Michael Ahern
Question:5 Mr. M. Ahern asked the Minister for Finance if he has advanced his proposals for a national forum to discuss plans for the European Monetary Union; and if he will make a statement on the matter. [15242/95]
Ceisteanna-Questions. Oral Answers. - European Monetary Union.
I take it that the Deputy is referring to my response to a parliamentary question from Deputy Cullen on the setting up of a national forum to prepare for economic and monetary union on 28 June 1995, in which I stated that it would be premature to publish a policy paper on Ireland's approach to European Monetary Union, or to set up a national forum on the issue.
The present position is that practical planning for European Monetary Union continues at both EU and national level. The main focus of our attention remains for the moment on the work at EU level. Following the Cannes European Council meeting in June, two working groups were established at EU level under the auspices of the monetary committee to further practical preparations for the single currency. These groups have met a number of times and Ireland has been fully represented. Their work will provide key input to the reference scenario or plan of action being prepared for consideration by Heads of State and Government before the end of this year.
We are continuing our preliminary practical preparations in Ireland. Discussions have taken place with the key players in the initial moves towards a single currency — the financial institutions and the central public administration — since the publication of the European Commission's Green Paper, on the practical arrangements for the Introduction of the Single Currency, in May of this year. I will be developing our process of consultation further after the reference scenario is agreed and at the Madrid Council meeting. I can again assure Deputies that timely and wide-ranging consultation will take place with the relevant interests on the practicalities of the changeover to the single currency, which is obviously a matter of vital public importance.
I believe, as Deputy McCreevy said earlier, that it is important that we have public discussion and establish a public forum on this issue. European monetary union will have a severe impact on our economy, especially taking into consideration that certain factors are unique to Ireland and do not apply to France, Germany, Luxembourg or some of the other large countries in the European Union. To say that we will have discussion six or twelve months down the line is evading the issue. It is important that every sector in our society is advised of the benefits and down sides of European Monetary Union. The Minister should produce a White Paper and set up discussion groups and arrange advisory meetings throughout the country at an early date.
Ireland is not in a unique position in respect of the possible implications of European Monetary Union. If the Deputy is, by inference, suggesting that because of our present currency relationship with the United Kingdom and the possibility that Britain may not choose to exercise her right to participate in 1999, we would be uniquely adversely affected, I have to tell him that at the Cannes summit, President Chirac berated the Italians for what he described as competitive devaluation vis-á-vis French interests. Likewise, French interests are complaining about competitive devaluation in reality, which the Spanish authorities, through the peseta, are engaging in against agriculture and food producers in southern France. The Belgians have complained rather bitterly, as have the Austrians, about their difficulties with competition coming from other member states within the internal market of the European Union.
Ireland is not unique, although special factors put us in the category of countries, like many others, who have asked the monetary committee in the European Union to look at what is described, following the French Presidency, as the problem of cohabitation between the currencies of founding members of the eurocurrency, on the one hand, and the currencies of states which are unable or unwilling to participate on the founding day. This is a problem for the whole European Union and for the integrity of the internal market.
With regard to waiting six months to a year, that is not what I indicated. I suggested to the Deputy, in my response to the first question and to a supplementary question from Deputy McCreevy, that as soon as the reference scenarios are published, debated and discussed in Madrid, we will have a much clearer picture of the plan of action and the steps involved in moving from 1 January 1998, to 1 January 1999. It would be incumbent upon any Minister for Finance to ensure that there is a full and open discussion with all interested sectors on how this system will impact on the Irish institutions, economy and consumers. I undertake, without reservation, to engage in and facilitate such debate, but it would be more productive and focused when we have a clearer picture of the steps that need to be taken, which we will hopefully have after the Madrid meeting.
Has the Minister brought home to his EU counterparts the problems that will arise if a number of countries join the European Monetary Union on the founding date and other member states do not? If that occurs not alone will we have the difficulties to do with the currency but, since the expansion of the internal market, we will have countries able to trade in the internal market for whom, all the barriers have been broken down being able to retain a key instrument of economic policy—an exchange rate vis-à-vis other currencies—which will give them the enormous flexibility of being in the club yet outside the club.
Given that the UK has specifically obtained an opt out clause and, as far as we can see, will not be joining European Monetary Union on the founding date, that will create enormous problems for Ireland. It will create problems for other member states of the EU as well, and for the extension of the EU also, but for Ireland the problems will be enormous.
The Deputy has put his finger on an important aspect of this debate. The British refused to join the European Monetary Union if it were to start in 1997. We know that is not going to be the case and they have not indicated what their position is in respect of 1 January 1999. The last time there was an authoritative statement — it was made by the British Prime Minister prior to the summer recess in the House of Commons — Mr. Major was clear about keeping open his options in this regard. We cannot presume what the British position is and we certainly cannot presume what it will be prior to their next general election. If the British authorities decide in 1999 to refuse to participate in European Monetary Union, even though their currency and their economy are deemed to be qualified, they will be saying to the rest of the world that they want to reserve for themselves the right to continue to devalue sterling.
That is exactly what they would be doing.
If Deputy McCreevy is saying that the right to retain the possibility of devaluing a currency is a desirable right, then I would like him to indicate that.
I am not saying that. The Irish problems will be compounded to an inordinate degree — possibly to an impossible degree — if the rules of the club were so changed that everyone would be a member of the internal market with free access to all of the European Union, yet the United Kingdom would have access to that market and have the right to devalue its own currency. The same applies to other countries that would be outside the European Monetary Union, but in our situation, given that at least 30 per cent of our exports go to the United Kingdom and a greater percentage of our imports come from the United Kingdom, it would put huge strains on the Irish economy and would be impossible to live with. I advise the Minister to make those points clear in any discussiuons leading up to European Monetary Union.
I must advise the House that this is Question Time and I want to dissuade Members from making statements or entering into argument.
To respond to the direct question put to me by Deputy McCreevy, the debate in Valencia, the previous debate in Brussels and the debate we will have next week in Luxembourg were and will be precisely on the issue of cohabitation. That is not unique to Ireland and Britain; it runs right through the entire European Union. It has been given the title, by way of jargon shorthand, the problem of cohabitation, and it reflects, in even greater measure, the Austrian economy at present vis-à-vis northern Italy and aspects of the French economy vis-à-vis the devalued role of the Spanish peseta.
I accept that.
This is a European problem that affects the integrity of the internal market and it will be addressed. In that context, of course I will bring to that debate my own knowledge of and concern for the Irish economy vis-à-vis other trading partners within the European Union.
Will the Minister agree that there is a unique aspect to Ireland's situation and that is that, whereas all the other countries may not qualify for European Monetary Union in 1999, all of them are obliged, in the manner the Minister has suggested, to strive towards that end, with the exception of the United Kingdom? Consequently, Ireland is in a unique position, because it is closely bound up economically with an economy that is not even required as a matter of EU obligation to comply with Maastricht convergence criteria. Will the Minister agree that Ireland should not adopt the position internationally and at EU conferences on cohabitation that our problem is jusdem generis with all regional problems in the EU. We have an economy which is much more closely bound up with sterling than the france is with the peseta or the Austrian mark is with the Italian lira. We must, therefore, view any possibility that the United Kingdom will not join European Monetary Union as a much more fundamental problem from our economy's point of view that it is for virtually any other economy in the EU.
Ireland is not in a unique position because Denmark has likewise retained a different, but similar, effective opt out clause.
Who is dependent on Denmark?
Substantial regions of northern Germany are dependent on competition from Denmark. Given its lander structure, that is of considerable concern to Germany. I recognise the valid concern shared amongst all parties in this House, but between now and when European Monetary Union comes into effect we need to develop and consolidate the competitive basis of the economy so that it is in a strong position to trade, operate and perform satisfactorily in whatever context we find ourselves in 1999. It is essential that we focus our concern on improving our competitive position now so that in 1999, irrespective of who is in Government, the economy will perform effectively in competitive terms. We can thus avail both of the opportunities the single currency will provide for us as well as warding off any dangers or threats implicit in other currencies not participating from the founding day.
When and if European Monetary Union comes about we are all aware of the problem of our dependency on the UK. However, what will be the effect on direct foreign investment, and the knock-on effect on employment, if we do not go into the European Monetary Union?
I am not in a position to give the Deputy an authoritative answer to that question and a speculative answer would not be helpful to anybody. Much of the attraction that Ireland offers to countries outside the European Union is the fact that we are full members of the EU. Anything that diminishes our full membership of the Union in economic terms must be construed in negative terms.
After December we will have a clearer picture of the path to European Monetary Union and the consequences of travelling down that path. In that context we will be able to have a much more informed and productive debate to which I look forward.