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Mr. Hendrick: I thank my hon. Friend for giving way—the shadow Foreign Secretary was reluctant to take my intervention, so I will make my point in a
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roundabout way. The Opposition say that they want to see enlargement with the likes of Serbia and Bosnia entering the EU, but whenever enlargement takes place, they call for a referendum and tell people that they would vote against the proposal. Does my hon. Friend think that position is slightly contradictory?

Mike Gapes: I do not want to explain the contradictions in the Conservative party, because it has enough problems in explaining them itself. It is vital that we enlarge the EU to include all the states in the western Balkans. We do not want to be in a position in which, by one means or another, Slovenia and Croatia are in and the other countries are out.

Reference has been made—I will therefore not go into the detail—to the current difficulties in Bosnia and Herzegovina. The solution to the difficulties there and in the whole of the former Yugoslavia lies in having the whole of that economic and political area within a common legal framework and a common means of trade and of free movement of people within the European Union.

Mr. Wilshire: I want to see whether I can cheer up the hon. Gentleman about Albania, about which he has rightly made some valid points. As he knows, the little-remembered organisation, the Council of Europe, also has a role. It laid down clear conditions about Albania’s democracy, human rights and the rule of law, and the Albanians are conscious that they have not met those requirements yet. I am one of the members of the Parliamentary Assembly of the Council of Europe which monitors what goes on in Albania. We recently visited Albania, where people are conscious of the ongoing shortcomings, accept that they must do something about them and are working out ways to do so as quickly as possible.

Mike Gapes: I am grateful for that intervention, which gives me the opportunity to say that I recently met the leader of the Albanian opposition, who was on a visit here, and engaged in constructive discussions. I am sure that many people in Albania, in government and in opposition, are working together to resolve the difficulties. We need to be aware that there are still difficulties, and the hon. Gentleman has rightly pointed out that the Council of Europe, other organisations and individual Governments will work to try to assist the remarkable progress that the Albanian people have made since the regime of Enver Hoxha. We need to think back; the difference between where the country was 20 years ago and where it is today is remarkable. Sometimes, we take the changes since 1989 for granted.

When the Berlin wall came down in 1989, I was in Warsaw at a Socialist International meeting. On 9 November that year, I was visiting President Jaruzelski and Prime Minister Mazowiecki. I remember that the only person who predicted that Germany would unify quickly was Rakowski, the communist leader, who said, “Mark my words—Germany will be united within a year.” Everyone else said that there would be a confederation and that unification would take time, yet in 10 months Germany was united.

The remarkable changes of less than 20 years ago are coming to a culmination. Countries that came out of the breakdown of the cold war and the ending of the
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bloc system—or the ending of national isolation, such as that of Albania—are coming into the democratic, pluralistic European Union. That is precious. We should work to make sure that it continues, because it provides political stability as well as economic prosperity to all the millions of people in central and eastern Europe.

Mr. David Burrowes (Enfield, Southgate) (Con): Does the hon. Gentleman agree that that dynamic in relation to accession to the European Union may operate for Turkey and for the problem, which has seemed intractable for decades, of the division of Cyprus? Negotiations for accession to the European Union may pave the way for a just and viable solution based on UN resolutions.

Mike Gapes: I do not want to get into the subject of the negotiations on Cyprus, which is in a strange position because it is already inside the European Union but has a divide within it. We need to recognise that there are now ongoing negotiations, brokered by Alexander Downer, the former Australian Foreign Minister. In the past, the European Union played a role and Lord David Hannay, former ambassador to the United Nations, was involved in the previous negotiations—the abortive Annan plan. There is clearly now some prospect of a breakthrough, but considerable issues of detail still need to be resolved. We need to give the necessary support, and we hope that a resolution of the Cyprus problem in the next year or two will facilitate the continuation of the aspiration for Turkish membership of the European Union. There are also other issues in respect of Turkish membership, and they need to be looked at.

I turn to one final issue before I conclude: European Union expectations, and how we respond to them, in respect of the changes that have happened and will happen in the United States. President-elect Obama has been elected and there is growing recognition—all the commentators are talking about it—that in the next 20 or 30 years, the US focus will inevitably shift much more towards Asia and the Pacific. Europe will be expected to make a bigger contribution to resolving some of the issues on our periphery and in our neighbourhood.

That will place demands on us, and rather than opposing the European security and defence policy, we should be working hard to strengthen it. We will need much better co-ordination—not just having naval operations intercepting pirates off the coast of Somalia, as was mentioned, not just trying to save lives in Africa, and not just doing the good work done by European Union forces in the Lebanon conflict or in the other conflicts in the region. In time, there will be greater demands on EU countries to make a more serious contribution in other areas. That will place big demands, particularly at a time of economic crisis, on the budgets and commitments of some European Union states.

Mr. Nigel Evans (Ribble Valley) (Con): What the hon. Gentleman says is absolutely true. There will be a greater onus on European Union countries to deliver more in the realm of defence. Does he agree that other EU countries should be looking to their own defence budgets given that, as he knows, we provide a high percentage of our gross domestic product for defence,
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outshining several of our EU colleagues? Does he further agree that when other countries are asked to provide troops to EU missions, they should do so unconditionally and not impose conditions so that their troops do not come into any danger?

Mike Gapes: I completely agree with everything that the hon. Gentleman says. Perhaps that is a topic for tomorrow’s debate rather than today’s.

Five years ago, the European Union developed the European security strategy, to which the Foreign Secretary briefly referred. That is being revised and updated, and High Representative Solana has been asked to produce the new version that will be considered for adoption this week. I hope that we can recognise that the EU faces different challenges in 2008 from those that it faced in 2003, but that some of those challenges are enduring and will continue. It is important that we not only focus on the immediate, but recognise that we need a strategic view about how we as Europeans can work, as we have over the past 50 years, to maintain peace, stability and prosperity in our continent.

Sometimes, hearing the debates in this country and reading some of our newspapers, one would think that the argument is entirely about a small percentage point of spending on the common agricultural policy or rebates, but some of the issues are much more important than that. I hope that we can lift up our eyes and look at the big picture—to coin a phrase that was used by a former Prime Minister—and think about where we, as Europeans, wish to be in making our contribution to the security and prosperity of the whole world during the rest of this century.

5.17 pm

Mr. Edward Davey (Kingston and Surbiton) (LD): The right hon. Member for Richmond, Yorks (Mr. Hague) began his remarks by reminding the House that, in the past six months, the world has changed in dramatic and serious ways. He rightly talked about the changes in the economy and the changes in the security debate, particularly after the crisis in South Ossetia. He could have added the election of President-elect Barack Obama, which significantly changes the nature of the world’s debate on foreign policy. Those three big forces—the economy, the security debate and President-elect Obama—push the case for greater co-operation within Europe and a strengthened European Union. The speeches of President-elect Obama show that he is absolutely clear that a strong, well co-ordinated Europe is in the interests of the United States and is what it wants to see, particularly as regards security and defence policy. The process of economic co-ordination whereby European nations can work together is incredibly important.

It is only through the European Union that Britain can exercise genuine influence as strongly as possible. I have to tell the right hon. Member for Richmond, Yorks that his party’s position on many of these issues, including the Lisbon treaty, puts it in great difficulty in meeting the challenges ahead. When the Conservatives leave the European People’s party, presumably later this year, their ability to influence the debate in Europe and engage with— [ Interruption. ] I am told that it will be next year, but it is clearly coming; I am glad that the Conservatives have confirmed that that is their intention. When that happens, their ability to influence the debate in Europe, and thus the debate in Washington, will be
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significantly reduced. The Conservatives must sort that out because if they do not, their position as a putative Government will be reduced.

The summit later this week will focus, quite rightly, on the financial and economic crisis; the question is how well the EU is doing now, and how well it will do in future, in responding to this urgent crisis. One thing is absolutely clear: we are much better placed than in previous serious downturns because of the single market. Indeed, we are much better placed than we were in the 1930s—parallel economic times to the ones in which we are living. If we did not have the single market, the calls for protectionism and trade barriers across Europe would be loud and potentially devastating. It is fantastic that we have that single market.

There is no room for complacency, of course. When one listens to some of the remarks of Prime Minister Berlusconi, for example, one worries slightly about the commitment of some of Europe’s leaders. Nevertheless, the fact that the European Union is there and has tight rules prevents people such as the Italian Prime Minister from undermining the importance of open and free markets, which will be critical if we are to escape from the current economic downturn. I was pleased to see in the Foreign Secretary’s statement on Monday, ahead of his meeting, that the Doha round will be re-engaged later this month. That is absolutely critical and backs up the importance of the single market.

That vital background notwithstanding, I do not think that Europe has necessarily covered itself in glory in the past few months. It had a shaky start once the banking collapses were well known. There was a summit on 4 October in Paris, where Germany gave certain commitments that it reneged on a few days later. It was a pretty shaky start, but I am pleased to say that since then there has been a lot more agreement, and that the EU has worked pretty impressively. Through the EU’s proposals on the stimulus package a few weeks ago and at a number of subsequent meetings, the EU has co-ordinated its policy ideas far more effectively than it could otherwise have done. Arguably, it has done that better than the United States, which is quite remarkable.

There is no single treasury in the EU, and nor should there be—and nor will there be one before colleagues on the Conservative Benches start raising ghosts—but what the EU has done in the last two months has shown how well policy can be co-ordinated. The theory of international policy co-ordination makes absolutely clear the importance of co-ordinated fiscal policy boosts in this sort of economic climate. The multiplier effects are much greater. The Prime Minister was quite right to say that if Britain and France have fiscal stimuli and other countries do not, there is a danger that the benefits to Britain of our fiscal stimulus will be reduced because some of it will leak into extra imports. That is why the Government are right to put pressure on the Germans, the Irish and those in other member states and to argue that they should join in the policy co-ordination on fiscal stimulus. We will all benefit if they do so.

Mr. Hendrick: I totally agree with the hon. Gentleman. I would venture to suggest that there are two reasons for the United States being in more difficulty than the European Union. First, the degree to which the state must get involved in order to provide a stimulus is anathema to the current US Administration, and, secondly,
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it has a lame duck President. Everyone is wondering what President-elect Obama would do in such circumstances. Although I agree that the EU has handled the situation much better than the United States, I have described the probable reasons for that.

Mr. Davey: I think that that was supposed to be a helpful intervention, but we know what President-elect Obama wants to do. He wants to do the sort of things that Britain, France and the European Union are doing. He has said that clearly on the record.

There has been some debate in the press, and earlier in our proceedings, about the position of the Germans on the fiscal stimulus. The Foreign Secretary read out figures referring to 1 per cent. of GDP and so on. Yesterday, I was privileged to be able to speak to some German parliamentarians who gave me the true facts behind the German stimulus package and told me how they thought things were working in the Bundestag. The €50 billion stimulus package that has been put forward contained many measures that they were going to introduce any way, so it really does not amount to 1 per cent. of GDP. It was fair for the Foreign Secretary to read out those figures, but they do not quite stand up to the analysis he provided.

However, Chancellor Merkel is having a few problems, and it is clear that she might be changing her mind as the hours tick by. She has called a crisis meeting with the German equivalent of the CBI on Sunday, and as German output is plummeting, the cries that action be taken by the German Government are getting louder. I hope that by Thursday or Friday, Chancellor Merkel might have moved on a bit and that our Government will therefore keep the pressure on. The problem is that she is slightly trapped—as is the Finance Minister who is her Social Democrat partner—by probably the only political pledge that they gave in order to have a balanced budget. Electoral problems—internal domestic German politics, not economic rationale—are actually preventing the Germans from going for the stimulus. Let us be absolutely clear about that. We have got to persuade both the Chancellor and her colleague that it is in their political interest, and in Germany’s interest, to join in with this stimulus. If that can be done, it will be far more effective.

The other issue relating to the economic crisis in Europe is the position of the euro, and the right hon. Member for Richmond, Yorks had some fun on that point. There are different views on that, both in this House and across Europe. Many of the smaller European countries have looked at Iceland and Denmark and said, “We’re really delighted that we are in the euro.” Talks with the bigger countries have also revealed that they are pleased because the euro has meant that there have not been big depreciations in the weaker economies, which would have caused problems for the German economy and the other big economies, and made their recovery much more difficult. There is a strong argument to suggest that the euro has been a good thing for those who are already in it.

The next few months and years will be a testing and interesting time because we will see whether the euro is as strong as those of us who agree with it believe it to be. There is no doubt that the test for the euro was always going to be the first major recession—and this will, I fear, be the recession of all recessions. If the euro can
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withstand a recession, it will show that an optimal, single currency area in Europe is completely sustainable. The pressures that exist have already been shown by what has happened in the bond market and the fact that the different yields on bonds between Germany and some of the other weaker economies have been increasing in recent weeks, particularly in Italy, Spain and Greece, which is not surprising given the problem of their debts. However, no one is talking about those countries being forced to leave the single currency, and that is a fascinating and significant fact. Who knows whether that will still be the case in a year’s time, but if the euro does survive with all the current member states intact, that will—

Mr. Cash: Will the hon. Gentleman give way?

Mr. Davey: In a second. I was waiting for the hon. Gentleman to intervene and if he lets me finish this sentence, I will bring him in. If the euro does survive this period, that will make a strong case for it, and some of the people who have been opposed to Europe will have great difficulty knocking that down.

Mr. Cash: Has it occurred to the hon. Gentleman that, over a fairly extended period, there has been a failure of the Lisbon agenda, the total failure of the stability and growth pact, higher and higher increases in employment—including in Germany, France and Spain—and massive over-regulation? The real problem that that encapsulates is not the possibility that the euro might somehow prove to be successful, but that the people in Europe will become increasingly concerned that it will implode and with it the democracy on which the whole of the European Union, through its individual member states, ultimately depends.

Mr. Davey: The hon. Gentleman did rise to the bait slightly in that intervention, and his analysis of economic matters was rather partial. I hope that he does not really want the euro to implode—well, he probably does want that to happen—because it would not be in the interest of European countries or Britain if it does. What I have been reading, both from politicians and in the opinion polls, suggests quite the reverse of what the hon. Gentleman said. People in the eurozone are drawing quite a different conclusion from him and saying, “Thank God we’ve got the euro.”

Mr. Hugo Swire (East Devon) (Con): Is the logical conclusion of the hon. Gentleman’s argument that during this extremely fragile economic time we should consider joining the euro? If so, what terms does he think the UK might secure?

Mr. Davey: Let me explain for the hon. Gentleman that we do not think that Britain should join the euro in the near term. There was some inaccurate reporting—just for a change—of the Liberal Democrat position, but it has been our position for more than one Parliament that UK entry into the euro could not happen in the space of a few years. The situation would have to converge and develop over a period of time.

It will be particularly interesting to see whether this downturn changes some of the British economy’s underlying characteristics, however, which might make it easier to join, particularly with respect to monetary markets and
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how they operate. These are interesting times. There are a lot of questions to which none of us in the House yet knows the answer. I am looking forward to having this debate in a year or two’s time, when the dust has settled and when I happen to believe that the evidence will be on our side.

Mr. Swire: Does the hon. Gentleman believe that it is not entirely impossible that some existing members of the euro will not be members in two or three years’ time?

Mr. Davey: I have already said that that is of course a possibility, but I do not think that it is going to happen, given the evidence that we have seen so far. However, I readily accept that these are early days.

Mr. Evans: The Government’s policy is to have a referendum of the British people on the euro before we would accede to it, but they have a history of reneging on referendums. Is the Liberal Democrat policy that the people should be consulted before Britain would accede to the euro?

Mr. Davey: Yes.

The other major issue at the summit is climate change, which has been a critical policy priority for the French presidency. Getting a deal on climate change is critical. I rather regret that the right hon. Member for Richmond, Yorks devoted only a tiny portion of his 40-minute speech to that critical issue, because in many ways the decision that will be taken this week is potentially historic. What concerns Liberal Democrats here and in Brussels is the backsliding that we have seen both from the Germans and from Poland and other countries in central and eastern Europe. We urge the Government to stand absolutely firm on the agreements that member states made only last year.

There is an historic opportunity at stake. We now have a President-elect in the United States who was elected on a ticket to take real measures to tackle climate change. Opinion in China has changed dramatically in recent years. The Chinese Government are talking about moving on climate change. It would be deeply ironic and quite disastrous if the European Union, having been the proponent of major measures, suddenly relaxed its pressure on the rest of the world on climate change. We have the discussions in Poznan—we do not quite know how they will conclude—but crucially, we have the Copenhagen summit this time next year, too. Therefore, we have to show leadership on climate change in the European Union.

As both the Prime Minister and we on the Liberal Democrat Benches have argued, the current economic circumstances present us with a massive opportunity. We should be investing in new technologies and trying to develop more green-collar jobs as a result of our current situation. The Foreign Secretary was quite right to call for a low-carbon economy as the vision for dealing with both the economic crisis and the climate change challenge.

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