Economic and Monetary Union: Motion.

I move:

That Dáil Éireann takes note of the recommendation from the Commission of the European Community, pursuant to Article 109j of the Treaty establishing the European Community done at Rome on the 25th day of March, 1957 (as amended by the Treaty on European Union done at Maastricht on the 7th day of February, 1992), concerning the fulfilment by Ireland of the necessary conditions for the adoption of the single currency.

The reason I put down this motion is to provide Dáil Éireann with the opportunity to discuss Ireland's prospective participation in economic and monetary union at the outset on 1 January 1999. EMU is one of the most significant economic events of this century and it is only proper that we should have the opportunity to discuss it again before the next major decisions are made at European level during the first weekend of May.

The people of Ireland decided by referendum in 1992 that we should participate in EMU if we qualified and the Government is resolved to give effect to that decision. Following the Commission recommendations last week, we are now very well placed to be confirmed as one of the countries which will be part of this most historic development in European integration on 1 January next. In accordance with Article 109j(1) of the EC Treaty, the European Commission and the European Monetary Institute are required to report to Council on the progress made in the fulfilment by the member states of their obligations regarding the achievement of economic and monetary union, EMU. On the basis of these reports, the Commission is required to submit separately to Council a recommendation as to which member states fulfil the necessary conditions for the adoption of the euro.

These reports examine whether there has been a high degree of sustainable convergence among member states and this is assessed primarily on the basis of progress made by member states in fulfilling each of the four convergence criteria of Article 109j(1), namely price stability, government budgetary position, the observance of the normal fluctuation margins of the exchange rate mechanism and the durability of convergence as reflected in long-term interest rates. In addition, the compatibility between national legislation, including the statutes of national central banks, and the Treaty and the Statute of the European System of Central Banks is examined. Deputies will be aware that these two convergence reports, with the recommendations of the Commission, were published last week on 25 March.

The publication of these reports and recommendations is the first step of the procedure set out in Article 109j which will lead to confirmation by the Council, meeting on 2 May 1998 in the composition of the Heads of State or Government, of which member states fulfil the necessary conditions for the adoption of the single currency. Based on the two convergence reports, the Commission recommendations to the Council are that the following 11 member states are suitable to enter into the third and final stage of EMU on 1 January 1999: Belgium, Germany, Spain, France, Italy, Luxembourg, the Netherlands, Austria, Portugal, Finland and, of course, Ireland.

Denmark and the United Kingdom are exercising their opt-outs and Sweden and Greece are judged by the Commission not to have fulfilled all the relevant criteria. As the next step, the European Parliament meeting on 29-30 April will deliver an informal opinion to the ECOFIN Council based on the convergence reports and the Commission recommendations.

On the basis of these reports and on the recommendation of the Commission, the ECOFIN Council meeting on 1 May will assess for each member state the fulfilment of conditions for the adoption of the single currency and formulate its recommendations to the Heads of State or Government. The European Parliament meeting on the morning of 2 May will then deliver its formal opinion to the Heads of State or Government who will meet that afternoon to confirm which member states will participate in EMU from 1 January 1999.

In addition to having the Commission and EMI convergence reports, I considered that it would be important to have an assessment of Ireland's convergence from the Central Bank of Ireland. This report was published yesterday and arrangements were made to have it laid before both Houses of the Oireachtas. The Central Bank's report also concludes that Ireland meets the four convergence criteria concerning price stability, Government budgetary position, exchange and interest rates. The bank states that membership of EMU offers Ireland the prospect of stable economic conditions, based on price stability.

In terms of legal compatibility, the EU Commission and the EMI convergence reports found that, following the enactment of the Central Bank Act, 1998, which was debated in the House some weeks ago, legislation in Ireland is compatible with the requirements of the treaty and the ESCB statute. The Central Bank report also states that "Central Bank legislation is now fully compatible with the requirements of the Treaty".

The EMI report notes two so called imperfections, which will not, however, jeopardise the overall functioning of the ESCB at the start of Stage III. These are not substantive, nevertheless appropriate adjustments of a drafting nature can be made when a suitable opportunity arises. The EU Commission report includes no reference to imperfections.

In relation to convergence among member states generally, the Commission recommends a total of 11 member states as fulfilling the necessary conditions for the adoption of the euro. In the words of the Commission, convergence is now an established fact in Europe. Member states have made great progress in bringing their economies closer together and have demonstrated a revitalised commitment to controlling inflation and placing public finances on a sounder footing.

I recognise that concern has been expressed about the sustainability of the performance of some member states, a concern reflected in the views of the European Monetary Institute that further budgetary consolidation is warranted in some member states. However, it is the objective independent assessment of the European Commission, which is the guardian of the European treaties, that these 11 member states fulfil the necessary conditions, in accordance with the treaty. That assessment is based on the convergence reports of the EMI and the Commission which, under the treaty, examine the achievement of a high degree of sustainable convergence. In the context of the decisions to be taken at the beginning of May, it is my intention, therefore, to support the Commission's recommendations.

Deputies will be aware that the effects, both negative and positive, which EMU is likely to have on the Irish economy were analysed in detail by the ESRI in its study, The Economic Implications for Ireland of EMU, published in July 1996. This report concluded that membership of EMU would, on balance, be economically advantageous even were the UK to remain outside. The net benefit to the Irish economy from taking part in EMU, without the UK, was estimated by the ESRI to be an additional 0.4 per cent of GNP on an annual average basis over the medium term, allowing for possible shocks to Ireland arising from the UK's non-participation.

The ESRI also looked at potential but unquantifiable effects of EMU participation. It concluded that some of these, such as the increased attractiveness of Ireland as a destination for foreign direct investment, could be substantial. The ESRI's conclusion was endorsed by the National Economic and Social Council in its report, European Union: Integration and Enlargement. NESC found no reason to revise its long-standing position that Ireland's strategic interest lay in full economic and monetary union.

In relation to our long-term strategic interests, it is necessary to view EMU membership in the context both of past long-term economic performance in other member states and of the appropriate medium to long-term future strategy for Ireland, while at the same time taking account of the short-term challenges that may arise.

In summary, the case for Ireland joining EMU from the outset is stronger than ever, given the remarkable convergence that has occurred among the 11 potential EMU participants which is sustainable into the future, assuming that appropriate stability orientated policies are pursued by them. This is confirmed by the EMI, Commission and Central Bank convergence reports and the Commission recommendations. Taken together with the economic assessments that have been made by the ESRI and the NESC, it is clear that Ireland's long-term strategic interests lie in joining EMU from 1 January 1999.

However, EMU brings with it certain responsibilities to ensure that we can sustain our excellent economic performance into the future. Despite our very low inflation to date, inflationary pressures in the economy, if left unchecked, could cause severe damage to our future potential. This is widely recognised here in Ireland and is a concern to which I have referred in the past. It is also a concern at EU level and is reflected in the reports of the EMI, the Commission and the Central Bank of Ireland. It is important, therefore, that we act appropriately and prudently to ensure future balanced and sustainable development of our economy. It is against this background that the recent revaluation of the ERM central rate of the Irish pound must be seen.

As the House will be aware, on 14 March 1998 it was agreed that the central rate of the pound would be revalued by 3 per cent against other ERM currencies, from DM 2.41105 to DM 2.48338. The new central rate of the Irish pound is broadly in line with its recent market rate. This revaluation was agreed unanimously by our European partners, who recognised the determination of the Irish Government to adopt the mix of economic policies best suited to ensuring price stability on a continuing basis.

The decision on the revaluation was taken with a view to ensuring that our economic success continues in a balanced and sustainable way. The communiqué issued in Brussels on 14 March refers to three elements of Ireland's economic and budgetary policy stance: the revaluation itself, our budgetary policy in 1998 and 1999, and the Central Bank's intention to continue its present monetary policy orientation which is aimed at price stability.

These three elements of policy taken together make up a coherent and prudent policy stance in view of the challenges facing the economy. One of these challenges was the risk of a significant increase in inflation, particularly in 1999, because of our rapid economic growth, prospective lower interest rates in EMU and the overall currency depreciation of recent months, even in circumstances where the current strength of sterling is not sustained. We needed to avoid adding to these pressures by a further fall in the currency to our previous ERM central rate of DM 2.41. This was especially so because of the threat that significantly increased inflation would pose for the current Partnership 2000 agreement, as well as the negotiations on the next wage agreement.

The European Commission convergence report forecasts that the personal consumption expenditure, PCE, deflator will rise by 3.3 per cent and 3.5 per cent in 1998 and 1999, respectively. These forecasts represent a worse case scenario and are not directly comparable with the consumer price index figures. This is because the PCE does not take account of movements in mortgage interest rates which is a significant omission in the case of Ireland where interest rates are expected to converge to lower European levels over the coming months.

The Commission used the PCE for cross-country comparability purposes and because the more generally used EU harmonised index of consumer prices does not have historical data which would provide a longer perspective. In its spring forecasts, the Commission actually predicts consumer price inflation of 2.8 per cent and 3.1 per cent for Ireland for 1998 and 1999. These figures are quoted in the European Monetary Institute Convergence Report.

The CPI is a broader and more representative measure of changes in consumer prices and is, of course, the measure used in the context of Partnership 2000. While I do not see the need at this stage to revise my budget forecasts for CPI inflation of 2 per cent in 1998 and 2 per cent in 1999, I do not want to understate the risks to these forecasts of inflation which currently exist.

Having considered the inflationary risks that lie ahead, I decided the most prudent course of action was to bring the ERM central rate of the Irish pound broadly into line with its recent market rate. In making this decision, the needs of the economy were taken into consideration and I had to strike a balance between inflation concerns on the one hand and competitiveness considerations on the other. The short-term advantages for some sectors were balanced against the need to counter inflationary risks for the economy in general, including those sectors.

The new central rate broadly confirms the recent market level of the Irish pound against the Deutschmark. Therefore, assuming that ERM central rates form the basis for EMU entry rates, this new higher EMU entry rate for the Irish pound of DM 2.48338, compared with the recent and current exchange rate in the market, will not result in a worsening of the Irish pound value of EU payments, nor will it make our exports any more expensive. It should also be noted that Irish producers have received a gain in competitiveness from the depreciation of the currency over the past 12 months or so.

Assuming that ERM central rates will be the basis for EMU entry rates, I accept as a general statement that the revaluation of the Irish pound's ERM will mean that, compared with the situation of entering EMU at DM 2.41105, the Irish pound value of EU payments, including agricultural payments, will be about 3 per cent lower and our exports will be 3 per cent more expensive. However, this negative impact on EU payments is just one of a wide set of foreign exchange flows which will be affected by the revaluation. For example, annual debt servicing costs will be lower in Irish pound terms than they would have been if there had been no revaluation. In any case, it should be remembered that any short-term gain in competitiveness there might have been from entering EMU at DM 2.41 would have been eroded if the risk of higher inflation were to materialise.

Similarly, any gains to farmers and others could have been quickly eroded if the lower value of the Irish pound had resulted in higher inflation. It should also be remembered that the exporting and agricultural sectors will, like the rest of the economy, also benefit from the convergence of interest rates across member states participating in EMU by the beginning of 1999.

It would be wrong to focus on what some see as the negative aspects of the revaluation in isolation from the benefits of a less inflationary environment from which those in receipt of EU payments will also gain. The purpose of the revaluation was to provide a more stable and balanced economic and business environment which would make the challenges ahead more manageable by lessening the threat of inflation. I am confident that the recent revaluation was a balanced and appropriate response to the challenges that lie ahead. Taken with the expressed intentions on domestic economic policy, it places Ireland in a strong position to participate successfully in EMU, and will facilitate the continued sustainable development of the economy.

The communiqué issued following the revaluation of the Irish pound signalled my decision to hold strictly to the tight expenditure targets set out in last December's budget and hence to allow the general Government surplus — already pitched at 0.5 per cent of GDP — to increase in line with any unanticipated revenues this year. The communiqué also noted my resolve to propose a budget for 1999 having as its primary objective the continuation of low inflation. This approach to budgetary policy will help to secure the medium-term sustainability of our economic growth.

This decision regarding the conduct of budgetary policy in 1998 and 1999 is fully in accord with the commitment contained in the Economic Background to the budget last December to run budget surpluses when the economy is doing well. Prudent management of the public finances has helped underpin our strong economic performance. Low budget deficits and a rapidly declining debt ratio have helped secure the stable low inflation and interest rate environment which has proved so conducive to strong economic and employment growth in the economy.

The National Economic and Social Council in a recently published report, "Private Sector Investment in Ireland", highlighted the key role played by reduced macro-economic uncertainty in the economy in stimulating strong investment growth in recent years. As I stated many times, the final decision on the pre-announcement of the bilateral exchange rates between the currencies that will participate in the euro area will not be taken until the first weekend in May. However, it is widely expected that these bilateral exchange rates will be based on the ERM central rates which will become effective on 1 January 1999, at which date one euro will become equal to one ECU. In line with the Treaty on the European Union, and because the ECU is a notional EU currency which contains elements of currencies which will not participate in the euro, the setting of the conversion rates against the euro can only take place on 1 January 1999.

Our strong competitive position in recent years stems from a strategic framework built upon,inter alia, the foundations of a consensus approach which brings the social partners into the national goal-setting arena, sound fiscal and economic policies pursued by successive Governments and a long-established investment in education. This is now translating into strong employment growth, a continuous decline in unemployment and increased national resources to tackle social priorities. Competitiveness is a multifaceted concept. While a purist might be inclined to list the many factors involved, as a man who prefers to home in on the core issues, I am indebted to the National Competitiveness Council for its succinct definition, namely that it boils down to “success in markets that delivers a better standard of living for all”.

The social partnership process is one of the strengths of the economy in addressing the challenges of EMU. The preparation of the economy for entry to, and participation in, EMU was a vital consideration for the social partners in the negotiation of Partnership 2000. The continuation of the social partnership process and the negotiation of an appropriate successor to Partnership 2000 will be essential in ensuring Ireland's successful participation in EMU.

The competitive challenge of EMU will require an intensification of the flexibility and problem-solving approach displayed by the Government and the social partners over the past decade. Partnership 2000 also provides an explicit review mechanism in the case of a disturbance to Ireland's international competitiveness in EMU. In this regard, the Government, IBEC and ICTU have agreed to meet in the near future, in the context of Partnership 2000, to accelerate the preparation for the competitive impact of EMU.

Enhanced competitiveness will be important in determining the economy's capacity to successfully accommodate economic shocks. Provided we maintain our competitiveness, disturbances can be more readily absorbed by appropriate adjustment to domestic costs and prices, leaving long run competitiveness unaffected. The use of interest and exchange rates as economic instruments to deal with shocks which are particular to Ireland will, however, no longer be available in EMU. This means that if there are any shocks in the future, which are particular to Ireland, the adjustment process will have to be assisted by a combination of fiscal policy, pay policy and structural reform.

Monetary policy will be the responsibility of the European System of Central Banks which, for this purpose, brings together the Central Bank Governors of the euro-area member states and the Executive Board of the European Central Bank. The treaty guarantees the independence of the ESCB; it cannot receive any instructions from either member states or the European Institutions. The primary objective of the ESCB is to maintain price stability, an important objective which will facilitate growth and employment generation in the years ahead. Without prejudice to the objective of price stability, the treaty requires that the ESCB shall support the general economic policies in the Community with a view to contributing to its objectives.

In this context, arrangements for dialogue between the ECB, Council and the European Parliament are provided for under the treaty. The issues arising from the establishment of the European Central Bank were recently debated at some length in the House in connection with the Central Bank Act, 1998. I will not, therefore, repeat them and will instead deal with the other aspects of EMU relevant to Ireland.

The success of our response to any economic shocks will depend to a large extent on how well the economy has been prepared in advance to cope with such an eventuality. Structural policies for the development of Ireland's competitiveness, as well as prudent budgetary policy and appropriate pay developments, will be critical to these preparations. The reduction in policy options in macro-economic terms which EMU will bring will also heighten the importance of factors such as skills, costs, infrastructure and quality.

The work of the National Competitiveness Council, established under Partnership 2000, will provide a basis for developing appropriate medium-term policies in this area. Also important are the maintenance of competition in product markets and the development of suitable infrastructure — both "hard" or physical infrastructure and "soft" infrastructure such as public services and the skills and knowledge base.

A key concern of many Irish firms is how sterling will perform against the euro once our entry rate has been determined. The sterling issue is important but we must be careful not to overstate its importance. When analysts talk about a sterling shock they are, for the most part, talking about a sharp fall in sterling from its equilibrium level. Sterling is currently well above what most commentators, including the Governor of the Bank of England, consider to be its equilibrium level. Sterling would have to fall a very long way before it could be considered to represent an economic shock.

The Government is not, however, ignoring the need to prepare for the possibility, no matter how remote, of problems for Irish industry as a consequence of sterling falling significantly below its equilibrium level. Consultants have been appointed by Forfás, under the auspices of the EMU Business Awareness Campaign, to examine the implications for Irish industry of the UK remaining outside EMU. I understand the consultants' report has been received by Forfás and that it has identified a wide range of actions in the fields of finance, marketing, distribution, etc. that firms could consider as part of their contingency planning. These actions will be summarised in a document to be included in a Forfás information pack prepared as part of the EMU Business Awareness Campaign to be widely distributed in the next few weeks.

I now turn to the practical preparations being made for the changeover to the euro. I am glad to say that preparations are going well. My Department has responsibility for co-ordinating the preparations of the Irish public administration and has a key role in helping the rest of the economy to prepare itself for the changeover.

Private and public sector representatives were centrally involved in the preparation of the national changeover plan, the second edition of which I published in January. The plan outlines the arrangements that will be made across the public sector, as well as by banks, building societies and the Irish Stock Exchange, to facilitate the changeover. The plan also shows the designs for euro notes and coins, including the design for the Irish face of euro coins. An appendix to the plan describes the changeover work being done by various public bodies and trade and professional associations and lists contact points for further information.

All Members of the Oireachtas received copies of the plan so I do not propose to describe it in detail. The plan is available from my Department and from Forfás, including the Internet. However, I should draw attention to the statement in the plan that, assuming the European Council confirms during the first weekend of May that Ireland fulfils the necessary conditions for entering EMU, a currency changeover board will be established after the European Council's decision, in order to oversee the detailed implementation of the changeover, including the areas of public and consumer information. The euro changeover group is expected to provide the nucleus of this board.

The EMU Business Awareness Campaign being run by Forfás has been very successful in providing information for businesses about EMU and the changeover to the euro. The campaign has produced an excellent information pack, of which over 30,000 copies have been circulated. Two radio advertising campaigns have been run and a summary leaflet has also circulated to employers in conjunction with the Revenue Commissioners. Over 140,000 copies of this leaflet have been distributed. Forfás has also drawn up a short leaflet specifically for small and medium size enterprises and over 60,000 copies of this leaflet have been distributed. Forfás will continue its activities for 1998 and plans to issue further documents on issues such as information technology and a guide for retailers.

With the proximity of EMU, the national information programme will be extended to provide information on the changeover to the euro aimed at the needs of the general public. This programme will be co-ordinated by my Department in conjunction with the European Commission and the European Parliament offices in Dublin.

The Government recently approved the drafting of the Economic and Monetary Union Bill, 1998 to cater for the other legislative changes necessary for the introduction of the euro from 1 January 1999. The purpose of the Bill is to ensure a clear and comprehensible framework in Irish monetary law following the introduction of the euro; to remove incompatibilities between Irish monetary law and the legal framework for the use of the euro; and to give effect to enabling provisions within the legal framework, for example in relation to the redenomination of outstanding debt. The Bill is also designed to facilitate companies which wish to redenominate and renominalise their capital structure in euro even before the final changeover to the euro on 1 January 2002. It is intended to have the Bill enacted by summer 1998. In preparing it, my Department is consulting with the European Monetary Institute, the European Commission and interested parties in Ireland.

The adoption of the single currency, the euro, represents one of the most important economic events in the history of the State and an important phase in European integration. The establishment of the euro will yield significant benefits for the Irish economy as part of the wider European economy. A permanently fixed exchange rate will consolidate the gains already achieved through the Single Market. The euro will allow for the full advantages of the Single Market to be obtained due to higher price transparency and greater competition. EMU will enhance overall economic efficiency and stability within the euro area, boosting the sustainable rate of output and employment growth and creating a truly single market of some 288 million people.

Successful participation in EMU will require an intensification of the flexibility and problem solving approach displayed by the Government and the social partners over the past decade. Structural policies for the development of Ireland's competitiveness, as well as prudent budgetary policy and appropriate pay developments, will be critical. I am certain that the Irish people and their Government will face those challenges and opportunities imaginatively and successfully.

Ireland is well placed to participate in EMU from the outset as reflected by the positive recommendation from the EU Commission. I am very pleased to commend this motion to the House.

I am glad we are having this debate but I am somewhat disappointed at the way in which it is being treated. I note that there is not a single member of the media in the Press Gallery. The Minister is shrugging his shoulders — that is probably par for the course — but for once I would like to see the spotlight on the Minister. I do not like to see him suffering from the loneliness of the long distance runner. One of my principal concerns is that there is a need for greater public awareness of what we are about.

I am a little disappointed with the Minister's speech in view of the inflationary threat which I perceive as being one of the greatest difficulties currently confronting the economy. That is recognised now but it should have been recognised much earlier. The issue of the exchange rate with sterling needs to be explored further and I will touch on that issue.

Another issue not mentioned by the Minister — perhaps it is irrelevant but it is looming on the horizon in many EU member states and throughout the world — is the question of the millennium bug and the effect that will have on this major changeover. If we talked about the millennium bug with any seriousness a few months ago we would have been laughed at, but when I see people like Tony Blair, the British Prime Minister, taking a personal interest in the issues that will arise on the millennium, it is time to sit up and take notice. I raise that matter in the context of this debate because of the enormous changeover in fiscal, monetary and currency terms we are embarking on and I wonder about our preparedness for that changeover from the point of view of technology. The central issue in the debate concerns the recommendations from the Commission for the fulfilment by Ireland of the necessary conditions for the adoption of the single currency. I am glad we are taking note of that recommendation which I endorse. It is a tribute to all Governments and political parties in this decade that the conditions that enable us to be recommended by the European Commission have been met so well. I should point in particular to the performance of the rainbow Government, which was in power until June 1997, in setting up the economy in such a way as to achieve this recommendation. However, all the political parties have contributed.

When I first came into politics different political parties and members within political parties were convinced of the benefits to the economy of huge borrowings. The "Martin O'Donoghue" theory, which was adopted by the Fianna Fáil Government at the time, was that the way forward was to borrow and to force up unnecessary employment in semi-State bodies. That madness afflicted this country for quite a number of years, and it took a long time to overcome it and eliminate its effects from the economy. Fortunately there is now, and has been, a common determination to ensure that sensible economic policies are followed. We have done that in the context of inflation — there is a question in relation to that which I will come to later — and in terms of reining in our debt with the GDP ratio coming down considerably year by year until we are virtually within the 60 per cent prescribed by the Maastricht Treaty. All those who have been involved in it politically deserve a pat on the back. That is not to forget those who have been involved on the administrative and support side, particularly those in the Department of Finance who have been giving very sensible advice for quite some time. I spent a while in the Department of Finance and I have the feeling that they had previously been giving sensible advice which, at the time of the madness of which I spoke, might have been ignored. Credit is due to everybody for putting us in the situation where we have this recommendation.

Not being the Opposition spokesperson on Finance but having had to stand in at short notice for my colleague, Deputy Michael Noonan, who is at present dealing with important issues regarding National Irish Bank at the Select Committee on Finance and General Affairs, perhaps I can look at these issues with a greater degree of objectivity than an insider who is dealing with them week in and week out. That is why it is natural, as somebody attempting to quickly come to terms with the issues, to focus on what I initially thought was a huge information deficit. On considering it further, I would say that it is not really an information deficit but a communication deficit. There is no doubt there are reams of information available on this issue, and much effort has been made at business level to try to prepare people for the change which the Minister has rightly described as the single most important economic event in the history of the State. I endorse that view. This is a momentous event which requires a momentous effort to ensure that everybody fully understands and is fully aware of its implications. In some ways this changeover will have more significant long-term implications for our future than the discussions taking place in Belfast on the peace process. That is why I am concerned about the communication deficit. While credit is due to IBEC, Forfás etc., for their efforts, my concern is for ordinary citizens. The general public are ill-informed. Merely having a paper available does not ensure that the information reaches the general public. I note in this regard that there is an intention to formulate a national information programme, which I support. There is a great need for that and the sooner it is done the better. I would like to see a detailed plan of campaign being put in place as quickly as possible. Let us not forget the need for briefings for the media, the politicians and the councillors. There cannot be too much effort on this front. I urge the Minister and the Government to consider a well focused plan of campaign as soon as possible.

I am very much in favour of EMU. I am a committed European. I believe our place is at the heart of Europe. My views in that regard were shaped as Minister of State at the Department of Foreign Affairs and, for a short time, as Minister of State at the Department of Finance. From the political point of view, I have no doubt that our future is at the heart of Europe. From the economic and monetary point of view, I am similarly committed. That is not to say that we should not be alive to the danger and problems, and that brings me back to the issue of inflation. I am usually concerned about the threat of inflation. I am also cognisant of the fact that because of monetary union the instruments that will be available to us nationally in future will be far more limited. There are questions the Minister has to answer in this regard, taking into account the recent past, say, the last six months. Six months ago we had a booming economy which the Government inherited from the rainbow coalition. That is not a political point. The point is that we had a booming economy and the Government knew that. It also knew, or should have known, the gathering strength of sterling and the impact that would have from the point of view of imported inflation. That changeover has been taking place over the past six months, but the Government knew that when it was formulating its proposals in the last budget. The Government also knew that our interest rates were higher than European rates, and knew that at some stage during 1998 our interest rates would fall. From nearly every point of view, falling interest rates are welcome.

Debate adjourned.
Sitting suspended at 1.30 p.m. and resumed at 2.30 p.m.