This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
The Prime Minister discussed the future of the euro, Greece, economic growth in Europe, migration and the Arab Spring.
Good afternoon and welcome. There were four issues that particularly concerned me coming to this European Council in June: the first, the future of the euro and the situation in Greece; the second, the need for stronger economic growth in Europe; the third, the issue of migration; and fourth, our position with respect to the Arab spring. And I just want to say a word about each of them.
First of all, on the euro, let me just repeat Britain is not in the euro, Britain is not going to join the euro, but we do want a successful eurozone and a growing eurozone, not least because 40% of our exports go to the eurozone. So we want the eurozone to sort out its problems and its difficulties and we’ve been constructive in trying to help make that happen.
Specifically on Greece, we were not involved in the first Greek bailout, we haven’t been involved in talks about potential Greek bailouts, so I believe it is absolutely right not to use the European Financial Stability Mechanism (the EFSM) for future payments in terms of Greece and I wanted to seek assurances at this European Council that Britain won’t be called on to do that. I sought those assurances, I have received those assurances, but nevertheless I will continue to be vigilant on this issue.
I don’t want to speculate about another country in the eurozone, a fellow member of the European Union and I recognise that Georgios Papandreou is taking great steps forward to try and deal with the problems in that country. What I do believe though is important is that I think all European countries need to use the time that we have to strengthen banks and banks’ balance sheets and make sure they are meeting all of the requirements, so that they are strong and can withstand any problems and difficulties. In particular, we shouldn’t be watering down in any way the Basel requirements and I made sure that some language went into the communique at this European Council to that end.
Second point: European growth. The point I repeatedly make at these European Councils is there is no further monetary stimulus we can give our economies. Interest rates in the UK are as low as they possibly could be. There is no further fiscal stimulus that we can give to our economies. Most of us have got large budget deficits and the whole key at the moment is to get those budget deficits down rather than radically increasing them through irresponsible tax reductions or huge spending increases.
Given you can’t have a monetary stimulus and you can’t have a fiscal stimulus, the best stimulus we can give to our economies is to make sure we are promoting competition, deregulation, supply-side reform, innovation, structural changes and also promoting both trade within Europe and also trade with the rest of the world. So I use these meetings to press for the completion of the single market, the completion of the single market in services, getting rid of unnecessary barriers and making sure we promote small businesses and innovation. Again, I’ve secured into the communique, the Council conclusions, some strong language about deregulating on small businesses and particularly micro businesses, trying to exempt them from classes of regulation as we’ve done in the UK. Once again, I’ve also secured strong language on world trade and Doha.
I do believe there’s growing support for this agenda. Britain produced an excellent pamphlet on choosing growth. A number of other member states have backed that and have said how much they want to work on that agenda and make sure these European Councils give that agenda a boost. One of the problems often is we have pages and pages on processes in Europe, but not enough about what the European Commission itself is actually going to do to help drive the growth agenda and I’ve been pushing that very hard.
The third issue is migration and the pressures of immigration and migration in Europe. Let me be clear again Britain is not in the Schengen Area. We’re not going to be joining the Schengen Area. We have, by and large, proper and sustainable borders and I want us to have proper and sustainable border controls. I was worried before this European Council about potential proposals to suspend the Dublin arrangements that allow us to return asylum seekers to the country from which they have come. I’m glad to report that Britain and Germany together made sure that those proposals aren’t even referred to in any way in the Council conclusions. I think that is important. We want controlled migration in Europe and we want controlled migration, above all, in Britain.
Fourthly, on the Arab spring, I believe it’s good that we have achieved, after perhaps a difficult start some months ago, but we’ve achieved real unity in the European Union, real unity of purpose and political will when it comes to the vital issue of Libya and that was clearly expressed in the Council discussions today. I believe that we must be patient and we must be persistent, because I think that the time pressure is on Colonel Gaddafi and his regime, it is not on us. I believe we need to show real support for the Transitional National Council, who I believe are demonstrating that they’re not extremists, they’re not Islamists, they’re not tribal, they want a united Libya but a more democratic Libya. And I also think we should push ahead with the measures that Europe has taken in terms of sanctions and travel bans and asset freezes, all of which have been effective and show that Europe can actually make a difference on an issue like this.
Above all, I think we have to remember what we’re doing in Libya and why we’re doing it and it’s about protecting civilian life. It is about stopping Gaddafi and his evil regime shelling, killing, maiming, murdering his own citizens. I think we have been effective at doing that and I think the pressure on Gaddafi is growing. I think you can see that when you consider his foreign minister’s left him, his oil minister has left him, many of his generals are departing him. A month ago, I think many people thought, ‘Well, the Misrata pocket, that won’t hold, what’s happening in the west isn’t sustainable.’ You now see a growing rebellion in the west of the country and the growing strength of the Transitional National Council. The pressure and the time is telling on Gaddafi. We must keep that up and make sure this comes to a good and satisfactory solution.
We also discussed, obviously, Syria and other issues in the Middle East. What is happening in Syria is quite appalling. Thousands of people have been killed; tens of thousands have been interned. Britain and France together are leading the charge at the United Nations, drafting and proposing a resolution. We need to build more allies and more support for that and, again, I think the European Union has been effective and can be more effective in terms of the asset freezes, the travel bans and other steps that should be taken. I specifically made sure that in the communique we mention the current problems on the Turkish border and the concerns about what the Syrian troops are doing close to the Turkish border.
Finally, we also welcomed the prospect of a new member to the European Union, Croatia. I think we are getting very close to Croatian accession and the Council conclusions will reference that. I am extremely enthusiastic about membership by western Balkan countries of the European Union. I think it’s absolutely the right thing to do.
I have to say I am less enthusiastic about the presentation we were given for a new building for the European Council. This is a decision that was taken many years ago and I pressed that if we are to go ahead with this project - and it seems, I’m afraid, unavoidable - we must make sure it is done with economy and with efficiency, because at a time when we’re having to make spending reductions at home I think our voters, our constituents, our publics want to see the European Union saving money, not spending money.
We didn’t discuss the budget at this European Council, but I’m absolutely determined to keep making progress on the budget issue and winning allies and support for doing just that.
Thank you very much indeed. Very happy, as ever, to take your questions.
You say that you’ve prevented a move to get Britain to help with the Greek bailout, but Mervyn King today is warning that there is a real risk of contagion, that if the Greeks default the problem will be for the banking system in European as a whole and British banks. How worried are you that you may have won very small victory here, but actually, overall the signs are very ominous?
Well look, I thought, first of all, it’s just important, as I said, Britain did not contribute to the first Greek bailout, we haven’t been involved in the discussions about it, we’re not in the eurozone and so, as a result, I think it would be wrong for us to be drawn into the European element of a future payment. And I sought assurances on that, I got assurances on that, I think that is important for Britain. Clearly, we’re a leading member of the IMF. We sit on the IMF board. We have a responsibility when countries get into difficulty and that’s one we’ll always discharge.
In terms of what Mervyn King said, of course, banks right across Europe have exposure to Greece because they hold Greek debt, Greek government bonds. Every bank needs to make absolutely clear what its exposure is, has to do that work and, as I’ve said and secured in these Council conclusions, we need to make sure all our banks are being strengthened in terms of their capital reserves and what they can withstand. I’m confident that that is taking place in the UK. We need to make sure it takes place right across Europe and I think that’s absolutely vital and what Mervyn King has said is right.
Thank you, Prime Minister. I just wonder if I might take you back to the building. What’s your reaction when you saw this glossy pamphlet being handed out, which they appear to have spent tens of thousands of pounds on at a time when issues of austerity are on the agenda?
And secondly, apparently Tony Blair has given an interview saying that he still wants to join the euro. What’s your reaction to that?
Well, first of all, on the euro, I think it would be a dreadful idea for Britain to join the euro for a very simple reason: I think there are times when different countries need different interest rates and you need to have that flexibility. And I think now is exactly that sort of time. Britain, outside the euro, does have greater flexibility. Yes, of course, we’re having to get on top of our budget deficit and we’re doing that, but we’ve actually been able to see our interest rates come down because we’re taking the right action in terms of our budget. So I think Britain is out of the euro, I believe we’ll stay out of the euro and certainly as long as I’m doing this job there is no prospect of Britain even contemplating joining the euro.
In terms of the building, I just, I hope as I’m demonstrating, I think this is my seventh European Council, I do believe in being positive, in being practical, in actually working with allies and trying to get things done in Europe. And whether that is prosecuting what we’re doing in Libya, whether it’s putting pressure on Syria, whether it’s completing the single market, whether it’s trying to create jobs across Europe, I’m a practical, positive person and I come to these meetings with a practical, positive agenda. But sometimes when you’ll see a document being circulated with a great glossy brochure about some great new building for the European Council to sit in it is immensely frustrating and you do wonder whether these institutions actually get what every country and what every member of the public is having to go through as we cut budgets and try and make our finances add up.
I’ve only been to this building seven times in the last year, but it seems to me to do a perfectly good job of housing the European Council. The microphones work, there’s plenty of room, we could fit many more people in the great room where we all sit round and discuss, and the food isn’t bad either. ‘What’s the problem?’ would be my question, but this decision was taken years ago, as I understand it, the money has already been spent, most of it, but I just wanted to press my colleagues even at this late stage can we please try and do this with economy and efficiency, recognising that every country in Europe is having to take those steps.
And I do think this comes back to the budget debate. The European Commission, the European institutions have got to demonstrate that they get the austerity measures that every member state is having to make. And if you rewind to when we became the government, we did, you know, freeze the pay of MPs, cut the pay of ministers, reduce the size of the House of Commons, radically reduce the size of central government, because I wanted to be able to look the British public in the eye and say, ‘Yes, I am asking you to do difficult things and there is a pay freeze in the public sector, we’re going to have to reform public-sector pensions, there are areas of public spending that will have to be reduced, but the reductions have to start at the centre and start with us’. And I think the European Union, in my view, if it wants to build confidence, because it does do good things, as I’ve just said, but if it wants to build confidence it’s got to demonstrate it gets that.
Prime Minister, you say you want to a successful euro. Almost every economist believes that Greece will have to default sooner or later. Do you therefore believe it is wise lending Greece further money?
Well, the point I would make is this: first of all, we do genuinely want the euro area and euro members to succeed. Fifty percent of our exports go to Europe; 40% go to the eurozone. It’s not in our interests for the euro to falter or fail. It’s not in our interests for members of the euro to falter or fail. That would have bad consequences for the UK - I’m absolutely clear about this.
Second point is, I don’t think it is responsible to speculate about another European country and its economy and what’s going to happen next either politically or economically. I don’t think that is a sensible thing to do. What I do think is sensible is you should always make sure that you’ve prepared for all eventualities and that’s why I think it is important that banks strengthen their balance sheets right across Europe and that needs to be done now and it needs to be done properly.
I would say, looking at a fellow politician and fellow Prime Minister who is trying to do the right thing for his country, who’s taking difficult steps, I do recognise that the Greek government are doing difficult things to try and make sure they can deal with their issues and problems. And the dinner last night and the communique that was put out showed, I think, real support and solidarity for what the Greek government is trying to do. But I think for Britain, very clear that we weren’t involved in this bailout; we shouldn’t be involved as a non-euro country in anything that might happen subsequently and also we should be making sure that we strengthen our banks at home.
I just wondered if you could give us some insight into your decision to send Sir Jon Cunliffe to Brussels. What are the qualities you see in him? And isn’t it a bit of a poke in the eye for the Foreign Office that you’re sending a career Treasury man to Brussels?
First of all, Jon Cunliffe is a hugely accomplished civil servant, I think, with a great grip and grasp right across all European issues. Now we have a National Security Council and we brought together Whitehall, brought the Foreign Office, Number 10 and the Cabinet Office much closer, I don’t see this great divide between having a Treasury man or a Cabinet Office man or woman or a Treasury person. I don’t see it like that.
A lot of what Europe does - as you can see from the communique today - is about the economy and about economic issues. What I’ve seen of Jon Cunliffe over the last year - because he’s been my Sherpa effectively for G8s and G20s and for all European Councils apart from sadly this one as he’s been unwell - is that he’s got great grip of European issues. He’s got a huge understanding of the financial issues; he’s tough and he’s strong and he’ll stand up for Britain’s interests which is absolutely what you need.
I’d like to pay tribute to Kim Darroch, who I think has done an excellent job here at UKREP and who I’ve really enjoyed working with for the last year, and obviously he’s going to be playing a key role in the National Security Council back at home. So it’s probably some football analogy about how I’ve swapped Beckham and Rooney or something like that but I can’t think of one right now. They’re both very good and they’re going to be in the right jobs.
A lot of people here are saying this is one of the worst crises the EU has faced, or perhaps the worst crisis. Aren’t you missing a huge opportunity here, as many in your party are saying, to reshape Britain’s relationship with Europe and reshape the European Union - that you should be showing bolder leadership here? Or is this perhaps one of those areas where you don’t feel you can be bold because of the Liberal Democrats?
I don’t accept that. I think first of all, I think it’s very important to come here and recognise you have a job to do to defend Britain’s interests. Now it’s in our interests that the eurozone sorts itself out and we haven’t stood in the way of the Euro-Plus Pact and other things like that. We’ve been thoroughly constructive.
But it’s also right that where we haven’t been involved in a previous Greek bailout, we haven’t been involved in discussions, we aren’t a member of the eurozone, I think it’s right to stand up for the interests of British taxpayers and say ‘well, this isn’t something we should be contributing to’ and I don’t regret in any way putting a lot of negotiating capital into that effort. I also think it’s been right, as I inherited a situation where there was this European Financial Mechanism that we are subject to - under qualified majority voting - I put quite a lot of capital into getting us out of that from 2013 when the new arrangements come in, and again I don’t apologise for that. That was a good move for Britain; I’ve cut off the chance post-2013 of us having to contribute to these situations in future, a very good deal for Britain.
Third point, I actually think that what the British are pushing for here in the European Council is actually in all of Europe’s interests and that is saying if we want to get the European economies going, we’ve got to promote trade, deregulation, completing the single market, less of the grandiose gestures and communiques, more of the real rolling up your sleeves and making sure that actually Europe has got a strong economy.
Let me just give you one tiny example. Here we are a single market, the biggest single market in the world - we don’t even have a digital single market, I’m sure you use iTunes like I use iTunes - only 15 of the 27 member states you can use iTunes in. So we haven’t yet completed the single market, so I don’t accept that Britain is not taking a leading role. I think we are. We’re pushing for things that will make a real difference. But we have to accept this point: we’re not in the euro so we’re not in all those discussions about what the euro will do in the future.
Now, I personally believe that being out of the euro is so advantageous for us that it far outweighs any advantage of being in those discussions. And so I don’t have any worries or concerns that somehow we’ve lost some influence there because if we were in the euro I think we’d be in a pretty drastic position in Britain having had an 11% budget deficit. Because we’re out of the euro we have the chance, difficult though it is, to roll up our sleeves, sort out our problems and be one of Europe’s success stories.
But what about all those euro-sceptic things you were saying in opposition? I mean, is it the Liberal Democrats that are holding you back?
Well, I don’t accept that. I said in opposition that we’d stay out of the euro - we have. I have said that we would stay out of Schengen - we have. I said as soon as I became Prime Minister I’d examine the situation we had; we had to get out of the European Financial Stability Mechanism for the future. We’ve achieved that. I think actually I can point to quite a good list of achievements in Europe, and also I’d point as well to the budget where I think we are going to make progress in terms of cutting back what the Commission and the Parliament have been suggesting.
So I think on all those areas, and more besides, you can see a real British influence here. We are not in the euro, we are not in Schengen but we have real influence here in Europe on the things that we care about. And for instance on the issues of Libya and Syria, it is very often the British and the French together who are leading the argument and the debate and getting things done. So plenty of political will here in Europe by the British, by actually emphasising and concentrating on those things that will make a difference for us.
Will Sir Jon Cunliffe be taking his trusty Treasury slide rule and looking at such long-term issues as reforming the Common Agricultural Policy and will he be defending the British rebate?
Look, of course the British rebate is essential and of course that will be key to our whole approach to the future financing of Europe. I think what Jon will bring - of course we want to reform the Common Agricultural Policy; it’s been a long-standing aim of the UK. I think it’s important we go into this whole examination of future financing with some pretty clear ideas about what we want to get out of it. We want to keep the rebate; we want to stop Europe’s budget going up by more than inflation and we secured that very good letter signed by many European Council leaders. And we want to reform what Europe spends its money on so actually it spends money on things that can make a difference in terms of growth rather than just spending so much money on agriculture.
As I say, I think he’s got a very good grip and not just on economic issues. You can ask him about any number of things from rabies to horse passports and Jon will give you a good answer. There you go, I’m putting him to the test; I’m raising the bar for him.
Thank you, Prime Minister. Could you broaden out on what you were saying about the EU institutions and whether people get it? I mean, isn’t one of the most worrying things about Greece that huge swathes of the population there just don’t buy into the argument that’s coming down from political leaders such as yourself about the need for thrift and austerity? Do you - would you - agree that you haven’t actually yet won that argument?
And I must ask you about the circus-animals story: what was that all about? That you’ve got one of your own backbenchers saying that you’re throwing your weight around and bullying him.
Right, okay, let’s do circus animals first as we’ve certainly, as it were, been through the hoops, walked through the tightrope and possibly sent in the clowns as well. Look the point is this: I think actually there wasn’t a great difference between the government’s position, which is minded to have a ban, need to clear some legal obstacles out of the way, because the view that’s been come to is it’s not right to have wild circus animals in Britain in 2011 and beyond. So the gap between the government position, minded to have a ban but needing to clear these obstacles out the way, is not a million miles away from the backbench motion, which was slightly faster and harder. I thought we’d be able to find a compromise where everyone would be able to support language which would be more easily achievable by the government. That wasn’t possible so in the end the backbench motion went through unopposed; nobody voted against it and so that’s what’s happened. So I’m profoundly relaxed about the whole thing.
All I can say is my Downing Street operation - it’s not everyone’s absolutely like Mother Teresa, but that’s the sort of default setting. They’re very gentle, reasonable people so I don’t entirely agree with all the things I’ve read that there’s a sort of slathering rottweiler sitting by my desk. That’s absolutely not the case. As I understand, very gentle and reasonable conversations were had all round. As I say, a pity we couldn’t close the gap between two groups of people who wanted to see a ban take place, but just some arguments over technicalities and timings.
Yes, on that general point. I think that actually people right across Europe do understand the need for countries to live within their means. I find that if you take in the UK or elsewhere, of course there’s always opposition to individual proposals, but generally speaking people understand that governments, like households, can’t endlessly borrow and live without their means. They have to live within their means. I think that’s understood right across Europe and I’m sure it’s understood in Greece too. Clearly the challenge in Greece is very great because the deficit’s so big, the debt ratio is so big, people are being asked to do a huge amount. But, you know, we want the government to succeed in Greece, we want the euro to succeed and so these challenges have to be overcome. I do think it’s important as we do that that we show - whether it’s at the national level or the European level - that the politicians aren’t sitting in some gilded cage asking everyone else to take responsibility and that’s why I think it is important that in the UK the pay cuts and freezes at the centre, the difficult decisions made about Whitehall and Westminster, I think that has to be repeated here in Brussels.
Prime Minister, you’ve been stressing very much that you sought and received assurances on the EFSM last night and indeed it will be reflected in the Council conclusions. I just wanted to ask whether at the dinner Chancellor Merkel actually asked for the EFSM to be used.
Obviously I can’t - even if I could remember everything that happened at the dinner it wouldn’t be right to repeat it, so I won’t comment on what other countries did or said. All I would say is that I came here wanting to make sure that Britain wouldn’t be called on to contribute as part of an EFSM package for Greece and so I sought those assurances and I’ve had those assurances. As I say, you have to be eternally vigilant in all matters European and I will go on being vigilant and standing up for Britain’s interests because I think that is a very important part of my job.
On that, thank you very much and look forward to seeing you at another European Council soon.