Dáil Éireann debate -
Tuesday, 28 Apr 1998

Vol. 490 No. 2

Written Answers - Exchange Rate Mechanism.

Derek McDowell

Question:

47 Mr. McDowell asked the Minister for Finance the factors governing his decision to seek a change in the central rate of the IR£ within the ERM; and the nature of contacts with the European Commission prior to the meeting of 14 March 1998. [9522/98]

Minister for Finance (Mr. McCreevy)

I made the decision to seek a revaluation of the ERM central rate of the IR£ on 14 March last taking into account all aspects of the situation. These included domestic considerations and the discussions at European level, involving among others the European Commission, of our Convergence Programme 1997-1999.

As regards domesic considerations, I was concerned to ensure that our economic success continues in a balanced and sustainable way. While we comfortably met the EMU inflation criterion in relation to 1997, the possibility of a significant increase in inflation, particularly in 1999, was one I wished to avoid. I was keen to ensure we took timely action to prevent inflationary risks from posing any threat to our economic stability. I, therefore, decided that the most prudent course of action was to bring the central rate of the Irish pound broadly into line with its market rate prior to the revaluation. In making this decision the needs of the whole economy were taken into consideration and I had to strike a balance between inflation concerns on one hand and competitiveness considerations on the other.

As the EU Communiqué issued on 14 March last states, the decision to adjust the central rate of the Irish pound was made by mutual agreement of ECOFIN Ministers and central bank governors of the member states of the European Community, following a common procedure involving the European Commission and the European Monetary Institute, and after consultation with the Monetary Committee.