Dáil Éireann debate -
Wednesday, 18 Oct 1978

Vol. 308 No. 4

European Monetary System: Motion (Resumed).

Debate resumed on the following motion:

That Dáil Éireann takes note of the Conclusions of the Presidency presented by the Taoiseach to the Dáil on 18th day of July, 1978, following the meeting of the European Council in Bremen and, in particular, the conclusions on closer monetary co-operation.

—(The Taoiseach.)

Mr. Bruton

I propose to deal with this matter under three basic headings. First of all I will deal with the method whereby this decision, which I have already described as the major economic decision we have taken since our entry to the EEC, is being taken by the Government on behalf of the people. The second heading is the possible consequences for us of joining this monetary system in the event of Britain also going in; and finally the situation in the event of Britain not going in.

Under the first heading, I have said that the major problem we are facing at the moment is that the debate is being carried on in the dark because we have not been given proper quantitative data by the Government on the consequences of the alternative courses that might be taken or the effect on us of the alternative courses others might take. It was well within the Government's competence to have given us something more than abstract arguments, which are all we have had from the Government. All the Minister for Finance has told us is that on the one hand there are five unquantified factors and that on the other there are four unquantified factors. The House and the people are entitled to a clear quantified statement by the Minister on the implications this will have for our economy. It is well within the competence of the economists, using computers and economic projections, to produce quantitative statistics as to the effects a particular course might have on this economy in relation to the movement of its currency vis-à-vis other currencies. Why has the Minister not produced figures which will give us something to get our teeth into instead of the abstractions he has given us?

I suggest there is an element of undue haste in the manner in which a decision is being taken. There is a degree of haste in it which justly can give rise to concern. We have been told it will not be possible to make a clear assessment of the relative merits of joining or staying out until 20 Novemeber, at which time there would be clear indications of the transfer of resources and the form of such transfer to enable our economy to bear the shock resulting from our being linked to stronger currencies, when we would be allowed to move only within a band relative to such stronger currencies—that we will not know whether it will be a good thing or a bad thing until 20 November when the Minister will be made aware of the exact nature of the transfer of resources.

We have been told also that a final binding decision on the whole matter will have to be taken within less than a fortnight afterwards, on 4 December. Is that adequate time to allow for consultations with the various interests in our economy? Is it adequate time to allow even the Government to assess the relative merits of the different courses of action that can be taken? I do not believe the Government themselves realise the enormity of the decision that is being taken or of the need to consult with the various interests in our economy who will be affected in different ways by a change in our currency rates to an incalculable extent. There is no evidence that the Government are engaging in serious consultations or that they will be engaged in such consultations with the various interests in our economy between 20 November and 4 December. We have not been told that the NESC will be consulted or that the social partners will be consulted.

All we have been told is that a White Paper will be published, but there has been no guarantee that there will be any dialogue on its contents. We have not been told there will be an opportunity for such dialogue in the brief span between 20 November and 4 December. I question whether this debate, during which we will have set speeches from either side, is the right way for this House to consider such a vital question. The only way in which such a debate can be conducted is through a form of dialogue in which we could reach the nub of the issue in a more informal format than is possible in this debate. We will not get anywhere near the truth in this debate because of its format, regardless of its length. I have raised very serious points about the way in which this decision is being taken and the opportunities for consultation and factual hard assessment of the implications. The lack of such consultation and assessment is a serious problem.

I should like to discuss the consequences for our economy in the event of Britain also joining the EMS. The first question one must ask in this connection, and one that the Government have not yet answered, is: if Britain goes in does it mean we will retain our one for one link with sterling? Even in the context of our becoming members of the EMS alongside Britain, do the Government envisage that there might be a departure of the punt from the £? That question should be answered clearly because it conditions the whole assessment of the situation.

In the event of our breaking the link with sterling, even in the context of Britain and ourselves being in the EMS or Britain being outside and Ireland in, is it the Government's assessment that the punt will appreciate vis-à-vis the £? So far the debate in public fora has been predicated largely on the assumption that the punt will strengthen vis-à-vis the £ but I do not believe that that is necessarily a valid assumption. We must recognise that Britain has very substantial resources of national gas and that it is able to meet its own energy needs from within its own economy. We are not. Notwithstanding the inherent obsolescence of much of the British economy and, relatively speaking, the inherent capacity for modernisation of the Irish economy, the availability of domestic energy resources within Britain, resources that are not available here, could result in the punt actually depreciating vis-à-vis sterling in the event of a float occurring between the two currencies. The Government should give the House the benefit of their best assessment of what is likely to happen in such circumstances. It is not enough to go into this float situation without the possibilities and the Government's predictions being spelled out to the House in advance of our floating independently vis-à-vis sterling.

The next point I wish to refer to in relation to our joining the EMS is the implications this will have for our control over our own economic policy. Will it mean that in future budgets will have to be devised by the Minister for Finance in consultation with his colleagues in Europe or will he be free to present his budget in his own way, with whatever degree of stimulation of demand or dampening down of demand in the economy that he might wish to follow? Will he have to consult with his colleagues in Europe before he presents his budget to the Dáil? In other words, will we have a situation where people in Europe will know the contents of our budget before the Members of this House? What effect would that have on the much vaunted secrecy of the budget which is part of our constitutional system? What effect would it have on the sovereignty of this House vis-à-vis economic policy?

We have been told that in return for the acceptance of loans to support our currency—this is different from the transfer of resources issue with which I shall deal later—the Government may accept as part of such medium-term financing the possibility of conditions being imposed on our economic policy. I have asked the Government, and I repeat the question now, what conditions would they be prepared to accept and what conditions would they not be prepared to accept? That should be spelled out clearly to us. We cannot afford just to have a vague idea that there will be reasonable consultations, that the Government will do their best to reach an accommodation, that they will draw up their economic policy but that, of course, ultimately they will make up their own minds. The country is entitled to know now what conditions we will be prepared to accept and what conditions we will not be prepared to accept.

For instance, if the European Community were to tell us that the only way they would accept our budgetary strategy as a basis for continued loan support for our currency would be that we would cut social welfare, I ask the Government would such a condition be accepted? We are entitled to a clear and unequivocal answer as to the type of conditions the Government would be prepared to accept and the type of conditions they would not be prepared to accept. The House and the country are entitled to that answer before the decision is taken. If conditions are accepted in return for a loan in support of our currency, will they be published and will they be debated in this House? Will legislation be necessary to enable such a loan to be accepted? If there is to be legislation I would be a lot happier because there will be a possibility to discuss the conditions in a Committee Stage context. However, if there will not be legislation we must know now what conditions will be accepted.

I wish to refer now to the impact that joining the EMS will have on exchange control. At the moment if an Irish investor wants to invest in Germany he has to pay a 40 per cent dollar premium to get his funds out of this country into Germany. This applies to all investments by Irish people in companies in the centre of Europe, in the economic core of Europe, in Germany, France and Belgium. It seems likely, although it has not been spelled out, that one of the results of joining the EMS would be that such exchange controls would be out of order. This might come immediately or in the short term as a consequence of joining the EMS. The result would be that it would be 40 per cent more attractive for Irish people to invest in Germany and France than it is at the moment. At present the only alternative to investing in Ireland for Irish people is to invest in the United Kingdom unless they want to pay a 40 per cent dollar premium. In the event of it being open to Irish investors to invest in the Continent of Europe, do not the Minister and the Government foresee the possibility of a substantial outflow of native capital to the Bourse in Paris or to the stock market in Germany, more dynamic economies than ours? If that should occur what effect would it have on employment here? That question has not been answered.

In the event of the rate of the punt departing from the rate of the £, there is the possibility that the British might impose exchange control and a dollar premium on investments by British people in the Irish economy. We know how much UK investment there is in our economy, particularly in the older institutions such as insurance companies and so on. These institutions date prior to independence and they have continued with substantial British investment. All of us know how important that is. In the event of exchange control being imposed between this country and Britain, is there not the possibility that UK investors will start to sell off their investments in order to avail of the premium they got before the exchange control was imposed? Would this not lead to the possibility of an outflow of capital with possible dire consequences for employment?

Another question has not been answered properly, namely, what will happen in the event of our deciding that the loans being made available in support of our currency are not sufficient and that we have got to devalue? That is on the assumption that we are a free floating currency vis-à-vis sterling and that we have the right of autonomous decision as to our rate. With whom will we have to consult before we do this? It is spelled out fairly clearly in the annex to the Bremen Summit statement that such consultation will be necessary. Will we have to get permission before we change the rate of the punt vis-à-vis the order of currencies and set a new band for our economy? Whose permission do we have to get? In the event of our having to get permission from the Council of Ministers is there not a possibility of the Minister for Finance going round the European capitals cap in hand asking the various Ministers for permission to devalue the Irish currency? In that event is there not a possibility that the intentions of the Government will leak from one or other of the chancellories that he will visit on his mendicant tour and that the result of that leak will be massive speculation against the Irish punt which will force us into an even larger devaluation than might have been intended originally? This is the danger of having to consult with anyone about the rate of our punt in advance of making a decision on the matter. The precise method of consultation and the precise guarantees as to the secrecy of such consultation prior to our departing from our rate within the band must be clearly spelled out to the House now.

The next point is the transfer of resources which we are told are to be the quid pro quo that we will get for joining the band of stronger currencies and therefore having our currency appreciate. As a result of that appreciation we will lose the competitiveness on export markets that our exporters, mostly private entrepreneurs, have up to the moment by virtue of the fact that our currency is at a lower rate now vis-à-vis the European currencies than presumably would be if it were tied in to a “Tunnel” or a “Snake” in which the strong currencies were also involved. Our exporters have a competitive advantage at the moment, by virtue of being linked with sterling which is relatively lowly valued vis-à-vis these other currencies, which we would lose presumably if we joined the EMS. Our private entrepreneurs working in the marketplace are men who must make their own way, who must be prepared to take a loss, who must allocate their resources and if they mis-allocate them they will bear the consequences; in return for the private sector losing their competitiveness we are told that the quid pro quo will be the transfer of resources from the strong economies of Europe. How will that transfer of resources be made? Presumably through the Government. The money will not go direct to the private sector who will be suffering the direct loss of competitiveness. It will go to the Government who will give the money out presumably as some form of political largesse, saying: “Look at what we have got for you now. We have transfer of resources. We have more money to give out.” It will be given out, not on the basis of an optimum distribution of resources based on the marketplace and on the hard-headed calculations of men who must make or lose, who must stand or fall on their own decisions; it will be given out on a political/bureaucratic basis through various funds operated by the Government.

I question whether that is the best form of distribution of resources in terms of the need to expand the productive capacity of our economy. I question whether the quid pro quo we are getting, even if it is £ for £ equal to what we will be losing in terms of competitiveness will not lead to a net loss, because there will be a less good allocation of resources through the transfer payments system, by virtue of its being a bureaucratic allocation, than there is through the existing system of improved competitiveness for our private sector exporters of resources. I would like that structural point to be dealt with. It is a very serious point because it will mean greater public sector control of our economy if more and more money comes into our economy not in the form of better export prospects for our private exporters but in the form of money to the public sector. That will mean a shift towards the public sector away from the private sector as a direct result of joining the EMS.

There is another issue in relation to transfer of resources. Will the transfer of resources be in the form of loans or grants? If it is in the form of grants there will be no problem; the money comes into the Irish economy and stays there unless we waste it. If, on the other hand, the much vaunted transfer of resources in return for our losing export competitiveness and losing money into the order books of our exporting companies is not to be grants from the Germans, the French or the European Community but instead loans, is that acceptable? Are loans a fair return for the loss of export orders? Are we not already too heavily borrowed overseas and have we not already got too many external debts to repay and too much interest to be paying out of this country every year without accepting as part of an alleged bonanza further loans with further interest repayments? Is that the consequences we are going to face?

How optimistic are the Government about this transfer of resources? Do they really believe that the German taxpayer is prepared to pay more taxes to give more money to the Minister for Finance and the Minister for Economic Planning and Development to disburse to the Irish economy? Is the Minister not aware that the German Government are facing a general election in the very near future? Will they be prepared, in the face of a general election, to tell the German taxpayer: "We want you to pay a higher rate of tax so that we can help boost the economic policies of the Minister for Finance and the Minister for Economic Planning and Development in Ireland"? Are the German taxpayers prepared to buy that sort of package in return for what they are told is a theoretical benefit to them of better exports—probably a real benefit but not a benefit that can be sold in a general election? Of course they will get certainty as to exchange rates. They will get much greater opportunities of exporting to the Irish economy as a result of our joining the EMS and the fluctuations of our punt vis-à-vis the mark being restricted. It will be much easier for German exporters who want to plan an export programme into Ireland to do so.

Of course the German economy will be benefiting and the Germans will have every right to make such transfers to us but I should like to know if our Government are optimistic that the German Government will be able to sell that relatively abstract concept of improved competitiveness and improved export opportunities to the German electorate in the face of an imminent general election? Will the German Government be able to sell that to the extent that the German electorate will be prepared to fork up more taxes so that money can be paid over in the form of transfers to us? How optimistic are the Government about that? Do they think that the German electorate will buy that sort of a programme?

If our decision on this matter is predicated on some decision that may be taken in the Bundestag as to the transfer of resources surely we are not leaning on a support that is all that reliable. If it is not going to come from increased contributions—indeed, resulting from increased taxes being paid by the Germans, the French or other stronger currencies—is it going to come from the existing Community budget, as the British want? The British do not want the German taxpayers to pay out any more money to finance transfers to them and us as a return for our joining the "Tunnel". The British want the money to be taken out of the common agricultural policy. They want the support to agriculture reduced so that this money can be made available for transfer. That would not be acceptable to us but I should like to know if that is the price we will have to pay to get the British in. Would the Irish Government be prepared to use their veto in the Council of Ministers, under the Luxembourg compromise, to prevent any diminution in the strength of the common agricultural policy as part of a compromise that might be entered into to get the British into the "Tunnel"?

We should be given a clear and definite assurance on that point. I should like to know if our joining will lead to any change in the method of calculating MCAs. At present a margin is allowed for variation in the movement of MCAs by virtue of the fact that our currency floats but if it ceases to float within the wide bands it has been floating up to now will that lead to a change in the method of calculation? What consequences will that have for our economy? Will there be a new base on which agricultural prices will be calculated? At present we are using what is known as the agricultural unit of account and this is based on the strong currencies. The new ECU is based on a basket of all the currencies, strong and weak, and I should like to know if the ECU, which will be a consequences of us joining the EMS, will also become the basis for agricultural prices? Will a softer currency be used for agricultural prices rather than the harder currency that has been used up to now?

I should like to know what effect that will have on us. Will it mean that Ireland, instead of having a negative MCA, as at present, will have a positive MCA in future? Will it mean that the Germans will have a permanent advantage over us because they will have an even bigger positive MCA and we will never be able to bring them back to competitiveness? In that even we will never be able to achieve the situation where they will be paid the same price as we are. What way does the Minister see that evolving. We have had many questions raised by Mr. Blake, the IFA economist, at a recent conference in Loughlinstown about the possible impact our joining the "Tunnel" would have in the event of our currency appreciation vis-à-vis sterling and the inflation rate staying high within the Irish economy. He felt that this would have a serious effect on our processing industries. Is there a likelihood in the event of the Irish currency strengthening vis-à-vis sterling that there would be an incentive to people to export cattle live, as against dead, over and above the present incentives that exist? What effect would that have on employment in the meat trade?

If the British currency devalues vis-à-vis our currency in this context, what effect will that have on those commodities which are not covered by an MCA? The MCAs will give us protection, a sort of automatic adjustment, which will allow, in the event of the currencies fluctuating, the difference to be filled up. Presumably they will still be there and, therefore, they will still be a sort of cushion for us but there will not be a cushion for us in relation to all agricultural produce. Competitiveness will be open to serious undermining as a result of the British currency depreciating vis-à-vis ours in respect of some commodities. In that event what will happen, for instance, to exports of horticultural products to Britain which are not covered by an MCA? More important, what will happen to exports of canned beef? At present we suffer a serious problem in relation to exports of canned beef because there is no MCA on canned beef whereas there is an MCA on carcases. Therefore, the incentive is for Irish processers to kill the animal and export the carcase to have it canned in Britain because of the lower rate of the green £ there vis-à-vis the green £ here.

In the event of this existing divergence being accentuated by a depreciation of the British pound as well as the British green £ vis-à-vis our currency this will presumably add further to the disadvantage of the canned beef sector of our economy, the area of meat processing with the greatest added value and the greatest employment content. Are the Government prepared to contemplate with equanimity a development of that sort which would worsen the situation in the canned meat sector? That sector, as we all know, is already facing serious problems in the existing situation.

I should now like to deal with the question of how we are going to afford thi situation. The main condition that has been underlined, perhaps not sufficiently, is the need to control inflation in our economy. We are told that we must get inflation down to the level of the strong currencies if we are to be able to survive in an economic monetary system with them. I should like to know what measures the Government have in mind for reducing inflation. As my colleague, Deputy Kelly, pointed out in the course of a recent radio interview, the results of the last budget were to fuel the flames of inflation and wage demands rather than dampen them down. Certain fiscal measures they took made it highly unlikely that the 5 per cent which they were seeking in the last wage agreement would be achieved. It was not achieved and the wage agreement was far more inflationary than that.

That was a direct result of the financial policy of the Government in the last budget, raising expectations, getting rid of taxes and giving people to believe that there was money to be got if they looked for it. Before the election we were told that Fianna Fáil had clear policies for price control. After the election they sent submissions to the National Prices Commission but they have not been heard of since. There has not been any change in our system of price control. In fact, the much vaunted ideas the Minister for Industry, Commerce and Energy had prior to the election about how price control could be improved have disappeared. They were sent to the Prices Commission but we heard nothing since. Indeed, we had the situation recently of him telling the oil companies to reduce their prices and they telling him that they would not. That is all we have had from the Government in terms of improved price control.

The only measure that will have a direct bearing on inflation is something that will dramatically increase inflation, namely, the removal of the food subsidies as is contemplted by the Government at present. If they are seriously contemplating that in order to pay for their profit and promises of the last election, have they considered the effect that would have on domestic inflation and the effect increased domestic inflation will have on our relative competitiveness within this much stricter economic monetary system than has been the case in the past? What institutional procedures have they in mind for bringing about a reduction in inflation in our economy? If they are going to go about this major decision in our economic policy in the way they are going about it now I do not believe they will get or deserve the co-operation of the trade unions because they are not telling the people the facts. I strongly urge trade unions to co-operate to the fullest extent in strengthening our currency and reducing inflation because it is in all our interests to do so, but we can only reasonably expect the trade unions to co-operate if they are given the facts and are taken into the Government's confidence. There is no evidence that the Government are taking anybody into their confidence about this major decision they are about to take.

They have not published a quantitative data about the effect this will have on the economy. So far as we are aware they have not set up consultative procedures with the social partners about this issue. They are prepared to publish a White Paper on a take it or leave it basis and leave it at that. Yet they expect the social partners to take action which will lead to sacrifices by their members to reduce inflation. I ask the House if that is a reasonable proposition to put to the people. I ask the Government to seriously consider if they are going about this in the right way. Are they not retaining information that should be given to the people? If they take the people into their confidence they will get a positive response but if they do not, the consequences for our economy in the long term will be very serious.

Two other very important points I would like to deal with relate to the situation that will arise in the event of there being different currencies in Northern Ireland and the Republic. In the event of our departing from sterling this will mean that the Irish punt will not be capable of being used in Northern Ireland. If one wants to go to the North one will have to buy sterling at a different rate of exchange. Economic transactions between the North and the South will be interfered with. Out of social visits and economic contacts come an identity of interests ultimately leading to political co-operation and, we all hope, to unification. What consequences will such a departure have on the prospects for increasing harmony and interchange between the two parts of this island? The Government have not seriously addressed themselves to that problem. One might argue that that is a more important issue than all the economic arguments I have been dealing with so far. Most of us are in politics to bring about reconcilation in this island. We all want to see that although we all have a different way of going about it. We in Fine Gael have a different approach to the problem than some people on the other side. What effect would a departure from sterling have on that prospect? I believe it would have a very bad effect and I do not believe these effects have been fully considered by the Government.

I will give an example. If we have a different rate of currency from that obtaining in Northern Ireland, does that mean that live cattle movements, which are free at present, across the border will have to be restricted? If so, that will have a major effect on the agricultural economy in border areas. Will such restrictions be introduced? We should have a very clear statement on that.

The other point deals with domestic industry. We all know that most of the foreign industries based in Ireland, by virtue of being attracted from Europe, Japan, America and so on, have markets outside the sterling area. In the event of our currency appreciating vis-à-vis sterling, I presume that the effect on these foreign industries will not be very great because they are already exporting most of their products outside the sterling area. Most native industries—I am open to contradiction on this—rely much more on the UK market than the foreign-based industries. I believe that our economic salvation rests on native entrepreneurs and not on foreign entrepreneurs but the consequences on Irish industry of our currency departing from the one-for-one relationship with sterling—and it is presumed that our currency will be strengthened vis-à-vis sterling—could be very serious. I would like to know if the Government have done any assessment on the relative effects of this change on different types of industry within our economy. Will it lead to a greater reliance on foreign industry and a lesser reliance on the development of our traditional industries? Have they examined the consequences of this move in terms of the control of enterprises within the country? Have they seriously addressed themselves to these problems?

I have asked a number of what I believe are pertinent questions which have not yet been answered. I believe the Government can obtain the co-operation they need when making this major decision if they are prepared to come clean with the people and answer all the questions that are being raised in this debate and which will be raised in the months ahead. I am not satisfied that the arrangements they are making are sufficient for such consultation or making available such information. I hope when the Minister replies to this debate that he will be able to answer fully and comprehensively the questions I have raised, and if he is not able to do so that he will make other arrangements to ensure that they are answered publicly and in time to enable the people to assess the Government's decision clearly.

Dr. Woods

I welcome this motion which is being discussed at such an early stage in the life of this Dáil. I appreciate that, since the meeting in Bremen took place after the Dáil went into recess, it was not possible to have this discussion earlier. I was surprised at the number of Opposition Deputies who claimed there was no discussion on the question of the monetary union and that there was no previous information in relation to this matter, because I am a member of the Joint Committee on Secondary European Legislation and the 14th report published earlier this year covers this subject very broadly. Members representing each party in this House are also members of that committee.

The Seanad, shortly after the publication of that report, on 5 July last, discussed at considerable length the implications of the European Monetary Union and the movement towards a European Monetary System. That report is given in Volume 89 of the Seanad Official Report for Wednesday, 5 July 1978. The Minister for Economic Planning and Development gave his views also at that stage on the general background to the discussions which were taking place. Nevertheless steps have taken place since that time.

I very much welcome the Taoiseach's statement and the very comprehensive one also of the Minister for Finance. In the Taoiseach's statement there is one very salient point of which we must take note:

In 1972, gross domestic product per head in this country was about 64 per cent of the average for the Community. In 1976 it was 60 per cent. This decline—which is on the basis of figures corrected for purchasing power parities—contrasts with the rise which has taken place in the major central economies.

In that statement the Taoiseach made it very clear that there is a problem, a divergence, that we are not keeping pace with developments in Europe and that something further needs to be done to strengthen our position within Europe. Many of us will have some conviction that our link with sterling has had something to do with that. Certainly our over-concentration on the British industrial situation and at times our mimicking of the steps being taken there cannot have been helpful to us in developing our resources, policies and growth rates within Europe. There is a clear need for growth if we are to create jobs. This is one of the very clear-cut and specific targets of this Government, as outlined, as seen by any backbencher here and must surely be seen by the Opposition front bench. We must go for growth if we want to have the jobs, and we have a major problem in their creation. Consequently the Taoiseach has set the scene for a further step in policy, one which would be taken as one of tremendous historical importance. Of course, ultimately we want to arrive at a position of parity in a variety of ways with our partners within the EEC.

The Minister for Finance, in what was likewise a very comprehensive and detailed report, outlined as clearly as he could possibly do at this point in the negotiations the standpoints, views and factors which influence the decision under consideration. I was rather amazed at Deputy Cluskey last evening when he described the Taoiseach's and the Minister for Finance's approaches as romantic. One would find very few documents less romantic than those dealing with such a complicated, technical matter as the European Monetary System. These are heavy, weighty matters necessitating a great deal of consideration and thought. The Minister for Finance has indicated clearly that credit supports will be required, that the resource transfers of the order of £650 million over five years are part of his objective and that a significant expansion of the regional fund, of FEOGA—and particularly the guidance section of FEOGA—and of the social fund will be necessary. We are inclined to gloss over these. But when we consider the influence the social fund has had already on our economy and job creation, further when we examine the benefit that an organisation like AnCO has had already from the social fund, and also the Department of Education, we can see how these broad measures can have a major effect on the day-to-day affairs of the country.

I believe that the documents presented are very useful. Certainly I appreciate them. The issues arising here are basic, such as the future of the European Economic Community. There is the question of the economic, monetary and political union within the Community. There is the whole question of the diverse nations within the European Community working closely together in a common purpose. Some arguments put forward by Opposition Deputies remind me of the situation approximately 200 years ago in the United States of America when broadly similar arguments were made about the coming together of their various states, questions such as those dealing with the public versus private business with their attendant fears and concerns. We can think back even 100 years ago when there was an equivalent situation in which the smaller states within Germany were considering the coming together of their monetary systems to make a stronger economic union within the various parts of that country.

I doubt if anybody would disagree that, as a nation, we have participated fully in the EEC to date. Not alone were we enthusiastic entrants but we have been enthusiastic participants since joining. This was true of the Fianna Fáil Party. At that time, indeed, the Fine Gael Party backed the same enthusiastic entry to the EEC. Indeed, the people, in the subsequent referendum, showed their enthusiastic desire to be more closely involved with the peoples of Europe. We have been good participants which cannot be said of all countries. Certainly we have not had a dog-in-the-manger attitude towards the EEC and this aspect is recognised amongst our partners. If we examine results to date it can be seen that in agriculture we have reaped considerable benefits. The benefit from the FEOGA guarantee section alone in 1977 was £245 million. The guidance section of FEOGA amounted to £7.5 million in 1977. Hence the reason for the Minister for Finance indicating very clearly that this guidance section necessitates very substantial transfers in any arrangements that might be made. Even in relation to agriculture we know that the direct, visible benefits were part only of the total scene. The major benefit to our agricultural economy was the stabilisation of prices and the provision of economic prices for our farming community. This has had a dramatic effect on growth and improvement within that community. Nobody can deny that.

In regard to the social fund, during 1977 we had a direct transfer of £19.7 million. Our benefit from the regional fund was £12.6 million, making a total under those direct headings of £285.5 million. In that sense we appreciate that the regional fund has not been what many of us would have wished and we appreciate that it must be developed significantly. Nevertheless, we have had some very direct and beneficial results from our membership of the EEC following that historic and difficult decision for our country at that time.

If we look at economic development in general we find that it has become easier to attract industry. Membership of the Community has helped growth in agriculture, it has also reduced our dependence on the UK and their markets and we have seen an increase in exports to the EEC. Against this background we have two major decisions to make: the first is in relation to the question of the direct elections to the European Parliament which must have considerable influence on the future of that Parliament as on our future as a member of the EEC; secondly, in relation to the question of closer monetary union by way of the European Monetary System through which we must face up to the co-responsibility with our partners within the EEC for the development of all the peoples and countries within the EEC.

The European Monetary System has very serious implications for us. We are regarded as one of the weaker currencies and there is always the danger of the creation of a two-tier system, which has been suggested in the past, within which we with other weaker countries would be on the lower level. We would not support or welcome this as a future direction for the EEC and consequently I welcome the consideration of a system which would involve all partners within the EEC. If we take a simplistic view of the implications of the European Monetary System we would think in terms of our output, our productivity, our competitiveness, our enterprise or ability to reduce inflation, our ability to reduce imports and increase exports and in simple terms like strengthening the £ in our pockets and improving our balance of payments. Naturally we feel we must do all these things if we are to be a stronger and a healthier economic people within Europe. We have reservations about such a major step and people will say: "Let us do it when we are strong enough." There are fears of the possible effects of the EMS. Fears were expressed already during the debate about our inability to export given certain developments. There are fears of increased imports, particularly if the United Kingdom do not come in on a parity basis with us and there is the whole question of our relationship with sterling. If the UK come in with us will they devalue and will they keep parity with us? What will be the effects on prices, jobs, on prospects for growth and consequently on further job creation? These are the things about which the ordinary people wish to know. In this context if we look at agriculture the picture is very comforting in many ways because 90 per cent of our agricultural produce is covered by the common agricultural policy and by the MCA system. The MCAs more or less shelter us in agriculture, particularly against any decisions which the UK might make, as 90 per cent of our agricultural produce is covered by the common agricultural policy and MCAs.

Deputy Bruton referred to another group of products which are not covered by MCAs. This group represents 10 per cent of our total agricultural produce and this 10 per cent, which includes fruit, vegetables, sheep meat, potatoes and processed meats, needs clear safeguards particularly in a situation in which the UK would operate at a different rate from ourselves. In the event of Britain not going in, consideration should be given in relation to these products, to the creation of accession compensatory amounts to cover a period of years. Something like that was done when we joined the EEC in the first instance, particularly in relation to these commodities. These were the transitional compensatory amounts which became known subsequently as compensatory amounts and they extended over a five-year period. Should it happen that Britain decides not to go in this 10 per cent group should be given some definite safeguard and I would suggest that accession compensatory amounts be considered here.

We are also aware that farm inputs, like agricultural machinery, to the extent of £50 million per annum are imported from the UK, that nitrogenous fertilisers are imported from there, and that especially with the North Sea oil production this would mean a disadvantage to Nitrigin Éireann Teo., and that this is a question which must be considered in the negotiations.

As far as food prices are concerned, Deputy Bruton raised the question of the effects of MCAs. It is true that at the moment the MCAs are having very little effect because the gap is very small and consequently the recent rate of MCA is £1.20 per hundredweight liveweight and 2.3p per pound for sides of beef. This gap is very small and represents only approximately a 3.3 per cent monetary gap, but in 1976 and 1977 according to the Eleventh Report of the Developments in European Communities, the monetary gap was very substantially greater and at one time it was around 27 per cent to 30 per cent. That meant that there was penal charge on agricultural exports of over £100 per beast as a result of the MCA. This led to changes in the green £ and caused certain disturbances from time to time which were sorted out afterwards. There was a very strong lobby to have the MCAs stabilised.

The EMS would not have any great immediate effect on the MCAs but ultimately it must surely lead to a stabilisation of the MCAs and in the long term to the possibility of new proposals for dealing with the whole question of MCAs, so I do not see the danger which Deputy Bruton saw in the short term in relation to MCAs. As I see it, there will be no change in 90 per cent of food prices as a result of the European Monetary System. They would continue on the plateau which they have reached at this stage, depending on the annual price reviews as they are at present. The balance of 10 per cent is unlikely to increase in price as a result of the EMS, unless we devalue our £ on entry into the EMS, which is an unlikely occurrence.

Therefore, it looks as if food prices should not be directly affected. To the ordinary consumer this is a major question and it is important to give clear assurances at this stage that as a result of the EMS there would be no direct adverse affects on food prices. In the EMS the Irish £ would be supported by the joint reserves and therefore, it is likely that devaluations and scope for devaluations in the green £ would be much less than was the case previously. Consequently, there would be fewer and smaller increases in the future in respect of food prices to the consumer. I cannot foresee any scope for hidden increases in the cost of food or household goods.

Another feature that should be pinpointed is that there would not be repetition of the rounding-up that occurred in the case of decimalisation. Regardless of what may be said from official quarters, the consumer knows very well that there was a rounding-up to a considerable extent at the time of the change to decimalisation. It is important to make clear that there is no mechanism involved here that would allow for a similar situation. Our currency would remain the same. We would have the same £ in our pocket. That assurance should be given to the consumer. While talking with people in my constituency on this matter I have been asked what will happen to the £, whether it will be discontinued as a unit of currency and whether we will be passing around ECU's. It is only between the central banks that ECU's will be used, at least in the short term.

I agree with Deputy Bruton that we must be vigilent lest the UK seek a reduction in relation to the CAP. I agree also that we must ensure there is no fundamental change in respect of that policy, a policy that is of vital importance not only to our agricultural industry but to our economy as a whole. However, it would not be the first time for Britain to seek a change. On other occasions she has sought a change in the CAP for one reason or another. I am sure that our other EEC partners are well aware of the importance of the CAP and of the fundamentals particularly of that policy to the weaker economies especially, economies such as ours which are very dependent on agriculture. Therefore, I would not share the Deputy's fears in that respect and I doubt if the officials concerned would share it either. They know where they stand but I agree that the matter is one about which we must be continually vigilant.

In the industrial area we would have, within Europe, less freedom to vary our monetary value as a competitive mechanism and as a means of increasing our exports and reducing our imports. From that point of view the situation would be somewhat more difficult but on the other hand there is the consideration that our industrial exports to the EEC are increasing. People concerned with this aspect of the EMS, to whom I have spoken, are of the opinion that this union would have long-term benefits for the industrial sector. However, if the UK decide against joining the EMS, industrial exports to the UK and industrial imports from there would need to be protected against undue fluctuations between sterling and the EMS.

A number of Deputies referred to the question of Northern Ireland and emphasised that this would be a sensitive area especially in the event of Britain not joining the EMS. Deputy Barry said that we must not set back by one day the movement towards the unification of the country. Even as a backbencher I am confident in assuring the Deputy that there is no possibility that Fianna Fáil will ever take a step that would delay the unification of Ireland.

Mr. Kelly

They have been doing that for 50 years. Since their foundation they have done nothing but impede unity. They created ditches and high walls where previously there had been flat land.

An Leas-Cheann Comhairle

Deputy Kelly should not be so sensitive on this matter.

Mr. Kelly

That is what distinguishes that party from the rest of the Irish people.

Dr. Woods

If Deputy Kelly's party had been as positive in regard to Irish unity 50 years ago as they are now we might be much further along that road.

Mr. Kelly

Deputy Cosgrave was the only Irish Leader to sit at a table with the Unionists.

Professor O'Donoghue

But the present Leader has changed that policy.

Mr. Kelly

He, too, has sat round the table with the Unionists.

An Leas-Cheann Comhairle

The unification of Ireland is not under discussion.

Professor O'Donoghue

But the unity of Fine Gael is.

Dr. Woods

I only wish to reassure Deputy Barry that there is no fear that Fianna Fáil would set back by even one day the unification of this country.

Mr. Kelly

God help us.

Dr. Woods

Deputy Bruton expressed fears that through the EMS we would create yet another divide with Northern Ireland. We know that the North is integrated economically and monetarily with Britain but let us look at what is happening. Since we joined the EEC our growth rate has been greater than that of Northern Ireland. Our rate of inflation is lower. The 1978 forecast is that the inflation rate for the UK and Northern Ireland is 9.5 per cent while for us it is 8 per cent. Here I cannot avoid digressing and smiling somewhat on recalling Deputy Bruton's remarks about inflation because he and his Government were in office at a time when there were extremely high rates of inflation but within a very shot time the present Minister for Finance and the Minister for Economic Planning and Development have succeeded in reducing the rate to 8 per cent.

Mr. Kelly

That Minister admitted only yesterday that the inflation rate here is determined virtually by what happens in England.

Professor O'Donoghue

I doubt if the Minister used the word "determined".

Dr. Woods

Our farmers are in receipt of better prices for cattle and milk and our workers are in receipt of somewhat higher wages. In addition, householders no longer have to pay rates and in the main car owners are relieved of the burden of road tax.

An Leas-Cheann Comhairle

We are moving away from the motion. We may not discuss the whole economic policy. It is relevant only in so far as it is affected by the EMS.

Dr. Woods

By way of reply to Deputy Bruton, I assure him that we are not creating a divide and that the evidence shows we are building a more attractive alternative to integration with Britain so far as the people of Northern Ireland are concerned.

We owe it to our people to go forward within Europe and the EMS is one further means of ensuring growth and stability in our economy. The people of Northern Ireland may well be looking to us at this time to provide the leadership and the direction that is required. Our Government are prepared to provide that leadership and direction.

On the question of youth, the Taoiseach told us that the Community faces a massive increase in the number of young workers. He reminded us that a recent survey showed that although people under 25 constituted 30 per cent of the work force they represent 44 per cent of the unemployed. I was glad to note that at the Bremen Council the Taoiseach stressed the need for speeding up the special measures that have been under consideration for dealing with this problem. It was encouraging, too, to hear from the Taoiseach that the council agreed to ask the Council for Labour and Social Affairs Ministers to devise special measures to combat youth unemployment within the framework of the European Social Fund. This is a very fine aspiration. I would like to see it turn into real action. The Joint Committee on Secondary European Legislation, of which I am a member, have looked over various proposals and have made amendments and alterations to them for the improvement of youth employment within the EEC, particularly with reference to the Irish problem but I see no definite arrangements coming forward from the Community. I welcome the stress the Taoiseach has put on this aspect in his representations at the Bremen Council and also in his report to the House.

I note the strong positions that have been taken by the Taoiseach and the Minister for Finance. I believe we will have further quantification of the measures that are proposed and the effects of them. We need clear guarantees in certain cases in the event of Britain not going in. They affect particularly the 10 per cent of agricultural produce, which is not covered by the common agricultural policy, and our industrial exports. I know that the negotiations are still proceeding and, consequently, neither the Taoiseach nor the Minister for Finance are in a position to put all their information before the House. I regard the information which has been provided as quite comprehensive. I have every confidence in the Government and in our negotiators in this respect. I also believe that our people have every confidence in those negotiators.

Mr. Horgan

We have become very familiar in the last seven years with a form of speech which has become almost universally known as Euro jargon. It has become virtually impenetrable to the people who put us here and indeed to many of us. There is another kind of jargon, that of professional economists, and this also, given the slightest provocation, ascends into some stratosphere of meaninglessness for people other than those professionally engaged in it. One of the problems we face is that we are trying to talk rationally and in a way which will make sense to us, to our constituents and supporters, about a topic which combines both of those forms of jargon at possibly the highest level, the Euro jargon and the economic jargon.

Mr. Kelly

With a top dressing of Fianna Fáil cod.

(Interruptions.)

An Leas-Cheann Comhairle

We would get on much better if Deputy Kelly would wait for his turn to speak. Deputy Horgan is in possession.

Mr. Horgan

I will leave the culinary details to Deputy Kelly. This is a challenge to us because between now and the end of the year as public representatives we have the task of making some kind of sense to each other and to the people about the issues involved in this potential decision. I believe some trends are emerging in this debate, which will percolate into the public conscience, and this debate, although based on very incomplete and so far inadequate information, has been a step in the right direction in bringing people to an awareness of what is involved.

I am rather intrigued by the closeness of the November discussions and the December deadline in relation to what we are discussing. I have a mental image of this tiny infant, the European Monetary System, there in its crib with the smiling parents Chancellor Schmidt and President Giscard gazing approvingly over it and there ranged on one side are the three wise men, the Taoiseach, the Minister for Finance and the Minister for Economic Planning and Development, who have come from afar to adore it while the rest of us play the role of the shepherds standing around on the margins wondering what is to happen next. We need to proceed from this rather simplistic view of it to a more sophisticated assessment of what is involved.

I see three main reasons why the European Monetary System has got to its present stage of development and planning. The first—enough attention has not been paid to it in some of the speeches up to now—has been the need to provide a zone of monetary stability in the short and medium term against the vagaries of the dollar up and down the international exchange markets. This, in effect, is a defensive, a reactive aspect of the proposal. It is reacting to something over which it has no control and over which it wants to have more control. Naturally it has positive aspects but it is something which has been forced on the European Economic Community to some extent by the breaking up of so many of the economic moulds, certainly on the macro-economic level by the breaking of the sort of stability that most of the economists, including many of those who are educated by the Minister for Economic Planning and Development believe will be with us until the end of our days.

We have now had to come to terms with the realisation that that kind of stability is not necessarily on for the future. Hence the EMS and its predecessors the Werner plan and other devices, all of them attempts to stop the rot, to at least provide some sort of an enclosure within which currencies with performances relative to each other can be predicted with some accuracy and within which they can be protected from raids from outside.

I believe the second main element is the need to rationalise and harmonise farm policies within the Community. In a general sense this is an acceptable aim. The third main reason—this is the most positive reason—is that if the European Monetary System is to make sense in the long term it must involve some progress towards full monetary union. That prospect must be part of our debate. I would like to hear more from the Government side, particularly from the Minister for Economic Planning and Development, about the Government's long-term thinking about the possibility of monetary union. Mr. Horst Schulman, who is President Schmidt's senior economic advisor, has said he does not envisage full monetary union before 1990 at the earliest. That is not too far away for us to be talking about it and looking, even at this stage, for a response from the Government about what it might entail. I have a rather open mind about it. It will obviously involve some loss of sovereignty. I am not sure how real that loss of sovereignty is and we would need to discuss it in more detail.

One might almost argue that the move towards monetary union has the same kind of risks and the same kind of advantages as the original movement towards, and eventually into, the EEC. We have to—and this is one of the risks—accept the fact that the stronger European nations, in particular the Federal Republic of Germany, are not interested in the EMS or in monetary union any more than they were interested in the creation of the EEC in the first place out of a spirit of benign maternalism towards the weaker nations of the Community. They are interested in these things because they are industrial nations, they are exporting nations, they are expanding nations. For their industries to grow and expand it is essential for them, as it is for us, that they should export. Their export prospects are threatened by instability, by exchange-rate fluctuations and by poverty in the poorer countries of the Community.

The challenge to us in this situation is that we should accept and recognise that it is fundamentally self-interest on the part of the strong nations which prompts this attempt to create economic and fiscal stability in Europe. We must respond to that challenge by insisting that, if we accept, it will be on the basis of our own ability at some stage to turn back that tide and to make use of that economic stability and economic capacity for our own benefit and for our own exports rather than simply as a captive market for the more highly industrialised nations of western Europe.

The essentials of the European monetary system have been well stated by Mr. Schulman. I can do no better than quote what he said in a BBC radio discussion which was reported in The Listener of 5 October. He says:

You have to reach an agreement on two or three essentials if you want to operate a European monetary scheme. You have, first, to agree on the kind of exchange-rate system that you want to operate. In Bremen, we said that we wanted to have a system that is at least as strict as the snake. Obviously, it does not make much sense to set up a new scheme which is less strict than the snake; otherwise, you might continue with what you have at present. Secondly, such a scheme will only be viable if there is a greater convergence of economic policies and of economic performance than we have had in the last few years. In particular, what is needed for the successful working of the scheme is that inflation rates converge in a downward direction, in the participating countries. Thirdly, in order to make such a scheme credible, you have to set up certain support mechanisms—financial facilities—so that the interventions that are needed to maintain the rates within more or less narrow margins are available.

Before returning to that key definition of what is needed on an international agreement basis to set up a European monetary system, there is a fourth essential which we should look at briefly. Here, again, I would like a positive statement from a Government speaker. Will the European monetary system, as it is envisaged at present, to take effect from early next year, involve legislative changes which will have to be brought before this Parliament; if so, what are those legislative proposals and when will we have an opportunity of discussing them? It is important that this should be stated at this point so that we may be prepared for any legislative and constitutional changes that may be necessary.

I should like to refer briefly to what Mr. Schulman said. The first of his three essentials is self-evident: you need a system which is at least as strict as the Snake. The second one is critical, and much more critical than many speakers to date have pretended. Inflation rates, he points out, should converge in a downward direction in the participating countries. There is a need for a greater convergence of economic policies and of economic performance than we have had in the past few years. Other participants in this radio discussion that I was quoting from were rather sceptical about the willingness of the politicians—effectively, this means the politicians of the Governments of any of the countries involved—to take this second essential seriously. Sir Jeremy Morse said in the same discussion:

I am rather sorry to see that, in the Bremen communique, there was an excessive emphasis on monetary steps, with the problems of drawing the economies together in budgetary practice, fiscal practice, industrial practice, unemployment, inflation, and all that, thrown away in the last paragraph, rather lightly. There is a good deal of emphasis on the exchange-rate mechanism and all this discussion about parity grid versus baskets, etc. I hope the mistake will not be made of pushing too far on the exchange-rates and not going on with the other things.

There is a very real danger here, especially for an economy which is as vulnerable as ours. That is, that people will be led to believe that the European Monetary System, the control of the exchange rates, is some kind of magic device which will get us out of all our difficulties. To contrast the respective roles in the European Monetary System of the exchange-rate mechanism on the one hand and the economic performance, domestic and political policies on the other, is much the same as contrasting, for the purpose of somebody who wants to reduce weight, a corset and a diet. If we concentrate on the exchange-rate mechanism we are saying that if we cram everything into a corset we will lose weight, but everybody knows that the only effective way to lose weight is on the basis of a diet. Of course, at best it is only a short-term proposal.

Another commentator in the same debate, Professor Jerry Quinn, writing in this morning's Irish Independent, made much the same point. He was reminding people that domestic economic policies and domestic political and fiscal policies will have a much greater effect on the future of the monetary system, on whether it lasts or not, than we suppose. It will involve a great deal of deep thought. The Taoiseach did refer to this matter in some detail in his speech, particularly on pages 16 and 20. On page 16 he said:

We here, as a nation, must ourselves make an immense effort. That is the basis of the programmes on which the Government are working. We must expand our economy by our own efforts and make investment here attractive and profitable. That is the reason why we are committed to a level of expenditure which creates for us possibly the highest public sector borrowing requirements in the Community. And that is why we tolerate a deficit on our current balance of payments which is also extraordinarily high by Community standards— though not when measured in relation to our reserves.

These two, the level of public borrowing and the deficit on our current balance of payments, are precisely the things which are threatened by accession to EMS unless action is taken. The action the Taoiseach proposes is contained largely in his speech where he notes:

The Government will have to operate fiscal and monetary policies which will sustain growth, encourage employment and keep down costs. The social partners will be under an inescapable obligation to complement these efforts. In particular it will be essential to ensure that the rate of increase in incomes does not outstrip productivity.

Later he returns to this theme and says:

In particular, we cannot maintain and increase employment if we pay ourselves more than our production warrants and allow our costs to get out of line with those of other countries within the system. That is why the forthcoming negotiations on wages and the economic and financial policies of the next year will be crucial.

I would draw these passages to the attention of every trade union and every housewife because they are the "small print" of the EMS and it is small print which holds little consolation for them because it is based first on an idea of restraint and, secondly and more important, on an idea of restraint which is extraordinarily narrow in its scope and implications. What the Taoiseach is saying is that wage earners and their families should bear the burden of restraint alone——

Professor O'Donoghue

That is not true. What the Taoiseach said is that there is a limit to the increase in living standards that can take place governed by productivity. Anything beyond that is simply inflation. Is the Deputy saying that more inflation is good for us, because that is what he implies?

Mr. Horgan

It is not.

Mr. Kelly

The Taoiseach is putting limits on the people at the bottom and taking limits off those at the top.

Professor O'Donoghue

I should like Deputy Horgan to elaborate on this and get it right for the record.

Mr. Horgan

I have only begun to make this point. I hoped to have elaborated on it but I doubt very much if anything I say will be to the Minister's satisfaction. I shall do my best to elaborate what I mean and why I think it important that this small print of the EMS should be widely discussed.

It is a fact that inflation takes place and also that it can take place in such a way as to reduce real purchasing power of wage earners and their families other than through inflationary increases in wages. What seems to me to be indicated here is that if there is a growth in inflation which reduces the real purchasing power of wage earners and their families, through no fault of their own, they are now expected to make good the deficiency at their expense by increased productivity. We do not find in the Taoiseach's speech any reference to productivity in other sectors. There is no reference to the productivity of shareholders, to the productivity of the persons who would have been liable to wealth tax and the productivity of their assets. There is no reference to the productivity of the person whose liability is now going to be tapered off almost to nothing under the capital gains tax or to the productivity of their capital gains. There is no reference to the productivity of the farming community.

I was intrigued to hear at the recent seminar on the EMS at Loughlinstown House the chief economist for the Irish Farmers Association argue that the productivity of Irish farmers was lower than that of their Continental counter-parts and that the answer to that in terms of the EMS was a transfer of resources to the farming community. I find it strange, to put it mildly, that any shortfall in productivity should be regarded in one sector as a recipe for increased productivity and in another sector as a recipe for increased resources. What is sauce for one must be sauce for the other.

Professor O'Donoghue

The Taoiseach did not make that statement.

Mr. Horgan

I fully accept that but I believe there is a considerable danger—and this is the point I have been making in the past few minutes—that resource transfers will tend to favour one section of the community more than another. Secondly—and there is some evidence of this in the lack of detail in the Taoiseach's speech—productivity is being very narrowly defined and confined effectively to work rather than capital. That is the problem we must face.

I would advise the social partners, or at least some of them, if they are coming to these negotiations to take full account of that fact and also to use their bargaining power which will be considerable in this situation to look for not just appropriate financial rewards for their members—and I am talking particularly of trade unions—but for the kind of structural changes that are needed in this society, structural changes, which despite the opposition of the present Government, were begun by the previous Government and which the present Government have now begun to dismantle.

There are some other dangers in the EMS which should be mentioned and when I say that, I am not speaking from a position of total hostility to it but simply outlining some things to which we must pay attention. I see these dangers mainly as transitional but of course they could be very serious in the short term. The first is that of transfers. It is absolutely essential to realise that the European Monetary Fund if and when it is established—I believe the timetable for its establishment is about two years after the inauguration of the EMS itself—will not be a mechanism for effecting transfers of resources within the Community. It will be a mechanism for preventing fluctuation of exchange rates but if we are looking for transfers we shall have to look to the existing transfer mechanisms of the Community or call for the creation of new ones if these are not regarded as adequate.

The Taoiseach pointed out that in 1972, GDP per head in this country was about 64 per cent of the average for the Community and in 1976 it was 60 per cent. I am not quite sure where the Taoiseach got these figures but, if he got them from the reports of the regional fund, the dates he chose are intriguing. According to the reports of the regional fund, in 1973 GDP per head in this country had fallen to about 52 per cent of the average for the Community, and in 1977 it was no more than 48 per cent. This decline over a longer period is, in fact, even sharper.

There is a case for transfers and there is a case, without running the risk of being accused of being anti-Irish, for wondering whether the Government which we have, and up with which we will have to put for some time in the foreseeable future, have got the right end of the stick in their bargaining approach to this question. One might argue as well that we have a special need for transfers because of the failure in particular of the Fianna Fáil Government, when they negotiated our entry and since then, to offset even under existing transfer mechanisms the foreseeable ill-effects of our joining the EEC.

We have gained enormously in agriculture and many farmers deserved an enhanced level of income. One could argue first that the gains in agriculture have been more than counter-balanced by the losses in industry, and particularly in our traditional industries, and secondly that the effect of this failure of inflow to match losses has been aggravated by the secondary failure to redistribute in any socially progressive sense some of the major benefits of the common agricultural policy. While we wish our negotiators well that is why, on the basis of their track record, we should like some more evidence that they know precisely what they are talking about.

There is another major danger to which I do not think enough attention has been drawn, that is, the danger to an open economy such as ours of the out-flow of capital. Deputy Bruton already spoke in terms of the link with sterling and the particular problem in relation to capital flows between this country and Britain. I want to deal with it on a slightly wider level rescinding from the question of whether or not we maintain the sterling link.

Capital is vital to us and, unless we create the kind of conditions which will encourage capital by our own independent policies, we will be considerably at risk and even more so in a situation in which two things are happening: a situation in which inflation is increasing and, according to the latest report from the United Kingdom firm Reward Regional Services, inflation in this country has been higher than that in the United Kingdom in recent months and the gap between Irish and United Kingdom prices has widened. Also, the favourable downward trend in unemployment which was experienced during September has been sharply reversed in the first week of October. The 531 people who became out of work, not counting the extra new women claimants, represent a number substantially above the rate of increase which one would expect to result from normal seasonal redundancies.

Mr. Kelly

And earlier too.

Mr. Horgan

And perhaps earlier too. One can say that, up to the end of September, the seasonally adjusted unemployment figure is down less than 10,000 for the nine months starting in mid-December last. This is substantially away from the Government's targets, however they are defined. We on this side of the House reserve the right to define and to put flesh and bones on the Government's ambiguities about targets in relation to employment, just as they no doubt reserve the right to put their own construction on them. The electorate will decide in the end.

We need to create conditions for investment and for capital. On the evidence of the latest statistics. We are not creating that situation. The mini-consumer boom inaugurated by Fianna Fáil is now lessening and, once the situation turns around, it could become very nasty indeed. At the same time, we are going into a European Monetary System which will facilitate the free movement of capital to areas in the Community where its location is more attractive and more productive.

The Taoiseach said:

In fact, unregulated growth could well accentuate regional differences by pulling investment and labour even more irresistibly towards the central areas.

I do not quite understand why he said that in the face of the fact that the European Monetary System is designed, among other things, to make capital movement easier and is doing this precisely for the reasons that the main factor affecting the vagaries of the exchange rates between the member countries was erratic capital flows between one country and another.

We are moving into a system in which it will be easier to move capital away from the less favoured areas and we are doing so at a time when our Government's economic policy, to put the very mildest construction on it, does not tend towards making this country one of the more favoured areas for investment.

I now want to talk very briefly about the question of the link with sterling. Mr. Jenkins put it rather fetchingly some time ago when he described a nation's exchange rate as its virility symbol. He has chronicled in some detail his own problems in trying to persuade a rather chauvinist British Government to devalue when he felt they ought to devalue. I do not think we should be looking at our exchange rate in that sort of way, but simply in terms of the hard economic realities of life. When we look at the economic realities of life, when we look at the patterns of our trade, it seems to me on purely pragmatic grounds that the question of breaking the link with sterling is not so much whether but when and how often.

All sorts of options stretch before us into the foreseeable future. Britain and Ireland can go into the European Monetary System at par. We can go in not at par. Even if we go in at par, we can fluctuate within whatever narrow limits the European Monetary System allows. If we are inside at par, whether or not we went in at par, and the United Kingdom decides to leave, another situation is created. It is even theoretically possible for us to remain on a par with sterling even while they are perhaps outside the area. We have, I think, to be intensely realistic about this because of the very distinct possibility that, even if Britain does go in—and there are no substantial signs she will—the United Kingdom authorities will maintain a substantial degree of cynicism about the value of the EMS and will pull out as soon as they think it is suitable to do so. Only on Tuesday Francis Kearns, the economic correspondent of The Guardian, put the situation like this:

Having started off moderately enthusiastic about the scheme Mr. James Callaghan seems to have had second thoughts. He will have to make up his mind before the European Summit on December 4 and 5. The safest bet is that we will join but how long we will be able to stay in remains a wide open question.

That is as straight from the horse's mouth as anything from any Government spokesman on this side of the Irish Sea. We must be prepared. If we go in with Britain, assuming parity with some slight differences, we have to accept the very high probability that the link with sterling may be broken and may, indeed, at a certain point be reneged on.

In this context, I have been fascinated by the new found interest that the present Government have in the effects of the link with sterling on our economic system. I do not have a copy of the Minister's speech yesterday but, as reported in The Irish Times this morning, he says “But the effects on the Irish economy of the trend in the British economy between 1973 and 1976 gave rise to serious misgivings about the continuance of one-for-one parity with sterling”. Later on, he says:

The major criticism of the sterling link is that it has been largely responsible for our inability to insulate ourselves from the adverse effects of British economic and monetary policies and this criticism reached a peak during the period of high inflation in 1973 to 1976.

Mr. Kelly

But that was never admitted by him. He put the blame in quite different quarters in those years.

Mr. O'Kennedy

I beg to contradict the Deputy.

Mr. Kelly

But he did. I have it all here.

Mr. O'Kennedy

Selective quotations.

Mr. Kelly

In the Minister's book in those days it was Deputy Richie Ryan, and he alone, who was responsible for inflation.

An Leas-Cheann Comhairle

The Deputy may think that it is right but he may not say it at this stage. He will have his opportunity.

Mr. Horgan

The Deputy is trying to help.

An Leas-Cheann Comhairle

Deputy Kelly is not helping Deputy Horgan in any way.

Mr. O'Kennedy

Deputy Kelly is simply trying to pre-empt some parts of my speech.

Mr. Horgan

Deputy Kelly shares the same constituency with Deputy Horgan and that may have something to do with it.

An Leas-Cheann Comhairle

That is something to be discussed elsewhere.

Mr. O'Kennedy

But not, presumably, the link with sterling.

Mr. Horgan

The point I want to make about what the Minister said yesterday is that he carefully avoided making this criticism his own. But he wants in some sense to have the benefit of making it his own without actually claiming it for himself. He and the Government really must say whether they believe this now and, if they believe it now, did they believe it then because then, to my recollection, we were not told that the link with sterling was the fundamental reason for the trend in our inflation rate situation? In fact, we were told so often about the economic short-comings of the previous Government that it is extraordinary the Minister did not even put in a small saver to his speech yesterday to indicate that he and the present Government felt at that time that there were some other factors relating, for example, to the alleged mismanagement of the economy, factors which were responsible for our inflationary tendencies.

This is only part of a trend because in some of the first and major economic speeches here the Taoiseach and, to some extent, the Minister were honest enough to admit, first of all, that there had been a world recession, which they had ignored when they were in Opposition and, secondly, the economy and the graph of employment was in better shape than they pretended to the electorate. That is all for another couple of years' argument and the next few years' argument will include an argument about the consequences of any decision to join the EMS and, in particular, the consequences of any such decision on our domestic economic policies. If the Government are looking to the EMS strait jacket or corset to redeem them from the gargantuan overeating of the last 12 months they will not get a great deal of help from this side of the House in their endeavours and, indeed, the famous manifesto, which must have looked to some like the entrance gates to paradise, now resembles nothing so much as something out of "Jaws".

The fact is, whether we go in or whether we stay out, whether we break the link with sterling or whether we do not, we will still have the same needs as heretofore. We will still require the fastest growth rate in Europe. We will still require the greatest relevant number of new jobs, especially for young people. We will still require the greatest increase in enterprise and the greatest need for capital transfer. If I seriously believed that the Fianna Fáil Party policy either on the domestic or on the international level had any real prospect of meeting these needs I would not be sitting on these benches.

Minister for Foreign Affairs (Mr. O'Kennedy)

From time to time we have to take decisions in relation to our international relations both in the economic and in the political spheres. Sometimes these decisions derive entirely from our own prior decisions but, as often as not, indeed almost always, the decisions we have to take from time to time derive from movements that have occurred within a general group of nations, be it in Europe or elsewhere. So it was that, when we approached the question of joining the European Economic Community in 1972, and indeed, as we had done earlier, we were in fact responding to positions that had emerged in Europe for reasons mostly, let it be said, based on economic and political conditions in Europe after the war. We had a choice of staying outside all this, of isolating ourselves—some might say protecting ourselves; some might suggest securing ourselves—but, whether it was protecting ourselves, or securing ourselves, it would have been in isolation. We had that choice. We also had the choice of taking a positive and confident decision that we would at least participate in this new development and, by doing so, secure our political and economic future in a new European environment and, in turn, in a new international environment. The people supported the Government at the time in taking a positive decision to involve themselves in this new European dimension. In taking a positive decision it was our object to try to influence decisions which would inevitably influence us. There were some few who argued we should stay out and who questioned, as is being done again now, the motives of the comfortable capitalists whom one can paint in really dramatic strokes, such as Germany, the Netherlands or Belgium, and who tried to frighten the Irish people into reacting against these things. There is evidence that they are doing the same now. It is true that other European countries are not very often motivated by concern about our interests as a nation; they are motivated by their own interests within the European framework. We are part of that framework and we would be very foolish to give a negative response to any new proposals that emerge. We should not say that we will not participate simply because a proposal emerges from France or Germany and they have not given any thought to our interest.

Obviously we have benefited from our membership of the EEC, if only to the extent that we are now involved in the decision-making processes of that Community. We are no longer in the role of simply reacting to decisions taken elsewhere. It is obvious that the Government and business people are fully involved in promoting our interests within that European framework. It is also evident that the decision we all took in 1972 has been generally to our national advantage economically, politically and psychologically. Now we come to a situation where another decision has to be taken and we have in a sense the same kind of options as we had in 1972: do we stay outside and criticise from a distance, albeit in a low and weak voice, or do we get right in there in a mood of positive confidence in our capacity as a nation to influence directions within the EEC?

Sometimes we tend to underestimate the role Ireland has played and will continue to play in influencing directions within the Community. We can only do that if we are confident of our own capacity at home and, based on that foundation, confident of our capacity in Europe. Our greatest advantage in Europe is based on our own discipline as a Government or as a people and on our clear perceptions of where we are going and how we continue to go there. I do not want to compare the position of Ireland in the EEC with that of some other country but it is fairly clear that the more consistent one's approach in the area of economics, agriculture or any other area, as expressed by the various Ministers representing this country, the stronger is our position as a Government and that of the Taoiseach or Ministers representing us. As of now that position is quite strong, based on the consistency with which we have approached our opportunities and obligations in Europe. As a small country, the one thing we need and have always sought is discipline and consistency in Europe. We are no longer satisfied with reacting to directions that may come from Europe as to how we should control our inflation rate or balance of payments or borrowing. These are obligations that we as a Government have imposed on ourselves and we have on that basis said "These are our programmes. Please let us know the framework within which these programmes may be implemented".

We welcome any moves which are designed to create stability and discipline in Europe or between Europe and its partners in the rest of the world. We need to have the security of the European and international framework, both politically and economically, to guarantee our own national aims. That in a sense explains the positive attitude of the Government towards this scheme. That is not to say that we are blindly committed to the new monetary system. While we remain fully conscious that non-membership of this system could result in a diminution of our influence within the EEC, not only in the monetary field but also in such vital areas as the common agricultural policy and budget preparations, this Government have been conducting a very full examination at home and at Community level into all aspects of the scheme as it affects our national interest and as it will affect our economic association with our partners. That is clear from the speeches made by the Taoiseach and the Minister for Finance and it will also be made clear by the Minister for Economic Planning and Development.

We made it very clear from the start, in negotiations with our partners and discussions with the Commission, that our interest as a small nation committed to Europe and to its stated aims must be protected if we are to participate effectively. In other words, the conditions must be right, not because we say they must be right but because it is part of the European obligation that they should be right. Hence we can argue not just on the basis of our own special case but on the basis of the case which Europe has set for itself. If we were to respond to some of the arguments about staying outside at this stage, it would be seen as a sign of economic and political weakness and that would not be in the interests of our future, either nationally or internationally. We hope that the economic conditions within the Community and the economic proposals associated with this scheme will be such as will enable all the member states to participate fully and effectively in the scheme from its initiation.

Full account must be taken of the discipline which membership of the scheme will impose on a small country such as Ireland. In this context the demands which we have enunciated in regard to the concurrent studies must also be respected. It is important for the credibility of the EEC that this scheme should succeed, but its success will depend on the creation of a system and an economic climate which will allow all member states not only to enter the scheme but to remain within it.

Deputy Horgan touched upon the question of Britain opting in and jumping out again. One could suggest that this could happen in regard to any country. I would suggest that any country, be it Britain, Ireland, France or wherever else, would be very reluctant to engage in the jack-in-the box, in-and-out behaviour that Deputy Horgan was suggesting Britain would probably follow in future. First of all, it would obviously lead to a very serious blow to their political credibility not to speak at all of their economic interests. I think that, for once, it is unfair to the British to imply that their interests would be simply in pursuing that kind of a stop-go position in Europe. I believe that they have too keen an awareness of not only what their own interests are but also what the attitude of others towards those interests will be, to pursue that kind of activity.

When this was launched at the European Council one of the most basic concerns, if not the basic concern, of the heads of Government there represented was that this should be a lasting and secure system. That is not to say it should be rigid, but it should be sufficiently flexible to make it lasting and secure. Therefore I feel that some of the dangers that are being pointed out to us are not likely to be as real as is being suggested now. While we may have some expectations regarding the benefits which this new monetary system could bring to us, the benefits are based simply on securing monetary stability within Europe, thereby ensuring that a small open economy such as ours, which is so dependent on international trade, will have a guarantee of regular markets at secure prices which in fact have not been always available to us over the last number of years in view of the monetary instability. Even if it did give us that degree of European monetary stability, that in itself would not of course be the only answer from our point of view because the most important part of the answer could only be supplied by ourselves.

In pursuit of our own programme for economic development, far from looking at this as a panacea, we would, as the Taoiseach said yesterday, have to see it as an opportunity within which we could, by an effective disciplining of ourselves, realise our economic potential. So, rather than excusing us from our obligations it would impose on us greater obligations for instance, not to pitch our demands, our expectations, beyond our capacity to compete with other countries with whom we would be linked in this system, not just to think in purely narrow national terms but now to think, as we will be obliged more and more to do, in terms of our economic and monetary linkage with our partners in Europe and, through Europe, with our partners in the rest of the world. It would in fact highlight the need for greater discipline in the broadest and most positive sense of the word.

I am sure no member of the Government has suggested that we have presented this as a panacea for ills. We have never so suggested. It will involve a discipline for each member state in Europe and particularly for us as a small country which depends so much on international trade. For that reason it would also involve an obligation of trying to seek out a common purpose in Europe amongst our community of nations. It would involve an obligation for us to seek out the common purpose at home. For that reason I was a little disappointed by some of the latter remarks of Deputy Horgan when he not only cautioned but told the social partners, if I may use that phrase, that they should behave in anything but a partnership sense when it came to looking at this question, that the social partners should make demands which would guarantee a, b or c.

It is not with that kind of approach that we will make any progress in this or any other areas. The social partners are partners not just with themselves but with the whole community and for that reason the discipline imposed will be a very considerable discipline but a discipline in the positive sense. This, if it is nothing else, will be new when it is adopted, as it seems almost certain it will. There are some systems we adhere to here that are not very new. Some we have inherited such as some structures in trade unionism and otherwise. It seems to me sometimes that in our approach to some opportunities in the future we tend on occasions to think in terms of demanding the guarantees we had in the past. I would hope that for all the round and euphemistic phrases that are used, like "the social partners", we will really see what that means in this day and in the future as distinct from, as was suggested—I am not saying encouraged—by Deputy Horgan, trying to create sectional interests in a country which frankly can do very well without them. In that context, the judgment on us from the outside, which I have had some opportunity of observing over the last 12 months or more, is very positive. It is a judgment which shows, in a sense, a greater awareness abroad of what we as a small confident country can do in Europe and internationally than we ourselves are prepared to imagine or acknowledge that we can do. The judgments we impose on ourselves at home are the sectional interests, judgments or criticisms. I do not expect the Opposition suddenly to rise to their feet and say to the Government "that is a great job you are doing". But I do expect that, at least in approaches of this sort we would not seek out, as I detected in the contribution by Deputy Horgan, reasons for highlighting other sectional interests rather than finding a common interest which will be so vital if we are to succeed in this new era of economic and monetary discipline in Europe.

The present time in Europe is both a testing and relatively exciting time. For a considerable time we were all asking, "what is happening in Europe?" There was no new initiative being taken. There is no political will or economic capacity to do a, b or c. It is fairly evident now that things are happening. Whether we always agree with what is happening or not seems to be the only question. We will be having direct elections fairly shortly. We have been talking about it for so long that people tend to minimise the significance of it. Suffice it to say that it will be significant. The whole enlargement process is under way. That is rather significant. Now we have this. It is fairly obvious then that in all of this one has to see that Europe itself is ready and prepared and that means that all of these will demand a prior consolidation and strengthening of the community if it is to adjust successfully to the new dimensions which will emerge in Europe. It has been suggested and agreed at the level of the Council of Ministers and also at the level of heads of Government that henceforth when we think into the future in Europe we must think not just in terms of nine countries but in terms of 12 and perhaps even more. Therefore, it is necessary to lay the foundation, if no more, for the enlargement of the Community and for monetary stability within the Community which self-evidently will have some weaker members than the average of the present membership.

This will be all the more important if the enlarged Community is to continue to move forward towards the ultimate economic and political objectives which we have all set for ourselves. This Government, individually and collectively, can never be accused of being starry eyed about Europe. The development of economic and political institutions in Europe provides guarantees for these institutions which the kind of loose framework of a common market, that might sometimes be more acceptable to less enthusiastic Europeans, would not provide.

Our guarantee is in political and institutional development. Some spokesmen, as distinct from countries, from time to time seem to imply that we should have a looser kind of framework. We have never gone for that, not because we are starry eyed in regard to Europe but because this is an important element in the whole process of the move towards European integration. For that reason this decision of the Bremen meeting will be, likely, a significant step in the political as well as the monetary development of the Community. The decision to proceed with the EMS cannot be seen except in the broader political perspective.

There may be some who suggest that it was some rather remote keen brains in Germany or elsewhere who saw this as a means of securing their interests and controlling inflation. In the final analysis these decisions are made at political level. This emerged from heads of Government, who have a very keen awareness first of all of the political interests of their own countries but collectively of Europe. Having had the opportunity to attend the European councils in the last 12 months, I have to acknowledge that there is a keen awareness at heads of Government level of the need for cohesion within Europe, and the basis of the EMS proposals is that the Community will move towards greater cohesion.

I see the decision to proceed with EMS in this broad political perspective and therefore it will be necessary for us to continue to demonstrate our seriousness and enthusiasm, which we have always displayed, towards European integration. We must recognise the significance of the proposed monetary system as a step towards that goal.

Some people have been suggesting that this is not the result of any groundswell within the Community but merely the intellectual conception of a small number of individuals. Such people will also say that these proposals contrast with the apathy that is being experienced in other areas. As far as the first argument is concerned, that this is the brainchild of some rather remote but powerful individuals, the fact is there has been a strong commitment towards economic and monetary union in the Community during a number of years, particularly since 1972, and this can only be seen as a very important step in the general direction of economic and monetary co-ordination in Europe.

For instance, last December the European Council responded favourably to the Commission's five year programme to relaunch economic and monetary union, and they gave a much needed kick forward to the overall EMU objective, embracing the achievement of a greater degree of economic convergence in the Community and the development of regional and social policies which will affect a genuine redistribution of wealth within the EEC, and particularly because of its potential in the transfer of resources and the promise which EMU holds in relation to the closing of the major gaps in levels of economic development in the EEC.

We have always favoured moves towards the development of EMU and we see this proposed system as being the first real step forward towards this goal. For this reason we have pointed out the need for balanced economic development in Europe. We do not believe that a monetary system on its own can guarantee monetary stability unless there is to be a political commitment to guarantee economic stability and to create a co-ordinated programme within Europe which among other things obviously will involve elimination of regional imbalances and the creation of conditions in which periphery regions can develop to the maximum extent.

For those reasons, consistently we have pointed out the need for an effective regional policy so that the centre must not be allowed to continue to gain by comparison with the periphery, if not at its expense. Ireland's position in this is fully understood. It has been stated consistently in recent times.

I hope this new system can as well contribute to global monetary stability which is in the interests of primary producers in small and major countries and the developed world. The fact that the Community is endeavouring to create its own monetary stability is to the advantage not only of the Community but its partners in the developed and developing worlds. It is evident that this is not a plan for Europe in isolation. The fact that the Community initiative in the monetary area was on the agenda for the summit of the western economic powers in Bonn drew attention to the great degree of interdependence which exists, economically and politically, throughout the world. It emphasised that what we are trying to achieve in Europe in terms of discipline and co-ordination can be guaranteed effectively only if it is part and parcel of an overall economic and monetary discipline in the world generally.

In this context the EMS is part of an overall international package that, when we talk in terms of a new economic order in the world, demands that the developed countries behave responsibly in the exchange rate area by not allowing their currencies to float completely independent of one another. From what I have said it is obvious that it is part of an overall picture in Europe but it is also part of an overall package in the world. The more orderly development of international trade which we hope the EMS will facilitate should be of considerable benefit to the developed and the developing world and particularly to the small open economies which depend so much on the growth of trade for their industrial and economic development.

Above all else, as a small export-oriented country which regards protectionism as a special enemy, Ireland especially supports moves towards a better alignment of international currencies as part of the development of international trade and the development of economies. The position with regard to EMS clearly involves a political decision and, as our relations abroad are guided clearly by the economic interests of our people, when the decision on this occasion comes to be made it will be equally guided and informed.

Despite the stormy sea of monetary instability in recent times Ireland has managed to stay afloat. Our expectation is that EMS, as a system that is both wide-ranging and flexible, will facilitate stability not just in the exchange rate but also in other economic areas. It is our expectation also that it will provide the climate internationally that will ensure that the smaller, weaker countries of the world will have a better guarantee that exchange rate fluctuations which have posed problems for them will not undermine their programmes or cut across the co-operation between the rich and the poor which, I think, is becoming a more clear characteristic of international co-operation.

Whether we talk in terms of what must be done at home, what must be done within Europe or what must be done in conjunction with our partners —all of which I have endeavoured to do—it is obvious that the one thing the EMS system needs is a high degree of solidarity and co-operation. Everyone must co-operate to make the system work. As Davis put it, "None can be safe or sound but in the other's weal". It is self-evident that if we enter the system—and this applies also to other small member states—we will be better placed to protect our own interests and, as I said at the beginning, we will be able to influence decisions that will effect us in any event. A greater cohesion within the European Community implies greater security for the less-developed economies in the Community.

Obviously each country must take its own decision. For one reason or another there has been here a particular interest, if not concentration, on what position the British Government are likely to take. Quite clearly if the Government here decide to participate it is obvious that we hope the British Government will make a similar decision. We have no desire whatever to see a situation where monetary divergencies should become a barrier between us and Northern Ireland for instance, and for that matter with Britain which remains a major trading partner. So far as the North is concerned it is fairly clear that the Government's policies have been directed towards removing barriers rather than erecting them. So far as our relations with Britain are concerned, we have always made it clear in the formulation of our Northern policy that what we want to see is an even fuller and more harmonious relationship than that which has developed in recent years. Accordingly, it is self-evident from the political and economic points of view, because both are interrelated, that it would be very much our wish that both Britain and Ireland would join the system together on appropriate conditions.

The creation of such a zone of monetary stability, by leading towards a process of integration within Europe, would benefit both parts of this island. Within the larger area of co-operation and increased prosperity which an evolving Community would provide, it would also contribute to an environment where the people of the North would come to perceive the common interests they share with us. Indeed, our partners in Britain and elsewhere would become much more conscious of the interests we share in common disciplines and in common programmes.

Our success so far on the economic front has brought with it a new mood of confidence. This new mood may not be always accepted here at home; I believe it is always acknowledged, though not publicly, and certainly it is perceived clearly from abroad. This has led to a greater awareness of our potential as a people and to a new willingness to explore how that can best be realised in the future not just within this State but in the island as a whole. The Government consider that the proposed new monetary arrangements in Europe can help to consolidate these developments. Nothing is going to change, nothing will be imposed unless by agreement. We have made that very clear. However, we believe that certain inevitable developments that are occurring—not all of which are promoted here as in this case—create a climate which, by responding at the right time and in the right fashion, can create conditions for new prosperity and progress for all of us.

It is obvious that there can be no looking back. Our confidence in our capacity to achieve and maintain economic development is a keystone in our policy generally and also in our policy towards the North of Ireland, as I pointed out recently. It is our hope that both parts of Ireland will be able to join the system together, but whatever may be the decision the Government feel confident that through discipline and foresight we can chart a course towards greater prosperity that will be to the benefit of all our people.

I do not wish to engage in speculation but if Britain were to decide for one reason or another against participation—and I sincerely hope she does not choose this course—our decision would have to take account of that groundswell of confidence in our own economy and in our political capacity. Certainly it will not be based on any timorous attitude towards new opportunities. If it should happen that we were to enter and that Northern Ireland were to be excluded at that stage from the new currency area, we can only say that we would make every effort to ensure that any consequential administrative arrangements would be kept to the minimum necessary.

In this context the House can be assured that the current pace of development in cross-Border economic activity will be maintained and the Government are committed to ensuring as far as they can that the fruits of economic success in a new area of economic and monetary stability in Europe will extend to all people in this island. It is a question of new options and new economic and political conditions in Europe and in the world. As we have proved in recent times, by responding positively to these options there is a very fruitful place for us in Europe and, through Europe, with our partners in the developing countries and in the rest of the world. While the examination and studies are continuing the important thing is that we have a political will at home and abroad and a political capacity and respect that will enable the Government to take the right decisions. It would seem that this move towards a European Monetary System is very much in line with the approach which our Government have followed in recent years.

Mr. Kelly

The Taoiseach and the Minister for Finance have proved by their speeches to the House that this debate was very largely premature. There is no harm, when there is so little legislation, in the Dáil spending a few days debating in a very general way the implications of allying ourselves with a new European Monetary System, but it is evident that the Government so far have not thrashed out privately and in their own Departments the implications of this system, have not yet started asking themselves some questions which are important, whether or not the British join this system as well, and which are absolutely crucial if it should emerge that the British decide not to join and we are left with the option of staying in or going out.

I have to do the best I can with the hints which I see in the speeches, but I detect something less than unity of view between the Taoiseach and the Minister for Finance on a very important matter, namely whether Ireland will commit itself to entry into this system irrespective of the British decision. I could not help noticing yesterday that the Taoiseach was very indignant at a suggestion by Deputy P. Barry that he had said that irrespective of the British decision we were going to join. He denied that he had ever said such a thing. He asked for chapter and verse and I have to concede that he did not get them; nonetheless, I am on the side of Deputy Barry in this matter. There is no question but that the impression was created from the Government side in the middle of September that their decision in principle was made in favour of joining irrespective of whether the British decided to do so.

Professor O'Donoghue

The Deputy should not waste the time on this hoary chestnut of looking for a split in Fianna Fáil. Could he put the record right about what the Taoiseach said?

Mr. Kelly

If they want to confirm that they consist of flesh and blood, they have given too many evidences that there are among them sometimes people there who are short on the qualifications that a man ought to have in the sense of courage and guts. I do not regard them as a set of what might be called Prussian Grenadiers with that sense of purpose and discipline. They are far from that.

Professor O'Donoghue

Good. Could the Deputy put the record right on the subject matter of this debate? That we would join if the terms were right is what the Minister said.

Mr. Kelly

That we would enter if the terms were right?

Professor O'Donoghue

And that we would join irrespective of the British.

An Leas-Cheann Comhairle

Deputy Kelly is in possession.

Mr. Kelly

Deputy Barry may have been wrong in attributing this to the Taoiseach but I will tell the House tomorrow morning that it was claimed on the financial end by the Minister for Finance.

Professor O'Donoghue

Do not waste any time.

Mr. Kelly

I will make my own speech. I do not mind being interrupted.

Professor O'Donoghue

The Deputy enjoys it.

An Leas-Cheann Comhairle

Interruptions are not in order.

Mr. Kelly

The Taoiseach was at pains yesterday to disclaim any determination of his own to join this system irrespective of what the British did. To do so he was prevaricating, something of which he has been guilty in this House on numberless occasions. He did not invite Deputy Barry to correct himself by recalling that it was the Minister for Finance who said it. I had that impression when I read the Taoiseach's speech and tried to compare it with the Minister's speech. I could see something clear to anybody used to the Fianna Fáil mentality, that the Taoiseach's performance has given rise to misgivings, and to misgivings in his Department as to the advisability irrespective of what the British may do, of joining this system. I will give chapter and verse on this matter tomorrow.

Debate adjourned.

Business suspended at 1.30 p.m. and resumed at 2.30 p.m.