Written Answers. - Single Currency.
Ivor Callely
Question:
103
Mr. Callely
asked the
Tánaiste and Minister for Enterprise, Trade and Employment
the likely additional cost to business houses as Ireland enters the European single currency; the financial assistance, if any, that will be available to these businesses to assist them with these additional costs; and if she will make a statement on the matter.
[2429/98]
Economic and monetary union, EMU, is set to begin on 1 January 1999. On that date the single currency, the euro, will come into being and the conversion rates of the currencies participating in EMU will be irrevocably fixed against it. Planning and preparation in Ireland is proceeding on the basis that Ireland will qualify for membership of EMU from the outset.
The euro will be useable for non-cash transactions, for example, cheques and credit transfers, from the start of EMU but euro notes and coins will not be available for three years so Irish pound notes and coins will continue in circulation.
On 1 January 2002, euro notes and coins will be put into circulation and the withdrawal of Irish pound notes and coins will begin. By 1 July 2002 at the latest, legal tender status will be withdrawn from Irish pound notes and coins and the changeover to the euro will be complete.
It is not possible to give an estimate of the likely changeover costs to business of entering the single currency as any incremental costs that may be incurred in individual cases will depend on a number of variables. The main business areas where changeover costs are likely to occur are in information technology, accounting systems, marketing and merchandising operations, and payroll and training systems. No two businesses are the same in this respect. The impact of the changeover in these areas will depend on issues such as the size of the business, its customer base and whether this is predominantly domestic or export, the level of administration in the business and the sophistication of its business systems.
The key to a successful transition to euro based systems is early preparation by the business sector. This is one of the central messages of the EMU business awareness campaign which is managed by Forfás on behalf of the Department of Finance and the Department of Enterprise, Trade and Employment.
The issue of preparedness among the SME sector has been a particular focus of attention for the business awareness campaign over recent months. The campaign undertook a number of initiatives designed to specifically target smaller companies. These included preparation of a short, user friendly brochure summarizing the key issues for SMEs in relation to EMU and the changeover to the euro. Over 53,000 copies of this brochure have been distributed to SMEs through their representative organisations, State agencies, etc.; distribution of campaign material, outlining how SMEs should deal with EMU issues, to over 140,000 businesses as part of a mailing with the Revenue Commissioners and company VAT returns, and an initial advertising campaign on the radio and offering businesses the opportunity to telephone a dedicated euro line for information.
The Government has, therefore, been to the forefront in encouraging and facilitating the business community to make adequate preparations for the changeover. In addition, the Government has published its own national changeover plan outlining the arrangements that will be made by Departments, the Central Bank, the NTMA, and the Revenue Commissioners as well as banks and building societies and the Irish Stock Exchange. This will be a very useful guide for businesses of all sizes as they prepare for their own changeover.
I have no plans, nor do I consider it appropriate, to make financial assistance available to business in the context of the changeover. The costs to business of the changeover are variable and the key to minimizing costs that may occur is early preparation. The Government is playing its part in facilitating that early preparation.
It must also be borne in mind that the single currency will also bring benefits to companies. Interest rates should in general be lower in EMU than would apply if Ireland were not to join. Exchange rate uncertainty and transaction costs will be eliminated for trade, tourism and investment among the member states participating in EMU. The single currency will mean that the need for currency conversion will no longer arise within the euro area. Furthermore, such benefits will be permanent, while of their nature changeover costs will be once-off.
In addition, I would point out that the present economic climate of high growth, sound public finances and falling rates of income tax, corporation tax and capital gains tax are providing a very favourable climate for enterprise.
