Dáil Éireann debate -
Tuesday, 31 May 1994

Vol. 443 No. 4

Written Answers. - Establishment of ECU as a Parallel Currency.

Jim Mitchell

Question:

81 Mr. J. Mitchell asked the Minister for Finance whether he will support the establishment of the ECU, including the issue of notes and coins, as a parallel rather than a replacement legal tender currency in all member states, to be available alongside national currencies; his assessment of the monetary, economic and political feasibility of such a proposal as compared to a single currency; the role for a European central bank in relation to such a parallel currency; and if he will make a statement on the matter.

Minister for Finance (Mr. B. Ahern)

The idea of the ECU as a parallel rather than a replacement currency was considered in the period leading up to the Treaty on European Union, but the member states decided to take a different route. This is set out in the Treaty. In brief, it requires the substitution of national currencies by a single currency in stage three of Economic and Monetary Union (EMU), when the participants in European Monetary Union will have achieved the required degree of convergence in their economies. The single currency will thus be based on a firm foundation of sound and convergent economic performance by the participants in European Monetary Union.

The single currency will be administered by the European Central Bank. The main advantages of a single currency are of course the elimination of exchange rate risk and transaction charges in trade between participating countries and the provision of low interest rates and a stable environment for investors.

A parallel currency would not offer such advantages. Furthermore, its introduction would be inconsistent with the fact that monetary policy will remain the responsibility of the member states until the beginning of stage three of European Monetary Union, and would require the creation of a new central authority, complete with adequate resources, to administer it and support its value. I see no desire among member states to take these steps.

The European Central Bank provided for in the Treaty will be established only when the decision to move to stage three of European Monetary Union has been taken or, at the latest, immediately after 1 July 1998.