The following copy letter has come into my possession. It is from Mrs Penny Maws, legal adviser to Dr Roy Spendlove at the Division for Miscellaneous Projects. She is writing to Dame Lucy Doolittle, the Director of the Unit for co-ordinating cross cutting initiaitives and partnerships. I am still finding it difficult to locate this body and cannot vouch for its authenticity or accuracy, but find its points very interesting.
Dear Dame Lucy,
I hope you do not mind me writing directly to you. I do so because there is an urgent matter where we need your help. Dr Stronglove is on sick leave , and then has to go to an important Brussels conference on the co-ordination and co-funding of miscellaneous projects, so I write in his absence.
As you may know we were copied in to the recent government correspondence about the future Irish loan. I am just a little concerned about the legal basis for the whole European Financial Stabilization Mechanism insofar as it relates to the UK, a non Euro member. As you may recall, the total fund was estimated as being up to E500 billion. E440 billion of this is to be raised on behalf of Euro member states only, under an intergovernmental agreement through a special purpose vehicle. That seems well based legally, and does not include the UK.
The remaining E60 billion is to come from EU sources including the UK under Article 122.2 of the Treaty of European Union.(TEU). I am aware that the previous Chancellor of the Exchequer was given a full briefing on this and gave poltical consent to it in May just before the change of government but after the General Election. I am also aware that the new government has agreed to live with the results of his actions on advice that they cannot be changed, whilst at the same time criticising them in public.
My concern is to ensure that the government’s position is as watertight as possible should any outside person or company venture a legal challenge of the basis for making payments under this Article. As you know, there have been challenges in the past when European matters have been debated in public, even when these have been easily brushed aside in the courts.
The Article in question says:
“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.”
In this case there is no doubt that the Commission proposed, the Council consented, including the previous government of the UK, and the European Parliament was informed. The issue revolves around the power to make a grant or loan in the case of a country which has borrowed too much.
Clearly we cannot argue that this was a “natural disaster”. Our case rests on the sub clause of an “exceptional occurrence beyond its control”. Some might try to argue that excessive debt in some member states is not “exceptional” but common. Others may argue that debt levels are matters that can be under the control of the Member state if they wish.
Our critics wish to suggest that this whole Clause is about natural disasters, and limit the payment of monies to floods , hurricanes and other similar exceptional events. I think we can dismniss this, as clearly the clause covers both natural disasters expressly, and other “exceptional occurrences” which may not be from natural causes.
However, we do need to strengthen our defence to the notion that the debt levels of member states are not under their control. I suggest we commission more work on the relationship of banks’ debt to state debt, to see if we can find supporting arguments from there. Such work will also, of course, need to cover how we regulated the banks. If we go to a defence based more on bank finances than state finances, it may help but we would be vulnerable to a counter charge that the banks too should have been under Member state regulatory control.
I am sorry to trouble you with this, but I felt the work we need to buttress our legal position needed your approval, and resources from your department to make sure the government’s position is as challenge proof as possible. I understand the UK Parliament may be asked to strengthen the position by voting expressly for the loan which would be helpful. That still leaves open the chance of challenge to the use of TEU 122.2 in general, which affects other non Euro member states as well as the UK.