asked the Minister for Finance if, in view of the high level of the rates of interest at present obtaining in Ireland and of the fact that this could be detrimental to trade expansion, he will make a statement on the matter.
Ceisteanna—Questions. Oral Answers. - Interest Rates.
9.
I have no evidence that the level of interest rates currently prevailing has been detrimental to trade expansion. The relevant financial factor in the development of trade and industry at present is more the availability of sufficient capital than the interest rate. The guidelines of the Central Bank to the commercial banks provide that in the allocation of credit priority should be given to productive investment and I am satisfied that this is being done.
I would point out that the demand for capital exceeds the supply. If interest rates were brought down artificially, there would be less incentive to save and less capital would be available.
In view of the need to expand exports, will the Minister say why our official discount rate is approximately two points higher than that prevailing in Europe?
The rate charged here is very largely influenced by the commercial considerations. I agree, in so far as it is closely related with Britain, that it is at present somewhat above the level that might be indicated by commercial considerations, but only slightly. There are variations in different countries in Europe but in those cases there is much less free movement of capital than exists between this country and Britain so that effectively the rate charged here is very closely related to the rate charged in Britain.
Will the Minister agree that in order to attract capital we must have a higher rate of interest here and that this is a reflection of the confidence of people of other countries in our currency?
I am afraid I do not follow the Deputy's question.
We must have high interest rates because we will not attract capital otherwise. I consider this shows a lack of confidence by foreigners in our currency.
If the Deputy means we should have a low interest rate and expect people to invest their money here rather than in Britain where the interest rate would be higher, then I do not think he is in touch with the situation.
While it is desirable to attract capital at high interest rates, will the Minister not agree that it imposes severe hardship on people in Ireland who are trying to borrow money?
I am saying that the interest rates charged are perhaps slightly above the natural rate that would apply. They are higher than in some cases in Europe but we are talking about interest rates——
It may attract capital but the Irishman is victimised as a result because he has to pay more.
Money is like any other commodity; you have got to pay the going rate for it.
Can the Minister state why the overdraft rate has remained at its present level when interest rates generally, including the Central Bank discount rate, have fallen substantially?
The overdraft interest rate charged at present is approved by the Central Bank.
It is exorbitant.
That does not answer my question. Why has the rate remained at its present level?
I am calling Question No. 10.
The rate has not changed just because it is approved by the Central Bank.
The Central Bank has a statutory responsibility in regard to——
——the banks.
The Deputy should read the Bill and then he will find out. The Deputy does not know what he is talking about.
The Minister has a responsibility to this House.
I am calling Question No. 10.