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The right hon. Gentleman mentioned the issue of a levy on financial transactions, which is something that we have been proposing for some time. Originally, the Conservatives opposed it; then they said they would support if it was at a multilateral level; then they said they would support it even if it was not done multilaterally; and then they retreated into saying that they would support it if it was multilateral. That is about a policy a day, but it is the same policy that is being reinterpreted every day. That is the reason that people have very little trust in Conservative economic policy.

I come now to the European Council discussions on the economy. I just have to say this: why does the Conservative party want to attack the European Union all the time? Three million jobs depend on our European membership, more than 50 per cent. of our trade depends on Europe, and 750,000 companies depend on Europe, so why does the right hon. Gentleman want to go to the European Council-if ever he were elected-to say that he wants to renegotiate our treaties in respect of membership of the European Union? Why does he want to repatriate the social chapter and employment legislation to Britain? Why does he threaten that he is going to have a sovereignty Act for this Parliament to suggest that the law affecting the European Union could somehow be modified and amended by doing so? Why does he resist the European advice that we should work together so that we do not put the recovery at risk?

The announcement by the Conservative party today was first to withdraw £7.5 billion from the economy this year- [ Interruption. ] The right hon. Gentleman says that it is good to hear that, but he also wants to withdraw the support that is necessary for the economy to have a sustained recovery. The first thing that the Conservatives have done today is make it more difficult for us to retain the jobs, businesses and industrial infrastructure that are necessary, despite the fact that every bit of advice that we are getting-and that he is getting-is that we must maintain the investment necessary for recovery.

The Conservatives must explain why, at a time when people are worried about the recovery, they wish to withdraw support for the recovery. The second thing that they have got to explain is their panic measure today on national insurance- [ Interruption. ]

Mr. Speaker: Order. I gently say to the Prime Minister that I know he will want to focus his reply very specifically on the European Council- [ Interruption. ] Order. The shadow deputy Chief Whip has got something wrong with his head and I am worried about him. He does not have to keep shaking it. The Prime Minister will talk about the Council and, of course, the policies of the Government.

The Prime Minister: The policy of the Government is to make sure that we have a sustained economic recovery; the Conservative party policy, I am afraid, would put that recovery at risk. Then the Conservatives are going to spend nearly £30 billion on tax cuts in the next five years, which puts front-line public services at risk. People will understand that these panic measures by the Conservatives will not help a recovery, that they will mean public spending cuts and that they will put sustained investment in our economy at risk.

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We are the party that believes in Europe: it is the party opposed to Europe. We can see that if the Conservative party had ever been willing to change, it would have changed on Europe. It has not changed on Europe, and it has not changed on anything else.

Mr. Nick Clegg (Sheffield, Hallam) (LD): I wish to add my own expressions of sympathy and condolence to the family and friends of Rifleman Daniel Holkham, from 3rd Battalion the Rifles, and Lance Corporal of Horse Jonathan Woodgate, from the Household Cavalry Regiment, both of whom tragically lost their lives in Afghanistan this week.

I also wish to join the Prime Minister in expressing our condolences to the families and friends of the dozens of victims injured and killed in Moscow. Londoners especially, given the horrors of 7/7, will feel a strong bond of sympathy for the families of commuters affected in Moscow.

I thank the Prime Minister for his report from the European Council. It will most probably be his last European Union summit. I imagine that he will be feeling some relief about that, given that in a few short years he has gone from lecturing his colleagues in Europe on how not to run an economy to teaching them how not to run an economy by example. At last week's summit, the Prime Minister called in some of the few favours he has left from his colleagues in Europe to delay a decision on the alternative investment fund managers directive. Instead of defensively trying to stave off damage to the City, why did he not take the chance to show real leadership on the reform of our banking system? Real leadership is breaking up the banks. Real leadership is imposing an additional levy on their profits until that is done. Real leadership is getting banks lending to small, viable companies that are going to the wall.

Will the Prime Minister report on any conversations that he had with President Barroso, the President of the European Commission, as this summit was after all their first meeting since the Commission issued its damning verdict on the Prime Minister's handling of Britain's huge budget deficit? No doubt the European Commission will today be equally dismayed by the shiny promises of tax cuts from the shadow Chancellor, who is not in his place-he must be preparing for the mauling that he will get on television tonight. He has no idea how he will pay for those tax cuts. Labour and the Conservatives seem to be competing to come up with the most ludicrous fantasy announcement paid for with bags of gold found through efficiency savings. I am not sure who is winning, but I am certain that no one is falling for it.

On the bail-out for the Greek Government, as the Prime Minister knows, instability in the eurozone can and will rapidly turn to instability across the European Union, which will affect us too. Given that, I found the lack of details about the potential Greek bail-out a little concerning. Yes, Greece has not yet formally asked for help, but we have a deal on the table that is meant to calm the markets' nerves but gives us very little in the way of detail. The Prime Minister is frowning, but can he tell me what will be the exact role of the IMF in this deal? How will the burden be broken up between the other eurozone countries? What is the maximum level of support likely to be given to Greece in the event that it asks for help and, crucially, what conditions will be put on Greece in return for this support?

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The Prime Minister: I will tell the right hon. Gentleman the facts. There is a limit on the amount of support that the IMF can give. It is limited by its constitution and how it has always done things. That is a matter that we will discuss with both the IMF and the eurozone at the right time. It is limited by the regulations that it has.

On the right hon. Gentleman's other points, in the Budget last week we reached agreement with the banks about £92 billion of additional lending in the next year. We also reached an agreement-and said in the Budget-that proper supervision of that would be needed, so that the public and small businesses could be assured that the money was being paid to them. So we are setting up a small business mediator who will act on behalf of small businesses to try to resolve the issues that have left them without the funds that they need- [ Interruption. ] An Opposition Member says that that is ridiculous, but we have to protect small businesses to ensure that they can grow. As far as the banks are concerned, we are taking the necessary action.

As far as directives are concerned, we did not accept the compromise proposed by the European Finance Ministers. We will therefore renegotiate that over the next period of time, because we are determined both to have proper regulation of those industries and, at the same, to allow companies to have access to the full range of countries in the internal market, and that is what we are doing.

As for ludicrous policies, the right hon. Gentleman would win the race any day.

Ms Gisela Stuart (Birmingham, Edgbaston) (Lab): I prefer the Prime Minister's posters with a smile to the Leader of the Opposition's airbrushed images. There were reports in the press over the weekend that Angela Merkel is calling for economic government, which would require treaty changes. If that were to be the case, can I press the Prime Minister to make a commitment that that would also involve a referendum in this country?

The Prime Minister: We made it clear a few months ago-this was a decision that we asked the European Union to make-that there would be no further constitutional or institutional change of that sort over the next 10 years. We made it absolutely clear that the European Union should not be contemplating further constitutional or institutional change in the way that is suggested. As for improving the way the European Union works, there is a case for that improvement to be made, and we will join those forces at work in this taskforce to ensure better and improved governing of the European Union.

Mr. David Curry (Skipton and Ripon) (Con): Does the Prime Minister agree with the French Finance Minister Christine Lagarde that the eurozone has no hope of achieving sustainable recovery while the huge problem persists of a massive German trade surplus and persistently low consumer demand in Germany, and will he express those sentiments to the German Chancellor when he meets her?

The Prime Minister: I am grateful to the right hon. Gentleman for his comments, which are, in essence, supportive of our economic policy. I am grateful for that, first, because in the European Council conclusions
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we say that we have to look at the issues that have arisen from the severe imbalances in the European Union. Secondly, it is clear from what he says that he supports the maintenance of a stimulus and the public support necessary for the economy to have sustained recovery. In that, he is at odds with those on the Conservative Front Bench, who want to take £7.5 billion out of the economy, which would mean lost jobs, lost businesses and lost economic progress.

Mike Gapes (Ilford, South) (Lab/Co-op): Did the Prime Minister have the opportunity, either in the meeting or at the margins of the meeting, to have any discussion with his colleagues about the issues of international terrorism to which he has referred? In particular, was there any discussion about the prospects for European Union involvement to try to reactivate the negotiations in the middle east or about the situation in Iran?

The Prime Minister: I have talked about this on a bilateral basis with President Sarkozy and with Chancellor Merkel, and, outside the European Union, with President Obama. As far as the middle east peace process is concerned, we want the proximity discussions to move forward, and we want George Mitchell, the American mediator, to have all the necessary power to move them forward. As for the discussions in relation to Iran, Iran has not been prepared to accept the offer made by the major countries to help it get civil nuclear power without having nuclear weapons, which are a danger to the region and the world. We are contemplating what we must do next, and I believe that there will be pressure for a United Nations resolution.

Sir Peter Tapsell (Louth and Horncastle) (Con): Will the Prime Minister bear in mind that following the ratification of the Lisbon treaty, despite his breaking of the pledge that there would first be a referendum on the subject, he assured us, as a sop, that there would not be another European treaty for at least 10 years, a pledge that he has repeated this afternoon? So how does it come about that we are now asked to contemplate the establishment of a super finance ministry for Europe, which would certainly require another treaty and would certainly lead to Berlin being able to dictate British tax policies?

The Prime Minister: That is not the proposal.

Mr. Dennis Skinner (Bolsover) (Lab): Does the Prime Minister recall any conversation at all by the other countries in respect of joining the euro? Because I have a good idea for a poster, which the Tories will never produce: "Gordon Brown kept us out of the euro. Five conditions. Superb leadership." I think it would be a good idea for us to do that.

The Prime Minister: That was a difficult decision, but it was the right decision. In other areas, such as the financial crisis, we have also made the right decision, even when the Tories have proposed the wrong one.

Mr. Julian Brazier (Canterbury) (Con): The Prime Minister's opening remarks on the casualties in Afghanistan and on the terrorist attack in Moscow will receive widespread support. At the European Council, did he
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raise the issue of the terrorist threat to Europe and the poor performance in Afghanistan by most of our European allies?

The Prime Minister: This was a meeting to discuss two specific things: the economy and climate change. Of course, in the bilateral meetings that I had with President Sarkozy, Chancellor Merkel and others-and with the President of the European Council, Mr. Van Rompuy, and with the presidency, in the form of the Spanish Prime Minister-the issue of terrorism was uppermost in our minds. We have to persuade some of our allies that we need to increase the police presence in Afghanistan, and that we have to increase the number of police trainers to raise the number of effective, trained police there. I believe that President Sarkozy has been meeting President Obama to talk about exactly these issues. We have increased the number of trainers that we have made available for policing in Afghanistan, and we are looking forward to other countries doing the same.

Mr. Doug Henderson (Newcastle upon Tyne, North) (Lab): Does my right hon. Friend agree that any reasonable person-and any reasonable political party that is interested in more than just appeasing its anti-European factions-would recognise that a serious response to the recession requires common effective action at European level? Will he tell me whether the continuing problem of the higher unemployment among young people than among the population at large was discussed at the Council, and whether specific measures for tackling it were considered by our various European partners?

The Prime Minister: There are more than 20 million people unemployed in Europe, and the attention of the European Council was on what we can do to raise growth in Europe so that we can get unemployment down. The way to do that at the moment is to ensure that we maintain the support for our economy, and that support is maintained for the European, American and other economies, until the recovery is fully secured. I am working with 27 countries in total-26 and us-and they all agree that we should maintain the support that is necessary for the economy. I can think of only one party competing for government in the whole of Europe that is against that, and that is the Conservative party.

Angus Robertson (Moray) (SNP): We associate ourselves with the Prime Minister's comments about the loss of service personnel and the deaths in Moscow. We should also like to mark the funeral today of Billy Wolfe. Billy led the Scottish National party with distinction through the 1970s, and we pay tribute to his efforts to banish weapons of mass destruction from Scotland.

The Prime Minister must have discussed economic best practice among EU and non-EU member states at the European Council over the weekend. Will he explain how it has been possible for Norway to have a sovereign wealth fund that is significantly larger than the UK deficit?

The Prime Minister: I join the hon. Gentleman is his tribute to William Wolfe. I have to say to him, however, that when people talk about non-EU countries, they often refer to what was sometimes called the arc of prosperity, and the SNP often talks about the parallels between Ireland, Iceland and Scotland. That arc of prosperity collapsed a few months ago.

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Mr. Denis MacShane (Rotherham) (Lab): May I disagree with the Prime Minister when he says:

Surely it does make sense to distance ourselves from politicians who support the Waffen SS, who are climate change deniers or who have odd views on what happened to the Jews in world war two. Surely it makes sense to distance ourselves in particular from homophobic Members of the European Parliament. Listening to the Leader of the Opposition reduced to absolute speechlessness while trying to defend them last week was a collector's item.

The Prime Minister: I think that the British people would be shocked if they heard what Conservative Members of the European Parliament were doing in that Parliament. Only a few days ago, a number of Conservative MEPs voted against proposals to support the automatic exchange of information needed to crack down on those seeking to hide their money from the tax authorities. So here in Westminster they are saying that they want openness and transparency, but in Europe they are voting for the very tax havens that we know Lord Ashcroft has been very much a part of.

Mr. Douglas Hogg (Sleaford and North Hykeham) (Con): In the context of future changes to the governance of the European Union, of which the Prime Minister has just spoken, will he tell us whether he told his colleagues at the Euro Council that any proposal to transfer significant power from the United Kingdom to the European Union would have to be the subject of a referendum in the United Kingdom? If he did not tell his Euro colleagues that in the Council, will he please tell the House that now?

The Prime Minister: I have already mentioned the agreement made a few months ago that there would be no further institutional or constitutional change in the European Union for the next 10 years. Any colleagues in the EU know precisely what the British position is. Unlike the Conservative party, however, I am prepared for Britain to be part of a taskforce to look at how we can improve the management of the EU; only people who are blinded by Euroscepticism would oppose any form of co-operation in Europe.

Nigel Griffiths (Edinburgh, South) (Lab): Will my right hon. Friend give a cast-iron guarantee that he will reject the policies of Conservative Euro MPs who tour America denouncing our national health service?

The Prime Minister: Those people who said that the national health service was a 60-year-old nightmare were completely wrong. The NHS has been for many millions of people a 60-year-long liberation from ill health and disease. I think the Conservative leader should be ashamed of some of the people he supports in the European Parliament.

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