Can the UK work with the ECB to boost eurozone recovery?
The report by the House of Lords EU Economic and Financial Affairs Committee, Euro area crisis: an update, is to be the subject of a debate in the chamber tomorrow, Wednesday 23 July.
The original report in April of this year declared that the eurozone remained ‘weak and vulnerable'. The Committee also repeated its warning to the Government that the UK was becoming increasingly isolated, as the euro area knitted closer together.
Since the report came out the spectre of deflation has grown, prompting the ECB to take unprecedented measures including introducing a negative interest rate for banks holding deposits with the Central Bank.
Commenting ahead of the debate, Chairman of the EU Sub Committee on Economic and Financial Affairs, Lord Harrison, said:
“Notwithstanding some positive signs in recent months, the euro area still faces significant fundamental problems. As eurozone growth bumps along at only 0.2% a quarter, the threat of a prolonged period of low inflation, or even a deflationary spiral, looms ever larger. This in turn threatens to undermine the recovery that is so desperately needed. The ECB was applauded for its action in June when it announced that the deposit rate for banks would be cut to minus 0.1%, and that it would introduce targeted long-term refinancing operations. Yet the jury is still out as to whether these measures will have any tangible effect.
The crisis continues to demonstrate the growing importance of eurozone institutions such as the ECB and the Eurogroup, whose former Head, Jean-Claude Juncker, has recently been appointed as the new President of the European Commission. We urged the Government then, as we do now, to develop a healthy working relationship with these institutions, and to promote the role of the City of London as the number one financial market for the EU as a whole.
In the context of the election of the new European Parliament and the appointment of Mr Juncker, tomorrow's debate is an opportune moment to press the UK Government on what it is doing to maximise its influence on developments in the euro area, to the mutual benefit of all.”