The House of Lords EU Sub Committee on economic and financial affairs, and international trade is sceptical about implementation of new proposals and concerned about creation of a ‘two-speed’ Europe.
The House of Lords EU Committee reports on EU proposals to reinforce economic stability ahead of a European Council meeting on 24 and 25 March.
The report, which comes as the EU debates the future of economic governance in Europe, says that attempts to keep the euro area stable will fail unless EU Member States stick to the rules. The Committee is sceptical that Member States will sustain the necessary political will to do so.
Notes of warning
The report sounds several notes of warning. It says that controversial proposals for a Pact for the Euro risk developing a 'two-speed' Europe, creating a significant distinction in the single market between those states inside the pact and those outside. It warns that reassurances by the UK and several other Member States that the private sector would sustain no losses on sovereign debt issued before 2013 might prove too heavy a burden for taxpayers in countries such as Greece and Ireland to sustain. The Committee recommends that the private sector share the burden of restructuring sovereign debt after the new permanent crisis mechanism comes into force after 2013, saying, "It is only right that as they share in the rewards, they should share the risks".
The Committee warns that proposals to monitor and correct macroeconomic imbalances must not result in corrective recommendations being issued which could hurt Member States’ global competitiveness. This is particularly true for those countries with a current account surplus. The Committee says that it has reservations about imposing sanctions on a country deemed to have an excessive imbalance because of the difficulty in determining what constitutes a harmful imbalance. The EU should not publish Germany for running a large surplus.
Comments from the Chairman
Commenting on the report, Lord Harrison, Chairman of the Sub-Committee which carried out the inquiry, said:
"We rely on a stable and prosperous euro area for our own financial stability. We have seen several proposals for measures to underpin this, and they amount to a step in the right direction. But they don’t give us all the answers, and it remains to be seen whether the EU manages to sustain the political will to implement them."
The House of Lords European Union Select Committee's role is to consider EU documents and other EU-related matters in advance of decisions being taken on them. It does this to influence the Government, and to hold them to account for their actions at EU level. Its Sub-Committee on Economic and Financial Affairs and International Trade scrutinises EU policy on economics, finance and trade.