Andrew Tyrie: The British Economy Is 'Not Good' And The IMF May Not Be Able To Fix The Eurozone

Posted: Updated:
Print Article
TYRIE IMF
Andrew Tyrie Chairs The Influential Treasury Select Committee In The Commons | PA

The chair of the influential Commons Treasury committee Andrew Tyrie has described the prospects for the British economy as "not good", because it is at grave risk of contamination from further crises in the eurozone.

Tyrie, a Tory MP and former critic of the coalition's growth strategy, acknowledged that since his remarks last October the government had done a "great deal" to appease his concerns. But he warned: "They now face that huge decade-long effort of implementing it."

Speaking at an event in the City of London organised by the Thatcherite think-tank the Centre for Policy Studies, Tyrie warned that the eurozone crisis was far from over, characterising efforts by eurozone leaders to stabilise the currency as "flawed" and little more than "sticking plaster bailouts".

The latest attempt to shore up the eurozone came last month, when EU finance ministers approved a second Greek bailout package worth €130bn. However Tyrie warned that this bailout had only bought the eurozone time, and would only be required again if a more permanent solution wasn't found.

He told a gathering of business leaders and journalists: "The eurozone will remain in difficulties because it does not have transfer of payments from high productivity areas to low productivity areas, and lacks a mechanism for ejecting states which can't function within the system any more."

"Instability in the eurozone threatens the prosperity of the UK, the region and possibly the globe. This crisis is multi-dimensional, involving multi-bank defaults, sovereign default and potential contagion to other sovereign countries outside the eurozone."

Tyrie suggested the danger was acknowledged privately but had not been made public, saying: "An unpublished compliance report by the EU has warned that Greece will have to have a fiscal squeeze next year equivalent to 5.5% GDP. In other words the path to sustainability lacks credibility.

"Another report entitled 'preliminary debt sustainability analysis' - which looks suspiciously like an IMF document - suggests the Greeks will experience further recession, remain accident prone and lack further growth."

Tyrie, who has been publicly supportive of George Osborne's decision to lend a further £10bn to the IMF last week - told the audience that only the IMF had the economic credibility to resolve the Eurozone, but that "their resources so far have been woefully inadequate."

"The IMF is certainly not perfect, and it's possible that this crisis is beyond even them. But is a great deal better than nothing. The IMF now needs to show its toughness in negotiations which has secured its reputation for the past half a century.

"The IMF is currently treating the ECB and the European Commission as partners in resolving this discussions. But these bodies have an existential conflict of interest. They should be part of the solution, but they are also part of the problem," he concluded.

The next political challenge within the eurozone are Greek parliamentary elections taking place on 6 May, with opinion polls suggesting parties which oppose the government's austerity plan could do very well.

Around the Web

IMF | Business | The Guardian

Spanish banks 'vulnerable' and may need public help, says IMF

IMF Sees Latin America Economic Growth Rising; Risks Remain

IMF Is Best Guard Against Euro Crisis, U.K. Lawmaker Tyrie Says

IMF Staff Backs Mandatory Debt Restructuring Policy For Major Banks