Vol. 462 No. 8
10 Mr. Cullen asked the Minister for Finance the proposed plans, if any, there are to delay the launch of the Euro from the proposed starting date in 1999 in order to allow more countries to come on board; and if he will make a statement on the matter. [2550/96]
15 Mr. E. Byrne asked the Minister for Finance if his attention has been drawn to the findings by the German Institute for Economic Research that slowing European economic growth may make a relaxation of the Maastricht criteria for Economic and Monetary Union necessary; and if he will give his views on these findings. [5591/96]
27 Mr. Aylward asked the Minister for Finance if he shares the views of many of Ireland's executives, as surveyed recently by a company (details supplied), that the proposed single currency will be good for business; and if he will make a statement on the matter. [5565/96]
37 Mr. McCreevy asked the Minister for Finance the plans or proposals, if any, he has to establish a forum to discuss all the implications of Economic and Monetary Union for Ireland; his views on whether 1999 is a realistic date for monetary union; and if he will make a statement on the matter. [2544/96]
50 Mr. Molloy asked the Minister for Finance the likely dates for the introduction of EMU and the single currency. [2405/96]
I propose to take Questions Nos. 10, 15, 27, 37 and 50 together.
The European Council in Madrid last December unequivocally confirmed 1 January 1999, the latest date envisaged by the Treaty on European Union, as the commencement date for Economic and Monetary Union. The European Council also named the single currency the Euro and set out a reference scenario for the transition to it.
The reference scenario sets out the following timetable; as early as possible in 1998, the European Council will decide which member states meet the criteria for entry to Economic and Monetary Union. On 1 January 1999, Economic and Monetary Union will begin. The exchange rates of the participating currencies will be irrevocably locked, the Euro will come into being as a currency in its own right and the European Central Bank will begin to operate the single monetary policy attaching to it. By 1 January 2002 at the latest, Euro notes and coins will be introduced into circulation and by 1 July 2002 at the latest, national currencies will have been withdrawn from circulation in the area where the Euro is operating.
I am not aware of any plans to delay the commencement date of 1 January 1999 so recently confirmed by the European Council. I am however aware that preparations at EU and national level are intensifying on the basis of the timescale set out in the reference scenario.
The convergence criteria which member states must meet to join Economic and Monetary Union relate to inter alia the general Government deficit position. In this context, I have seen a summary of the Report from the German Institute for Economic Research referred to by Deputy Byrne. The Report apparently argues that it would be better to relax criteria than to delay the start of Economic and Monetary Union. In particular, the report seems to argue that, provided a member state met the other criteria, it should not be excluded from qualifying for Economic and Monetary Union on the basis simply that its deficit is over 3 per cent of GDP: account should be taken of the Treaty text which would allow a deficit above 3 per cent if the excess were exceptional, temporary and small. The report recommends that this approach be adopted rather than deferral of the 1 January 1999 commencement date for Economic and Monetary Union.
From the summary available to me, the Report seems merely to argue for application of text which is already in the Treaty. It will be a matter for the European Council, in the composition of Heads of State and Government, to decide which member states qualify for Economic and Monetary Union having taken due account of the reports of the EU Commission and the EMI and the opinion of the European Parliament.
As regards the survey referred to by Deputy Aylward, I understand that this survey was carried out by consultants who interviewed ten Irish executives as part of a survey of 169 top company executives in 13 EU countries. I welcome the recognition in the survey of the benefits Economic and Monetary Union will bring for Irish business.
I have no plans to establish a single forum to discuss all the implications of Economic and Monetary Union. Work on preparation for Economic and Monetary Union at national level here is structured to dovetail with the approach and timetable agreed by the European Council in December, the key dates of which I set out earlier.
The national level work is as follows: I commissioned the Economic and Social Research Institute to carry out a study on the likely economic, employment and sectoral implications of Economic and Monetary Union for Ireland in order to deepen our understanding of the opportunities and challenges which Economic and Monetary Union will present for the economy. Persons and groups with material to contribute to that end were invited to submit it to the ESRI consultants. The ESRI study is to be completed by 30 June 1996 and its findings will be made public. In the meantime, the National Economic and Social Council, on which the social partners are represented, will consider the question of Economic and Monetary Union among others in the context of the follow-on report to the council's Strategy for Growth, Competitiveness and Employment intended to precede the negotiations on a successor to the Programme for Competitiveness and Work. I made a presentation last week to the Select Committee on Finance and General Affairs about Economic and Monetary Union. My presentation was the first in a two-day debate which the Select Committee held on Economic and Monetary Union. The Committee has indicated its intention to return to the issue later in the year. I have made arrangements to set up an informal group representative of relevant interest groups in the private sector to advise my Department on technical issues, such as rounding, etc., which will be discussed at EU level in the course of this year and in the run-up to the 1998 Council decision on which member states qualify for Economic and Monetary Union. When the 1998 decision has been taken, I expect this informal group will form the nucleus of a more formal structure to oversee the practical arrangements needed to manage the transition to the single currency.
I thank the Minister for his detailed reply. I agree with his interpretation of the report from the German Institute for Economic Research. That flexibility exists within the terms of the treaty. Perhaps what is needed is a more liberal interpretation of what is already in the treaty.
What weight does the Minister give to the recent comments of Mr. Issing, the chief economist with the Bundesbank? I was quite taken aback that he would speak in such stark terms of the single currency being capable of destroying the EU. Economic growth expectations were predicted to be at about 2.6 per cent. They have now been sharply pegged back to less than 2 per cent.
Those two factors would seem to impact on the start dates in 1999. How does the Minister interpret both issues?
The comments attributed to the senior member of the Bundesbank were clearly made in his personal capacity. I do not take them to represent official Bundesbank policy because the Bundesbank policy is quite clearly in favour of Economic and Monetary Union although it has consistently expressed concerns about the need for real and sustained convergence among the participating member states. The President of the Bundesbank, who will be in this country later this week when the Deputy may have an opportunity to meet with him, will take that opportunity, once again, to put on record the official views of the Bundesbank in his capacity as its President.
Concerns were expressed by that individual and others about certain operational difficulties relating to the Single Market, the operation of Economic and Monetary Union and the question of the relationship between those currencies which participate at the outset and those that do not, either by choice or necessity. The issue is clearly a matter for ongoing study.
At the recent meeting were there any new developments or enlightenment on what relationship might exist between those currencies which are "in" and those that are "out"?
When does the Minister expect the ESRI report to be completed and will it be published?
I expect the ESRI report to be published no later than 30 June. I intend to make it public and I will publish it. The indications are that at the informal ECOFIN Council which, subject to confirmation, will take place on 15 or 20 April the President of the EMI, Mr Lamfalussy, will outline the details of the study, how it is progressing and how it is proposed to organise that relationship.
I am aware that the Minister correctly takes the view that the remarks expressed by Professor Issing's represented his own view. Nonetheless, does he not consider it disturbing that a person in such a senior position in the Bundesbank should query the viability of the Economic and Monetary Union project? Does it ring some alarm bells in his mind as to whether the ordinary people in the member states of the EU will support Economic and Monetary Union if contrary voices are expressed at such a senior level in institutions in which they have great trust?
The view expressed must be given considerable weight given the representational role that man possesses as a member of the largest central bank in Europe which is noted for its independence. The House will recall that serious reservations about German unification were expressed by the Bundesbank, particularly about the policy of the then German Government under Chancellor Kohl to offer an exchange rate of 1:1 between the Ostmark and the Deutsche Mark. In the nature of open and democratic society different views will be expressed. Serious issues surround the operation of Economic and Monetary Union, some of which have not been properly thrashed out. It is not unreasonable for people to express concerns about the operational feasibility and application of Economic and Monetary Union. That is the reason a study on cohabitation, or the ins and outs, as it is colloquially described, is being conducted. We must await the recommendations of that study and see if they are accepted in whole or in part by ECOFIN and the European Council. The core point of Professor Issing's conclusion was that Economic and Monetary Union will put the entire market of the European Union at risk. It will bring about a new currency relationship that will maximise stability among different currencies within a single market. It must be understood that even when Economic and Monetary Union comes about, the most optimistic projection by President Santer is that eight or nine of the 15 EU member states will participate. We will continue to have more than one currency within the internal market and, therefore, it is essential that a currency arrangement is reached that will minimise probabilities of competitive devaluations or fluctuations.
I innocently assumed we were dealing with priority questions and that I was debarred from making a contribution until Deputy McDowell contributed.
We are dealing with these questions under the category of "other questions".
I apologise for not being as attentive as I should. A report of the German Institute for Economic Research states that it would be better to relax the criteria for Economic and Monetary Union rather than delay the commencement of European economic and monetary union to give other nations more time to qualify under the existing terms. Does the Minister consider that we should argue for relaxing the criteria in favour of bringing more countries on board rather than bringing it in on schedule?
I would be against relaxing the criteria. As a young practising architect I was advised by a senior wise architect with whom I worked that people would never remember if a building project were completed on time, but they would never forget if it leaked. Therefore, it is important to ensure that whatever proposal we put forward, particularly on Economic and Monetary Union which will be an historical first as no other group of nations have done what we are proposing to do, is right rather than try to meet a particular timetable. That is my personal view. The criteria are designed to ensure maximum convergence among participating member States. A relaxation of the criteria would be open to a good deal of misinterpretation by financial markets and, in my considered view, would not be helpful to the overall project.
In its report the German Institute for Economic Research, which is a highly respected body, states that in trying to meet the Maastricht criteria by 1997 many potential members will be forced to implement restrictive economic measures which would weaken their economies and make meeting the criteria even more difficult. We know that the economic difficulties which caused the French Government to cut back on public spending, particularly social welfare spending, resulted in street riots recently. The Germans argue that if unemployment continues to rise social and political tensions could threaten the process of European Union. This Parliament should note the serious comments made by that respected body. What are the Minister's views on the frightening scenario of a possible social backlash resulting from pressurising certain countries to meet a criterion for Economic and Monetary Union?
I said on a number of occasions, including at a meeting of the Select Committee on Finance and General Affairs, that the Maastricht criteria are good housekeeping ones and are not a recipe for austerity or social upheaval. It would be a mistake to conclude that they are. The imbalances in the national accounts of Austria, France or Belgium would have to be addressed if the prospect of Economic and Monetary Union did not exist. In any case, the difficulties and diseconomies currently within the French social fund must be addressed by the French and it is a matter for those authorities as to how to address them. If I may intrude on the domestic affairs of another country, it would be possible for France to meet the Maastricht criteria by reducing its Defence expenditure and not cause the type of austerity on social expenditure caused by the Gaullist centre-right government. Under its rules and accounting procedures, internal problems confront the social fund out of which French social welfare contributions are made. Those problems must be addressed. The problems are similar in Austria. Problems have arisen for different reasons in Belgium. I am concerned that Governments addressing financial problems of a domestic budgetary nature are blaming the imposition of unpopular measures which they have politically decided to introduce on the obligation to meet the Maastricht criteria. In many countries that is not the case because they would have to address the issues concerned independent of whether the Maastricht criteria were in existence or the Economic and Monetary Union was a prospect.
Given our salutary experience during the currency crisis some years ago, and the attitude adopted by the Germans on that occasion, is the Minister concerned that, juxtaposing the comments of Professor Issing and Mr. Tietmeyer, who has also voiced some doubt on the issue, only if Germany is in support will it come about? I accept the reality of that if Germany is not in. How can we convey to other European Finance Ministers that this is not good enough, the Maastricht Treaty having been ratified, the decision in principle taken and all the relevant instruments put in place? Does the Minister agree that if Germany's priorities within the context of Economic and Monetary Union are weighted in its national interests only, this is not acceptable to other member states and that Germany must acknowledge that the overall debate on the issue has moved considerably since Maastricht?
The Maastricht Treaty contains an Article —I cannot recall its precise reference but I placed it on record in a Committee of the House last week at which Members present also participated — requiring member states to operate a monetary policy having regard to its impact on their neighbours but no sanction is attached to that Article, which is an aspirational rather than a legally binding one. Nevertheless, recognition of the necessity for a member state to have regard to the implications of its economic policy on other member states is written into that treaty.
Reverting to the reference to the currency difficulties experienced in 1992-93, under the Basic Law of the Federal Republic of Germany the Bundesbank must have regard to its obligations, a law I suspect that supersedes the Maastricht Treaty. The Bundesbank adopted policy decisions in 1992 based on its interpretation of its legal obligations. It is precisely because of the inherent difficulties experienced by different central banks implementing different legally enforceable policies that the Bundesbank believes it has a legal obligation to implement the Economic and Monetary Union proposal which contains inter alia the concept of a European central bank. This will mean that, rather than a dominant central bank setting policy and interest rates which other central banks are driven to replicate or follow through market forces, there would be a European central bank representing all the participating member states within the first round of Economic and Monetary Union forming policy within a council, at which we would also be represented, rather than being forced to respond to market forces following a decision of the largest central bank.
Would the Minister agree that that is precisely what we are endeavouring to achieve, that we do not want Germany to wreck the process of moving toward the establishment of a European central bank which would obviate many past problems?
It would be a mistaken view to think Germany is trying to wreck the process. I do not think that is the case. Legitimate concerns are being expressed by central bankers in Germany who are, by definition, within any market economy naturally conservative. Given the history of German attachment to anti-inflationary pressures and monetary stability, that is not unreasonable. In addition, Chancellor Kohl's political commitment to a single currency and to bringing the Federal Republic of Germany firmly into a so-called European house, including its Deutsch Mark, is unquestioned.
