Transcript of a press conference given by the Prime Minister in Brussels following an EU Summit on 20 March 2009.
Read the transcript:
Prime Minister:
I have always been clear that at times like these, in the face of such serious global challenges, Europe must lead. So I welcome the agreements we have reached today to tackle what the IMF has now proclaimed as the first ever global recession.
We are agreed, first of all, on our shared European commitment to reshape the regulation of banks and financial services, to reinforce our national regulators and to enhance international cooperation between them. We have agreed that we will move to bring systematically important institutions, such as hedge funds, into the supervisory web, we will put the spotlight on the shadow banking system and we will make impossible the excessive risk-taking which has done so much to hurt our economy. And we are also agreed here today to develop international principles on remuneration in the financial sector, based on an approach which rewards long term success and tackles tax havens. Markets must agree that they cannot be values-free.
The European Council is also sending out a message today that we reject protectionism. We are an anti-protectionist European Union. At a time when world trade is falling at its sharpest rate for more than 30 years we have reinforced our commitment to free trade, we have called for more rigorous World Trade Organisation monitoring of what is happening, and beyond that we need, as we agreed, a globally coordinated expansion of trade finance led by a strong European contribution. We must remain vigilant at all times to any form of protectionism - covert or open.
And we also agreed on the action that we need to take to support our economies at this time and to prepare for our future. We agreed that our five billion euro package of spending, we have asked the Commission to take forward on renewable energy and broadband will make the European recovery a green and high-tech recovery underpinned by 21st century principles of sustainability.
We have also agreed today to double the balance of payments assistance that may be made available to central and European countries to 50 billion euros, in other words to ensure that those within the European Union have the support they need to deliver the fiscal stimulus which is needed to underpin their recovery.
And we have also agreed on the importance of doing what is necessary to restore jobs and growth by the fiscal actions we take. We are agreed on the importance of maintaining vital public investment at this time as we both respond to the current crisis and strengthen our economies for the future.
Global capital flows fell by more than 80 per cent last year compared with 2007, the financing gap for our emerging economies this year is up to 800 billion. So this is not just an issue for the emerging countries, because of the risk of contagion this is an issue for every country in the world.
It is vital therefore that we increase the resources available to the international institutions so that they can intervene to stop the crisis spreading, to stabilise economies and return the global economy to growth.
So today we have agreed to at least double the resources available to the IMF. European Union countries have agreed over $100 billion that we will loan to the International Monetary Fund as part of a global package. So we have agreed the balance of payments support of 50 billion, we have agreed to support the IMF with loans of up to and around $100 billion, as well as agreeing our own five billion fiscal package.
Europe has laid the foundations today for the G20 Summit in London on April 2nd. Next week I will travel to New York and to South America to consult global business leaders, the UN Secretary General, and I will be meeting the Presidents of Brazil, Chile and other South American countries to discuss the priorities for this summit of the G20 on April 2nd. We will discuss what the European Council has been discussing, the action that we can take altogether to return the global economy back to growth and to invest in the future. And the decisions that we have made today, and the extra money that is being released will help ensure that we do everything in our power to return the world economy to growth at the quickest possible opportunity.
Question:
Prime Minister you have just said that Europe has today laid the foundations for the G20 Summit, but the banking package that you just referred to - £5 billion - doesn’t sound very big for tackling a global recession. Is that because you have been rebuffed by some countries, for example Germany, who have been resisting a bigger fiscal stimulus? And if that is the case, and there is a split here, doesn’t that suggest that you might be heading for a stalemate at the G20 in two weeks time with a disagreement between those who want a big fiscal stimulus and those who say no, let’s wait and see what the present measures do?
Prime Minister:
I think you should understand that the European stimulus is 400 billion euros, and then on top of that we have the money that we are lending to the International Monetary Fund - about $100 billion - and the extra balance of payments support we are giving to help eastern and central European countries of 50 billion. So we are talking about substantial sums of money that have been agreed today by all the European Union countries and agreed unanimously. What you will find in the communiqué when it comes out is our determination to do whatever is necessary to restore jobs and growth and I think you will find that that is the spirit of every country, I think you will find that is the spirit of the European Union and I think you will find when the G20 gets together that will be what informs its conclusions. Necessary action will be taken to deal with the problems of unemployment and growth and we are united in wanting to see that happen.
Question:
A couple of questions. I don’t know whether you agree with the view of Mr Barroso that perhaps one of the biggest obstacles at the G20 is countries like China that don’t have a culture of the common international setting of rules. I would also like to ask you about all this money that we are finding to lend to international organisations, does this add on to our sort of ever-growing deficit in Britain, and how much are we going to be lending to the IMF and how much do you envisage this World Bank global liquidity pool, how much good is that being as well please?
Prime Minister:
Yes, first of all let me just say that China is very much part of the international discussions that we are having. The idea that China is not involved in the discussions is wrong, any suggestion that China does not want to see a positive outcome from the G20 discussions is wrong, in fact China is anxious to participate in these discussions and David and I had Premier Wen across only a few weeks ago to discuss these very specific things.
So China is very much part of the G20, very much part of the discussions we are having at the moment, and we will continue in the next two weeks to have the private discussions that are necessary to reach the conclusions that we want to see at the G20 meeting.
As far as the International Monetary Fund is concerned, it has been a tradition for members to make available a loan, or the facility to receive a loan if there are critical issues that have got to be addressed. So we are not actually providing money to the IMF, what we are doing is saying that we are prepared under certain circumstances to loan them that money and that is why we agreed that as the European Union as a whole collectively, we would try to make available $100 billion in a loan facility, and that is what we are going to do.
I think you will see over the next few weeks some of the information emerging about other things that the International Monetary Fund and the World Bank can do, often with the facilities they already have.
Question:
Prime Minister how can you prove to people at home that these grand summits, the European one today, the G20 in a couple of weeks, has actually made any difference to their lives at home.? They might conclude that while world leaders talk about jobs, we have just broken through this 2 million unemployment barrier at home. Secondly, on Northern Rock you have been accused today of having your head in the sand three years ago, ignoring the warnings and failing to listen when you were at the Treasury. If you could respond to that as well please?
Prime Minister:
Well first of all I don’t think that is the case. We acted when Northern Rock got into difficulty, we have taken the action that is necessary by bringing Northern Rock into public ownership. I know that the other parties were not in favour of doing that, but I think the National Audit Office agrees that that was a necessary course of action. The Financial Services Authority has already said that it made some mistakes in its dealings with Northern Rock earlier on. I think we took, when we found out what was wrong, the action that was necessary and I think the National Audit Office report - which I have not read in detail - says that nationalisation was the better option, the alternative was to allow it to go completely into receivership.
Now Northern Rock has actually paid back many of the loans that have been given by the government. I think the latest figure is that Northern Rock has paid back £16 billion to the government, so the government has received money back from Northern Rock, and because it was able to do that it is now able to start lending, and so mortgages are now being issued by Northern Rock and therefore the home ownership market is going to be increased as a result of the availability of its funds.
Question:
On a different subject, if I may. Will you be travelling to Normandy for the 65th anniversary of the D-Day landing? And what would it mean to you personally to be standing alongside our Veterans on this special day?
Prime Minister:
Well I have talked to President Sarkozy about the Commemoration of the 65th Anniversary. And as some of you may know, I have written about this quite extensively in a book I have done for charity. So I want to be very much part of the commemoration of both D-Day and the huge contribution that British soldiers, I think 150,000, made in travelling to France and risking their lives for the freedom of Europe. I hope that there will be a commemoration service in Westminster Abbey, I hope it will give us the chance to thank and remind ourselves of the sacrifice made by so many people who are part of a great generation of heroes for our country, and President Sarkozy and I have been talking about what we can do together to commemorate this important occasion, not just for Britain but for the whole of Europe.
Question:
On the G20 summit, do you have any concern that expectations for the meeting have been raised a little too high, that maybe people have got the idea that on one day you can, well to go back to a famous phrase, save the world, and that no matter what ultimately comes out of that meeting some people are going to be disappointed?
Prime Minister:
There is action that has got to be taken. When people look at what is happening at the moment they feel insecure, because banks have not been able to guarantee to them that their deposits are safe. People are worried about their mortgages and their jobs. Now we know that this is a global banking crisis that has spread right across the world and we know that to solve that problem you have got to get all countries working together. If one country alone is acting to deal with this banking crisis it will not be as great in its impact as if all countries are working together. So the significance of the meeting of the G20 is that all major economies are coming together, they all have similar problems about the structure of the banking system, they all have seen the impact of that on the rest of the economy, with loans being very difficult to get, with people not being able to get mortgages, with small businesses starved of finance. We have a common interest in dealing with this problem.
So what do you do? The first thing we are going to do is to have common principles and actions to restructure the banking system, and that will have to be done nationally and internationally and you will find that there are very specific and precise proposals to do exactly that and to set down the action that each country has got to take to sort out its banking system for the future.
The second thing that matters to people is getting real help now; people want to be in a position where they know that action is being taken to stimulate the economy. In our case we have helped people with raising child benefit, raising pensions, we have also got a tax cut coming in in April, as well as our cut in VAT, and we have got a massive amount of public works investment taking place so that we can keep people in jobs and perhaps create new jobs as the year goes ahead.
So this matters directly to people, that we can get the international cooperation on the restructuring of the banking system and at the same time we can have international cooperation to stimulate our economies. And I believe that all countries understand the urgency of this action and all countries understand that their priorities are their individual citizens and the worries and fears that they have. Our duty is to help them, and the G20 summit is one of the ways that we can do this.
Question:
Prime Minister the last version of the Council’s conclusions that I have seen this morning says that the (indistinct) report should form the basis of a new European financial supervision and regulatory framework to be agreed by the June Summit. Are you comfortable with that framework, and what should actually be the basis for a new system of regulation?
Prime Minister:
Well as far as rules are concerned about regulations, we support that, but there has got to be coordination of the rules that govern the regulatory system. But I fear that from your point of view you will be disappointed to see that the version that you had this morning has actually changed quite a lot during the course of the morning. The Council is instructed to examine the report, as well as the proposals from the Commission on strengthening EU financial regulation and supervision with a view to first decisions at the June 2009 European Council, and that is the basis of the decision that was made. Of course we agree about the need for regulatory rules, but we also need to ensure that supervision is done also at a national level.
Question:
A question on tax havens. Do you think that Switzerland has now done enough to be taken off the black list? And second, what do you intend to do regarding British Overseas Territories?
Prime Minister:
Every country should sign up to the principles that require tax information to be provided on request, and every territory and country should be prepared also to sign bilateral agreements with countries so that these principles are put into effect. And that is the basis of the discussion that we are now having and as you know I have welcomed the fact that Switzerland, Austria, Luxembourg, Hong Kong, Singapore have all in the last few weeks decided that they will sign up to the principles of tax information on request. The next stage is obviously that bilateral agreements are signed to make that possible in reality.
Question:
Just looking at the better regulation of financial markets, a lot of the ideas contained in the conclusions are basically German ideas. Over a number of years, I remember when I was over in Brussels reporting on this at every Council, the Germans would be calling for tougher regulation of hedge funds and the British would always be opposing that. I just wondered what made you change your mind, particularly in relation to hedge funds, and whether it shows that the Germans were right all along.
Prime Minister:
Well first of all I think if you do your research you will find that we have been promoting the ideas of international supervision since the Asian crisis in 1998 and we have been trying to get a degree of transparency, disclosure and supervision of all banking and financial activities round the world, and that has been a principle that has underlain a lot of the solutions that we made for the reform of the International Monetary Fund and for the creation and then the extension of the Financial Stability Forum. As for hedge funds, I think we have always agreed about the need for proper transparency and the need for registration. What we are adding to this is bringing every country’s hedge funds within the supervisory net and I think that is an important step forward that is in line with the principles we have set out for years.
Question:
Prime Minister I just wonder if you could give us an indication of how much Britain would be prepared to contribute or make available in loans to the IMF nationally?
Prime Minister:
Well we will have to discuss that. Now that we have an idea of what Europe can contribute as a whole, we will consider. Let’s just remember, this is money that is being made available if it is needed, as a loan to the IMF. It is not money that is handed over immediately, it is money that is made available to increase the crisis facility that allows the IMF to intervene where countries are in difficulty. We will decide our figure later.
Question:
A question on climate finance. The Environment Ministers didn’t come up with a figure, the Finance Ministers didn’t come up with a figure, there is now still no figure on the table. The UN’s chief climate negotiator has said that the EU is backsliding on its commitments that it made at Bali. If this isn’t backsliding, what is it?
Prime Minister:
I don’t accept that, and neither does David.
David Miliband:
I have followed this debate with a degree of bemusement I have to say. The European Union confirmed its commitment to at least a 20% cut in emissions on 1990 levels by 2020, that is the global leadership role, 30% agreement at Copenhagen. And the European Union has also taken forward a serious debate about how we fund, beyond the carbon finance system, beyond the clean development mechanism, a mitigation and adaptation for the developing world. You will see from the conclusions today that the range of options, so-called climate finance, are going to be investigated very strongly. You will also see that the distribution of the European share of that is going to be looked at, and some of the issues within Europe about climate finance are going to be looked at.
So far from back sliding, the European Union is going into the last nine months before the Copenhagen Summit stronger and stronger in the offer it is making, but also clear about the responsibilities of all countries. And I think that is a very important thing. President Obama’s shift in the US means that the debate is changing quite fast. Kevin Rudd, the Prime Minister of Australia, has also shifted his country into a different position. So I think rather than the part of the European Union somehow being a back marker or backsliding, what you are seeing is a re-emphasis on the importance of low carbon investment, not just to economic recovery in the short term but to sustainable growth in the long term.
Question:
With the money that Japan has given, and what the EU is willing to give now, to give the IMF double you need about 50 billion more additional dollars. This seems like a small sum for the US and China and maybe Saudi Arabia and other countries to come up with.
Prime Minister:
I think you will find in our communiqué we want to substantially increase the funds available to the International Monetary Fund. I agree with you that Japan has given $100 billion in a loan facility, the European Union is now prepared to give as much, I think other countries can be expected to contribute as well. And when we come to the G20 in London I think you will see that the world is determined to make sure that we cannot only deal with crises by having the funds available, but prevent crises by doing more to help countries before they get to the point at which there is a crisis.
Today we have got agreement to extend the facilities available to eastern and central Europe because we know the problems that these economies are facing, so that goes up to $50 billion, and we have agreed also to provide this loan facility that is available to the International Monetary Fund. It shows that we are in a world where we have seen the biggest fiscal stimulus, where we have seen coordinated action to cut interest rates and where today we are seeing different parts of the world joined together to promote a facility that will help deal with and avert crises. And I think the world is coming together to try to deal with the problems that arise from what is a global banking crisis that needs global solutions.
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