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Mr. Nick Clegg (Sheffield, Hallam) (LD): As a newcomer to this Committee and a pro-European one at that, I can be lulled into a great sense of comfort that there is such a great deal of cross-party consensus about the Bill and clause 1, notwithstanding the eloquent evidence that we have heard from the hon. Member for Liverpool, Riverside (Mrs. Ellman) about the plight of Michael Shields and the clear failings in the Bulgarian judicial system, and notwithstanding the slightly more—how can I phrase it?—ideological objections to the whole process of the hon. Member for Stone (Mr. Cash).

Mr. Cash: No, practical.

Mr. Clegg: Practical concerns. Therein lies a great and, I fear, adjacent debate that will no doubt arise at another time.

Notwithstanding that cross-party consensus, some tension and legitimate concern arises from clause 1 and the terms on which Bulgaria and Romania are joining the EU. The treaty of accession provides a short-term safeguard clause that could jeopardise the final entry of Romania and Bulgaria into the EU, but only for 12 months. The hon. Member for Thurrock (Andrew Mackinlay) raised that issue on Second Reading. It is a legitimate one, and it has been echoed by the hon. Member for Altrincham and Sale, West (Mr. Brady).

What happens if Romania and Bulgaria are proved to have failed in their final preparations to become members of the EU? I fear that we are caught in a cleft stick. The accession treaty commits us to accepting Romania and Bulgaria into the EU almost come hell or high water. While there is a safeguard clause, it only defers but does not permanently postpone or put off accession. At a political level, once they have joined, the ability of the EU authorities to exercise any leverage over the domestic reform process is significantly weakened.
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As I mentioned on Second Reading, the manner in which the final stages of the accession of Romania and Bulgaria are handled would set an important precedent for much more controversial accessions, notably that of Turkey, if the negotiations with Turkey are ever concluded. The EU needs somehow, within fairly narrow parameters, to exercise influence over Romania and Bulgaria in the remaining stages of the accession process in as rigorous a manner as possible.

I draw the attention of the Minister to the annexes, with which he will no doubt be familiar, to the accession treaty, which spell out in considerable detail what Romania and Bulgaria are expected to do to get over the final hurdle of their accession. I cite annexe IX, headed, "Specific commitments undertaken, and requirements accepted, by Romania at the conclusion of the accession negotiations on 14 December 2004". It says that Romania—the same applies to Bulgaria in a separate annexe—undertakes

to enact anti-corruption legislation, and ensure

to introduce

and so on.

In a separate annexe, there are similarly detailed requirements for Romania to respect the Schengen action plan and ensure a high level of control and surveillance at Romania's external borders, which will of course act as the external borders of the EU. Those are substantive commitments set out in some detail.I have no doubt that the Commission will return to an examination of those commitments when it draws up its own monitoring surveillance report—I forget the formal title—in spring next year.

I am grateful to the Minister for his confirmation that, if the Commission recommends a further 12-month delay because of any failure to implement those annexes, which I think are a legally binding part of the accession treaty alluded to in clause 1, the Government will accept that as necessary. In common with previous speakers in the Committee, I ask what will happen if, after that 12-month period, Bulgaria and Romania have failed to implement the requirements to tackle corruption, ensure a secure external EU border, reform the judiciary and implement the necessary legislation to root out malpractice in the criminal justice system? What could we possibly do? The Minister referred to a period of three years during which the EU would be able to take some exceptional safeguard measures, but I should be grateful for any further detail he can provide about how they would operate during that crucial period, after which, I take it, there would be almost no meaningful leverage over the domestic reform process.

Kelvin Hopkins: My right hon. Friend the Minister for Europe referred to privatisation and his opposite number on the Conservative Front Bench, the hon. Member for Altrincham and Sale, West (Mr. Brady) talked about corruption. I want to bring the two subjects together.
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In other accessions to the European Union, we have seen rushed privatisation and a degree of corruption. In Hungary, for example, the leader of the alleged Socialist party made a personal fortune from privatisation. His party is now so keen on privatisation, so right-wing and so free market, it is no longer a socialist party in any sense. Indeed, the New Statesman cast a slur on the character of Baroness Thatcher by suggesting that, if she were Hungarian, she would vote for the Socialist party. That is unfair, because it is not at all a nice party. It is significant, however, that the Hungarian opposition party, which is Catholic-based, conservative and anti-communist, resists the privatisation of public services, and has become the party of the left.

The Catholic collectivism that was typical of Christian Democrats in Europe is being broken down by a rush to neo-liberalism and the free market. That is where the real division is occurring, significantly in Germany where Angela Merkel is trying to move away from Catholic collectivism and towards the market. That causes tension in Germany, even in her party.

I look forward to Bulgaria and Romania becoming members of the EU. Neo-liberalism and the free market should not be conditions of their membership. One reason I am so keen on enlargement is that it would inevitably mean a much looser association of member states, where each country could determine its own economic policy according to its democratic choices. That is the Europe I want and I think one or two Opposition Members want that, too. They may choose to take a much more conservative approach to running economies. I might choose a more social democratic or democratic socialist approach, but we would have that democratic choice; it would not be determined by the EU.

Mr. Cash: As the hon. Gentleman knows, I have attempted to put those arguments on a number of occasions. Does he agree that it would be better to try to reform the system before it implodes with possibly extremely dangerous consequences for democracy throughout Europe? We can draw on the example of what happened in France recently, which some of us predicted, as an indication of the creation of a compression chamber that simply does not work.

Kelvin Hopkins: I have some sympathy with what the hon. Gentleman says. In Hungary, the economy is doing well in some senses, but poverty—certainly relative poverty—has increased. It is said that some people were better off under communism. If the market leads to poverty and to a serious division between rich and poor in those countries, people will say such things.

Mr. David: Does my hon. Friend accept that the idea of a market economy is fundamental to the whole concept of the European Union?

Kelvin Hopkins: We have lived in a market economy since the second world war, but the extent of the state's role in the economy and the degree of public or private ownership is for each country to choose. Since the second world war, we have had a mixed economy, which worked extremely well in the first three decades. I advocate that approach to running our economy even now. It certainly worked better than what has happened
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since. In many areas of Europe, public utilities and services are still run in a traditional, social democratic, post-war way and they work extremely well. I would argue that case for the UK as well as for Europe.

In Russia, after the collapse of communism, there was a rush to privatisation and at the same time the adoption of a hard rouble policy, which caused economic chaos. There was a serious reduction of output and living standards fell. Only when the rouble was floated and the process slowed down did the Russian economy begin to recover.

Each country should be able to choose the exchange rate appropriate to its economic needs. One reason why I support the Chancellor so strongly in keeping us out of the euro is that we can choose the exchange rate suited to our needs. Exchange rates are essential springs and buffers between economies. They are necessary; they can be stable, there can be a pegged system, but they should be changeable. That is how we should operate with the new member states. They should not be encouraged to join the euro. While they are weaker, they should be able to decide what is best for their economies—choosing their own exchange rates, interest rates and fiscal balance between tax and spend.

Bulgaria and Romania should be allowed to decide what is best for their economies and not be told how to run them from outside by the EU. That may lead to problems and voices may call for a return to the old authoritarian system, although that would not be the wish of the democrats in the EU. The EU should not press strongly that those economies operate in a particular way; it should allow them to operate as is best in each case. We should open our markets to some of their goods and allow them to depreciate their currency if that would make them more competitive. We should urge them to adopt proper rules for their workers, such as good trade union standards and employment rights, so that workers have a proper share of the benefits of their developing economies, but we should not insist that they privatise their economies.

Recently, I visited Austria and Hungary with the Rail Freight Group to look at rail freight facilities. In Hungary, we spoke to senior figures in the Government and the railway industry about rail freight. The bulk of the rail freight system is still publicly owned and it is doing well. It makes a profit and provides the Government with funds that help the Hungarian people. There is a small private sector that is losing money but there is still pressure to privatise. If the Hungarian rail freight system was privatised and bought up, perhaps by a Russian oligarch with plenty of spare cash, the profits would not go to the Hungarian people. It could go towards buying expensive football clubs in Britain—who knows? At present, the benefits of that publicly owned freight system go to the Hungarian people. That is what we should allow those countries to do, not force them to privatise.

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