—the second issue that I want to discuss—the Government are right to insist on the EU facing up to its responsibilities. We cannot solve the problems of asylum, migration and human trafficking simply by relying on our own national border controls. The problems are common for the European Union as a whole and strengthening the EU's common border is an urgent priority. The need will be even more acute when relatively poor countries, such as Poland and others, become EU members in 2004.

Simply lecturing our partners on how they should live up to their responsibilities—as some people on the continent and indeed in this country do—will not work. It is not realistic to say to the Greeks, for example, "You deal with all the boatloads of illegals landing on your islands and solve our problems for us". Our partners—Greece is not the only one—need practical help to tackle human trafficking across their borders. We should be ready to establish the proper working of joint action teams and to use the EU budget to guarantee the security of the EU's common border. The states of the EU, acting together, can be a more effective force in stemming the flow through transit countries, tackling the causes of migration at source and securing an increased number of returns where illegal migrants are shown to have no case for asylum.

This must not become an exercise in feeding people's xenophobia in those countries, and I feel that quite passionately. I believe that addressing those issues—tackling them head on and having a proper debate about them—and formulating balanced and sensible policies is the only way to head off creeping xenophobia in Europe. I do not believe that formulating policies of that kind needs to or should conflict with the liberal and humanitarian values that we rightly uphold, not least because Europe needs some economic migrants to offset an ageing population and, indeed, to supply workers for our public services, for example.

We should be proud, too, as Britons and Europeans, of our tradition of offering a safe refuge from persecution for those genuinely in need of asylum, but I stress that that is an argument for managing our common borders with more efficiency, not for continuing with the present, unacceptable chaos, which is inevitably and rightly causing growing public concern and is a very real political threat not to the left or the right but to our democratic and proper ways of working in Europe, and we have to face up to that.

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The third issue that I want to touch on concerns the rest of the world outside Europe. Just to state the obvious, Europe faces considerable threats and considerable opportunities in the rest of the world. The organising principle that governed the international system for many decades following the second world war was, of course, that of the cold war—east versus west, freedom versus communism—and every international problem was seen through that model, through the prism of that conflict. Everyone lined up on either side and the international system was designed to mediate between those two competing blocs and ideologies to find some resolution of international problems and issues—which, more often than not, it did—but the cold war has ended with the collapse of the iron curtain and the Berlin wall, and we need to find a new organising principle around which the international system can revolve.

The organising principle that we now want to create in the post-cold-war era is one of order versus disorder. We will not bring order to any part of the world or to any regional conflict, dealing with any rogue state or integrating any pre-modern or failing state into the international system, nor will we succeed in spreading economic opportunity to the world—redressing and correcting the dark side of globalisation, which is manifested in so many ways and among so many people in different parts of the world—without America and Europe working very closely together.

America and Europe have worked very closely and successfully in sorting out the problems in Europe—we are still doing so in south-eastern Europe, in the Balkans—but Europe and America now have to work just as closely and effectively in helping to sort out problems beyond the European continent.

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