Vol. 462 No. 8
11 Dr. O'Hanlon asked the Minister for Finance his views on the recently produced interim harmonised inflation rates for EU countries and the proposed final harmonised system which is due to be in place by 1997; and if he will make a statement on the matter. [5564/96]
I welcome the Interim Index of Consumer Prices as an important step towards the goal of achieving fair comparison between inflation rates in member states across the EU. That goal is especially important in the context of the Maastricht Treaty, given that a satisfactory inflation performance is one of the criteria for eligibility for Economic and Monetary Union.
The new index is, of course, an interim one, pending agreement at EU level on a "Harmonised Index of Consumer Prices", which is scheduled to begin in 1997. Certain key purchase categories do not appear in the interim index, notably mortgage interest payments, health and education services, car insurance and foreign holidays. I expect that the harmonised index of consumer prices, when ready, will be more comprehensive in scope, as is envisaged by Article 3 of the Council Regulation on the matter.
The figures published on 29 February last showed that under the new Interim Index the latest inflation rate for Ireland was 2.3 per cent, comparing favourably with an EU average of 2.8 per cent. I am confident that future inflation figures for Ireland under the Interim Index, and subsequently under the harmonised index, will continue to indicate an inflation performance which is satisfactory and which enables us to meet the inflation criterion for Economic and Monetary Union. Discipline and vigilance on the part of the Government and the social partners will ensure that we meet this criterion.
What will be the impact of the elements omitted from our calculation of inflation rates such as mortgage interest payments, health and education services, car insurance and foreign holidays? What will be the effect of increased inflation rates in other member states on monetary control here?
I am not sure I have the precise numerical impact of the omission of mortgage interest rates, etc. within the Irish context but, given the large numbers of householders here — the highest in the Northern hemisphere — I would suspect it would be significant but I do not want to give the Deputy an estimated figure. I will communicate with him specifically in relation thereto.
On the second question, higher inflation rates in other member states would lead to tighter monetary control here because as one of its primary responsibilities the Central Bank, an independent institution, must have regard to inflationary trends and has a commitment to price stability. If it felt inflation was increasing it would use whatever instruments were available to it, principally interest rate policy, to ensure that did not occur. Subject to confirmation — and I shall write to the Deputy on the matter — there is a difference here in that our consumer price index last year was 2.4 per cent whereas the interim index suggests 2.3 per cent, from which one would deduce that the answer to the Deputy's first question is approximately 0.1 per cent. I will confirm that to him.
