Dáil Éireann debate -
Wednesday, 19 Oct 1994

Vol. 446 No. 1

Written Answers. - Single EU Currency.

Ivor Callely

Question:

92 Mr. Callely asked the Minister for Finance the likely time scale for the development of a single EU currency and Economic and Monetary Union; the difficulties this may cause for our trade links with the UK; and if he will make a statement on the matter. [1706/94]

Minister for Finance (Mr. B. Ahern)

The Treaty on European Union sets out the timescale for a move to Economic and Monetary Union (EMU). Briefly, it provides that the European Council will meet before 31 December 1996 to decide whether a majority of the member states fulfil the criteria for adoption of a single currency and whether it is appropriate to begin the third stage of Economic and Monetary Union, and, if so, to set the date for it to begin. If by the end of 1997 no date has been set, the third stage will begin on 1 January 1999, and the European Council will meet before 1 July 1998 to confirm which member states fulfil the necessary conditions for the adoption of a single currency.

At present ten member states, excluding Ireland and Luxembourg, have been judged by the European Commission and the ECOFIN Council to have excessive deficits and so not to meet the Treaty criteria. Accordingly, sufficient progress may well not have been made to allow Economic and Monetary Union to begin in 1997. Although the situation is likely to improve as Europe emerges from recession, it is too early at this stage to make a prediction either about the likely starting-date for Economic and Monetary Union or about which member states will qualify for participation.

Ireland's policy has been, and continues to be, to support the realisation of Economic and Monetary Union because of the benefits it will bring to member states and citizens. Our fiscal and other policies are geared to ensuring that we continue to meet the Treaty criteria so that we will be in a position to join Economic and Monetary Union from the beginning, whenever it is formed. The Programme for a Partnership Government and our recent Convergence Programme 1994-1999 set out the Government's determination to continue to meet the Treaty criteria.

The United Kingdom has yet to make a decision on whether or not to join Economic and Monetary Union. A decision by the UK to stay out of Economic and Monetary Union would not present significant difficulties for trade with the UK unless Sterling were to weaken sharply.

Such a development in the currency of any major trading partner would obviously pose a problem of competitiveness. The potential for such an eventuality in relation to Sterling has been with us since we joined the ERM in 1979 and it will remain a feature of the situation unless and until the UK becomes a member of Economic and Monetary Union, although clearly Economic and Monetary Union would deprive us of one possible response, namely to adjust our exchange rate.

At the same time, membership of Economic and Monetary Union would carry advantages on a wider front for Ireland, because it would eliminate exchange-rate risk and currency transaction costs for trade between participating countries and because Economic and Monetary Union should provide an environment of reliably low interest rates and inflation.