As reports of political debates in the House of Commons and House of Lords rarely receive much detailed coverage, let us consider one such debate on Tuesday in the House of Lords.
Hansard, House of Lords, 8th June 2010 Column 593:
"Asked By Lord Pearson of Rannoch
To ask Her Majesty's Government whether Article 122.2 of the Treaty on the Functioning of the European Union has been or could be used to require the United Kingdom to underwrite £9.6 billion of other European Union member states' debts.
Lord De Mauley: My Lords, EU finance Ministers agreed on 9 May that up to €60 billion of emergency finance can be provided to any member state in accordance with Article 122.2. Only where there are defaults on loan repayments would there be a cost to the EU budget. Member states would be liable for a share. Based on the United Kingdom's contribution to the 2010 EU budget, the UK's share would be approximately 13.6 per cent, or up to a maximum of around €8 billion. Euro-area finance Ministers have also agreed a €440 billion package of assistance to be provided through a special purpose vehicle. The United Kingdom has chosen not to participate in this, and there is therefore no question of any liability arising to the United Kingdom.
Lord Pearson of Rannoch: My Lords, I thank the Minister for that Answer, and I welcome him to his new position. However, I have to point out that this article can only be used legally to help with natural disasters, such as earthquakes and so on. Is he aware that the Eurocrats are also violating Article 125, which prohibits financial bailouts of any kind? If so, can he tell us what the sum of all this illegality is going to cost us? Secondly, since this year we have to send a further £9.7 billion in net cash to Brussels, and since the TaxPayers' Alliance puts the cost of our overall membership at £120 billion a year, has the time not come to review that membership, starting perhaps with an independent cost-benefit analysis?
Lord De Mauley: My Lords, there were several questions in there. I shall first answer the noble Lord's question about Article 125-the so-called bailout clause-which states:
"The Union shall not be liable for or assume the commitments of ... governments ... A Member State shall not be liable for or assume the commitments of ... governments ... of another Member State".
8 Jun 2010 : Column 594
That does not rule out member states lending each other money. The noble Lord refers to a figure of £9.6 billion. The Government do not recognise that figure. If he can give us a basis for it, we will look into it."
Article 122.2 of The Treaty on the Functioning of the European Union (TFEU) states:
"Where a Member State is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control, the Council, on a proposal from the Commission, may grant, under certain conditions, Union financial assistance to the Member State concerned. The President of the Council shall inform the European Parliament of the decision taken."
Article 125 of TFEU states:
"1. The Union shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of any Member State, without prejudice to mutual financial guarantees for the joint execution of a specific project. A Member State shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of another Member State, without prejudice to mutual financial guarantees for the joint execution of a specific project.
2. The Council, on a proposal from the Commission and after consulting the European Parliament, may, as required, specify definitions for the application of the prohibitions referred to in Articles 123 and 124 and in this Article."
For the record, Article 123 states:
"1. Overdraft facilities or any other type of credit facility with the European Central Bank or with the central banks of the Member States (hereinafter referred to as 'national central banks') in favour of Union institutions, bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States shall be prohibited, as shall the purchase directly from them by the European Central Bank or national central banks of debt instruments.
2. Paragraph 1 shall not apply to publicly owned credit institutions which, in the context of the supply of reserves by central banks, shall be given the same treatment by national central banks and the European Central Bank as private credit institutions."
article 124 of TFEU states:
"Any measure, not based on prudential considerations, establishing privileged access by Union institutions, bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States to financial institutions, shall be prohibited."
A number of observations:
1. Note that the Minister speaking on behalf of our LibCon government changed the term in his responses from 'emergency finance' to 'loan'.
2. The Minister states that only in the event of default would the United Kingdom become liable for a share of the cost to the EU. This means that whilst the UK is not part of the eurozone, it would become liable for a share of the cost were Greece to default - and we all know that Greece will repay every last penny of that 'loan', don't we?
3. Article 123 states 'Overdraft facilities or any other type of credit facility with the European Central Bank or with the central banks of the Member States (hereinafter referred to as 'national central banks') in favour of Union institutions, bodies, offices or agencies, central governments.....shall be prohibited....' A loan is a form of credit facility and as such is prohibited with either the ECB or central bank of a Member State, so when Greece defaults on repayment of this loan exactly who does the EU believe will be liable to find the 13.6% of this €60billion loan if it is not the Bank of England, our 'central bank'?
4. In Lord Pearson's 'follow-up' question one can hardly fail to note the omission of the Minister to comment on whether a full cost/benefit analysis would be undertaken.
5. The Minister stated that if required, the UK would be liable as follows: 'Based on the United Kingdom's contribution to the 2010 EU budget, the UK's share would be approximately 13.6 per cent, or up to a maximum of around €8 billion'. Note also the 'airiness' of the response - what exactly is the percentage figure and what exactly is the maximum figure?
6. It is acknowledged that the EU is using Article 122.2 to allow the Greek bail-out', yet this Article specifically states that it is for instances of 'natural disasters' or 'exceptional occurrences beyond its (member state) control'.
On that last point one can only suppose that the Greek 'bail-out' qualifies on the basis that politicians are natural disasters waiting to happen. However the fact that politicians do not possess that much financial acumen and have repeatedly shown an ability to run up mountains of debt would lead one to question how this can be classified as an exceptional occurrence.
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