Financial News

  • 16 January 2014, 11:11

Chancellor Warns The EU: 'Reform Or Decline'

George Osborne has threatened Britain will leave the European Union unless it reforms to reverse economic decline.

The Chancellor said that over the last six years the European economy had stalled, while in the same period the Indian economy has grown by a third and the Chinese economy by 50%.

Mr Osborne said economic power was "moving eastwards and southwards" and that Europe's share of global output was expected to halve by 2030.

"Make no mistake, our continent is falling behind," he said.

In what was widely regarded as an attempt to quell the growing unrest over Britain's membership of the EU among the Conservative party, Mr Osborne insisted the Government would fight to deliver reform in Europe - and then there would be an in-out referendum.

Addressing a conference on EU reform organised by Open Europe and the Fresh Start Project, Mr Osborne said: "The biggest economic risk facing Europe doesn't come from those who want reform and renegotiation - it comes from a failure to reform and renegotiate.

"It is the status quo which condemns the people of Europe to an ongoing economic crisis and continuing decline. And so there is a simple choice for Europe: reform or decline.

"Our determination is clear: to deliver the reform, and then let the people decide."

The speech comes after 95 eurosceptic Tory backbenchers put their name to a letter demanding that Parliament be given a veto over EU legislation.

Pointing out Europe's failings, Mr Osborne said: "Look at innovation, where Europe's share of world patent applications nearly halved in the last decade.

"Look at unemployment, where a quarter of young people looking for work can't find it. Look at welfare.

"As Angela Merkel has pointed out, Europe accounts for just over 7% of the world's population, 25% of its economy and 50% of global social welfare spending. We can't go on like this."

And he quoted Foreign Secretary William Hague's position on Europe that Britain should be "in Europe but not run by Europe".

The Chancellor also warned that Britain would protect the UK's financial services from binding legislation passed by the countries in the Eurozone.

He also blamed EU rules on bankers' bonuses for driving a sharp increase in bankers' salaries.

Mr Osborne's intervention comes at a time of heightened tensions over EU immigration. 

The Prime Minister, who has committed to a 2017 referendum on EU membership, has drawn-up a fresh economic plan for Britain which includes cutting the deficit and taxes, better schools, and addressing the issue of jobs and immigration.

However, on Tuesday Robert Chote from the Office for Budget Responsibility - the Government's economic forecasters - said cutting net migration would harm the British economy.

A Sky News poll in the summer showed that 51% of British people would vote to leave the EU, while 49% would vote to continue membership.

UK Independence Party leader Nigel Farage dismissed Conservatives' claims to be able to lead a process of reform in Europe and said: "Once again we have the Conservatives talking about EU reform, and once again their claims are utter bunkum."

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