Mary Harney
Question:35 Miss Harney asked the Minister for Finance the meetings, if any, held or initiatives taken in relation to the current currency crisis. [4484/96]
Written Answers. - Currency Crisis Meetings.
I do not accept that there is a currency crisis and, to judge by the low level of interest rates, neither do the financial markets. I am, therefore, very surprised at the Deputy's suggestion that there is one.
Sterling has fallen by about 4 per cent against the Irish pound since the end of 1994: sterling has been weak on international currency markets, reflecting inter alia market perceptions of the UK economy. Sterling has fallen against the Irish pound despite the different evolution of interest rates here compared with the UK, such that Irish interbank rates are currently some 1 per cent below corresponding UK ones. Furthermore, the fall in the value of sterling should be providing benefits to some businesses, in terms of lower input costs. The Deutsche Mark has of course appreciated against the Irish pound as have some other ERM currencies, a factor which should be of benefit to exporters to the countries of these currencies, while overall, that is on a trade-weighted basis, the value of the Irish pound has increased relatively modestly.
I am, of course, aware of the concerns of some sectors of industry in relation to the Irish pound-sterling exchange rate. During the past year, and particularly in the run-up to the 1996 budget, my officials and I had a number of meetings with industry representatives during which this issue was discussed in some detail. It is, of course, a matter for each individual firm in the first instance to make arrangements required to cope with the economic environment in which it finds itself. Nevertheless, the Government has a key role in trying to ensure that this environment is as conducive as possible to economic activity. The present environment is characterised by low inflation, moderate wage developments under theProgramme for Competitiveness and Work, interest rates close to historically-low levels, sound public finances, a strong balance of payments surplus and high levels of investment, notably under the Community Support Framework: all of these factors are beneficial for economic activity.
In addition, in each of the last three budgets, considerable Exchequer resources were allocated to employers through reductions in their PRSI contributions. This was done to assist employers to maintain and create employment and was targeted at lower-paid, labour-intensive and mainly indigenous sectors of Irish industry. The 1996 changes in employer PRSI reduced the costs of employment of virtually all employers. The ongoing cost of the PRSI reductions provided for employers in the 1994, 1995 and 1996 budgets is some £124 million annually. There have also, of course, been substantial tax reliefs, mainly targeted at the low paid, and changes in the corporation tax regime designed to assist businesses not benefiting from the 10 per cent corporation tax scheme.