I propose to take Questions Nos. 14, 16, 22, 27, 40, 47, 48, 63, 64, 65, 75, 84, 90, 93 and 102 together.
The basic thrust of the argument contained in the report to which the Deputies refer was that Economic and Monetary Union will be detrimental to employment and income in the peripheral countries of the Community because those countries will be more prone than others to region-specific shocks and will not be able to devalue their currency to counter those shocks.
I would like to address in turn the two main elements of this argument. We are conscious of the potential problems which Economic and Monetary Union may pose for peripheral countries. It was for that reason that, shortly after the negotiations on Economic and Monetary Union started, we submitted a series of amendments to the Treaty which were designed to cater for the situation of the less developed regions. I am pleased to note that the framework for future Community action on cohesion which we proposed then has now been incorporated in the revised Treaty text agreed this week in Maastricht. I am confident that this framework, along with the very specific political commitments contained in the Protocol to the Treaty to further immediate action to promote cohesion, notably through the Structural Funds, a new Cohesion Fund and a revised system of contributions to the Community budget, will provide sufficient protection to less developed regions. Moreover, the framework which has been adopted will enable the Community's actions in favour of cohesion to be developed in parallel with the increasing integration of the Community.
In this context I would also remind Deputies that the revised Treaty contains a provision for granting financial assistance to member states which are in difficulty or are seriously threatened with severe difficulties caused by exceptional occurrences beyond their control.
In sum, therefore, I am satisfied that we have enough protection against shocks. I would like to add, however, that, while we need to be aware of the potential problems which Economic and Monetary Union could confront us with, we should not underestimate the very tangible benefits which we are well placed to capitalise upon.
I am somewhat surprised that Deputies appear to set much store by the devaluation weapon. For the past number of years Ireland has pursued an exchange rate policy that has maintained a strong position for the Irish pound in the EMS. This has had considerable economic benefit for Ireland. It has helped reduce inflation and to bring down interest rates. Any devaluation of the Irish pound would threaten those gains. In addition, as an open economy, Ireland has to import much of its raw materials and energy needs. Any policy of devaluation would automatically increase domestic costs and, as research has shown, would have little long term benefit to the real economy.
As regards the supervisory role of our Central Bank, the draft Treaty on Economic and Monetary Union, in itself, will not alter the existing position. Article 105 (5) of the draft Treaty indicates that the European System of Central Banks shall contribute to the smooth conduct of policies pursued by the competent authorities relating to the prudential supervision of credit institutions and the stability of the financial system. This is a legitimate role of advising and assisting national supervisory institutions in a Community context.
However, the draft Treaty, at Article 108 (4), also enables the Council to confer specific tasks concerning policies relating to prudential supervision of credit institutions and other financial institutions except insurance companies. No parameters are laid down in the draft Treaty for the remit of these specific tasks but it seems sensible to allow for the possibility that the ECB might be given a future role in relation to the policy of prudential supervision if, for example, action at Community level were required or if the stability of the financial markets in the Community was involved. I would add that any such role would have to be approved unanimously by Council. This is a safeguard against any untoward action in this area.
In relation to the Government's attitude to the concept of a European Central Bank, our views are well known on this subject and do not require much elaboration on this occasion. The Government are fully committed to the establishment of a European Central Bank, which will have as its primary objective the maintenance of price stability and, without prejudice to this, will also have as an objective to support the general economic policies in the Community.
I do not see any conflict between Ireland's national interest and an independent European Central Bank established to manage a single currency and monetary policy throughout the Community. Our national interest can best be served through the pooling of sovereignty which is involved in the creation of such an institution. Through the involvement of our own Central Bank in the ECB, Ireland will be assured of an enhanced role in determining the monetary policy of the Community. This will be a signficant improvement from the present position vis-á-vis the EMS where we are committed to maintaining the value of the Irish pound against other EMS currencies but we have no direct say in the formulation of the monetary policy for those currencies.
