Vol. 471 No. 1
72 Mr. Foley asked the Minister for Finance his views on whether the characteristics and trading patterns of the Irish economy do not make it a natural fit with the core continental European members of economic and monetary union; and if he will make a statement on the matter. [20323/96]
The issue mentioned by the Deputy was discussed by two economists in a paper presented at the Dublin economic workshop economic policy conference in Kenmare last month. However, I understand that two international researchers responsible for much of the published analytical work referred to in the paper have subsequent to that work presented more favourable analyses of Ireland's situation and capacity to participate successfully in economic and monetary union.
As the Deputy will recall, earlier this year, I commissioned on behalf of the Government an independent study of the economic implications for Ireland of economic and monetary union. This study was carried out by the ESRI which published its report in July. The report reviewed the approach referred to by the Deputy and argues that "...most economists find the optimum currency area literature incomplete and unsatisfactory..." and goes on to say "In a sense ...we may regard the modelling exercise of this [ESRI] report as a fleshed-out implementation of the cost and benefit calculations hinted at by the optimum currency literature".
The substantive finding of the ESRI report is that membership of economic and monetary union for Ireland would, on balance, be economically advantageous even were the UK to remain out and with allowance made for possible sterling/euro exchange rate turbulence. This conclusion is reinforced by the fact that the ESRI found that the unquantifiable benefits of economic and monetary union membership for Ireland are also likely to be positive.
Finally, the Deputy might wish to note the enhanced integration of the Irish economy with the continental EU countries generally over the past two decades, a trend that would be likely to be reinforced as the full potential of the European Single Market is realised with the single currency, the euro. At the beginning of the 1970s over 55 per cent of our merchandise trade was with the UK. By 1995 the UK's share had fallen to less than 30 per cent. In 1995 other EU markets combined accounted for 36 per cent of Ireland's merchandise trade. This trend reflects the success of Irish industrial and agricultural producers in exploiting the opportunities for market diversification presented by EU membership.
