Dáil Éireann debate -
Wednesday, 17 Jun 1998

Vol. 492 No. 5

Private Members' Business. - Economic and Monetary Union Bill, 1998: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time."

Mr. McDowell

Before the debate was adjourned I was discussing the broad economic guidelines which have been agreed at Commission level. It is worth spending a couple of minutes thinking about how that happens. As I understand it, Ireland is represented at official level in discussions of the monetary committee. The monetary committee subsequently submits its considerations to the Commission and the ECOFIN council. They are normally rubberstamped.

Until this year, none of us paid a great deal of attention to that. However, it will become a great deal more important in future years and will form at least one of the pillars informing the political remit of the central bank, the economic policy of the ECOFIN council and the euro eleven committee. It is very important that we have a distinct democratic input to the formation of those guidelines. It is also important that this House knows the contribution being made on behalf of Ireland to those guidelines. None of that information is in the public arena. The deliberations of the monetary committee are, by statute of the European Treaties, held in private. This position is not acceptable. In future these guidelines will become very important in informing the way in which European economic policy is decided. We need look no further back than a couple of months ago when we were effectively told we were spending too much, that excessive tax cuts had been granted, that we should stop spending too much and should not grant any tax cuts in the upcoming budget.

It is incumbent on us to maintain a certain measure of independence. We must maintain, inasmuch as we can, independence in the way in which we distribute the benefits of growth in society. We should look to maintain independence in the whole area of tax harmonisation because the agenda has moved on over the past six months to a year. Tax harmonisation has gone from being something for which people hope some time in the future to being very much towards the top of the agenda. Not for the first time the co-ordination of DIRT tax is being discussed by the ECOFIN Council. Perhaps more importantly, we will undoubtedly be required in time to co-ordinate corporation taxes, and there are those who hope we will also co-ordinate income taxes. This is a process we should do our best to resist. I am not naive in the matter. I realise it is something we cannot avoid forever if it is the will of the bigger countries, but we should do our best to resist it, at least for the time being.

The discussions over the past weekend about the EU budget are also of considerable importance to Ireland. I was somewhat concerned by the reported remarks of the Taoiseach in relation to that budget. He is reported to have said that we could live within the current 1.27 per cent limit provided reform of CAP was not as thorough going as had been suggested. This suggests, in traditional Irish fashion, that our primary interest in the EU budget is the CAP. If one looks at the overall figures, that has been the case in the past. I emphasise that, while we acknowledge the dependence of many parts of the farming community on the CAP, there are others who also have their call on EU funding. We have started to spend money, hesitantly but in some ways effectively over the past while, on inner city communities, on local development and support and on infrastructural development in areas which are not as well off as others. That focus has to continue, and form an important part of the demand we make on the EU budget into the future.

I have never understood why the transitional process is as long as it is. I was interested to hear the Minister confirm that he wants to give himself power in this Bill to terminate the transitional process any time after 1 January 2002 and does not necessarily see the joint circulation of currencies continuing until 30 June. I have never understood why it is necessary to have a three year changeover period in the first place. The argument usually advanced is that it will literally take that length of time to produce the notes and coins. It is beyond me why it should take five or six years to produce notes and coins. It seems this is inviting an additional period of potential instability. It is not a road that we need necessarily have gone down, although I accept at this stage it is unlikely we will change that.

Reading the detail of the Bill, is it necessary to go through, for example, legislation in relation to the criminal law, to review the fines imposed and change them into euro? The Minister said that contracts would be automatically denominated in euro during the changeover period and law would also be denominated in euro in so far as it was relevant. However, that provision is not in the Bill. Perhaps the Minister and his officials could help me in that regard. The Minister also spoke about the fact that we would be able to use cheques and other negotiable instruments from 1 January next. I would like more detail as to how this will work. At the moment there is this phenomenon called a eurocheque. Using a eurocheque issued by an Irish bank one can in theory go into a premises in Holland or Germany and write a cheque in the local currency which will then clear through one's own bank in time. Anybody who has ever tried to use it will realise that the principle is very good but it does not work very well. It seems that if we are to use cheques and other instruments of that kind, there is a need for the banks, if they are not already doing it, to improve their clearing systems so that we can use cheques in a way that means something to ordinary people, tourists as well as business people.

The Minister gave us some clarification, but there are one or two issues that need to be teased out in relation to transaction charges and commission that the banks will charge during the changeover period. At the moment, if an ordinary individual wants to buy currency the bank will offer a particular rate, it will offer business a different rate, and a different rate again to the wholesale market. I understand that following 1 January next, there will be one rate and one rate only, so that there will be no discrimination between business, the wholesale market and individual customers. Perhaps the Minister would confirm that. Certainly there can be no justification for spreading a risk if there is no exchange rate in the first place.

We also need clarification in relation to the transaction costs. It is my understanding that the banks have agreed to charge minimal non-commission transaction and administrative costs for changing over between euro and Irish pounds or any of the other individual currencies. Has agreement been reached on the level of those costs because there is a danger that if it is excessive customers will quickly become cynical about the advantages in relation to transaction costs etc., that were meant to accrue following the introduction of the single currency?

I would be interested to hear the Minister's reflections on the bond market. He will know that many people who are active in the bond market believe it will not do well out of this, that the demand for Irish bonds will diminish considerably and that demand for Irish Government debt will also diminish considerably. Clearly there will be a need, if we want to stay in this market, for the NTMA and Government to market Irish Government debt quite aggressively after 1 January next since the obvious advantages which it holds at the moment will simply disappear. I would be interested to hear whether there have been discussions with the NTMA and whether Government has made any specific decisions in relation to that.

Deputy Noonan began his contribution by saying that effectively EMU is a political project. My party has endorsed it as such. It has potential economic disadvantages which we have gone through many times in this House. The fact that sterling will remain outside EMU is clearly a potential competitive disadvantage. It will impose a need for flexibility in areas where currently flexibility is not to be found. There are other disadvantages and potential difficulties, but on the passing of what I think will be the last legislation on this historic move, it behoves us all to be positive and say that on the balance of advantage to Ireland this is something we should do both for our economic benefit and because it is an economic necessity.

Mr. Rabbitte

My party too will support this Bill. It is a major technical Bill, but it is a great deal more than that. It is very significant in terms of the historical nature of the decision we are making. The Minister's speech deals in very succinct fashion with the preparations that have been made, the provisions for an awareness campaign, including reference to the Forfás campaign for business, limited reference to the distribution of leaflets for the domestic consumer and so on. There is little or nothing in the speech about the history or political significance of this monumental decision. That is a pity from a number of points of view. It is a technical measure and it is an economic measure but it is, above all, a gargantuan political project with an economic dimension. It is the politics and the historical proportions of it that ought to be emphasised on an occasion like this because, as Deputy McDowell said, we have discussed the pros and cons on a number of occasions and I see little point in retailing them again. We are underselling the size and importance of the decision we are making by stripping it of its political excitement.

It is 200 years since there was a debate of this proportion leading to the Act of Union. What we are engaged in now is nothing less than the abolition of the national currency. That is a major decision. We are abolishing the national currency because we are entering another union — the economic and monetary union. It is a political construct and it is a pity, therefore, that there seems to be a European-wide consensus to sell it as being about economics, business and commerce. The result is that we have lost the attention of the people.

One only has to examine the results of the referendum on the Amsterdam Treaty to note from the level of abstentionism and the scale of the "no" vote that we have a real problem in a democratic sense. It is difficult to account for the high level of the "no" vote on the Amsterdam Treaty given the scale and proportion of that treaty which, in other circumstances, might not be the subject of a referendum at all, yet the people took the opportunity to express that view, including very many fervently committed Europeans. They voted "no" because they do not like the way we do our business. They do not like the fashion in which the Union does its business. They do not like the bureaucracy that goes with it or the decisions being made by the bureaucracy. The entire structure of the decision-making process lends itself to decisions being made behind closed doors and the people rarely being involved.

It is remarkable, when one considers the dimensions of the decision we are making, that there has been so little debate. The debate, in so far as it has taken place, has been left to economists. That is regrettable. The political community has not really engaged in the debate and in selling the significance of this.

The question of leaving the decision to economists is particularly regrettable because we have seen a number of anti-EMU economists lead the debate, similar to the way some other people led the debate on the Amsterdam Treaty as if that treaty were about neutrality. Neutrality struck a chord with a number of Irish people not otherwise engaged. Similarly, the economists who want to push a particular line, notwithstanding their unremarkable record in predicting events up to now, not least the current boom — it is remarkable that was not predicted by an economist; perhaps it might have changed the course or the timing of general elections — know the answers on this question and they are very vocal. By and large there is not a political riposte to that.

There are economists of a certain persuasion who argue that EMU will be our ruination for what seems to be a peculiar reason, namely, that it will stop the Government doing what needs to be done to stop inflation getting out of control. According to this peculiar view, the Government needs to hike interest rates, reduce the growth rate, slow down job creation and, by implication, increase unemployment. I invite those economists who hold this view to stand for election on this platform at the next opportunity. On second thoughts, that might not be such a good idea because I might involve myself in being complicit in a lynching mob because that is the reception they would get from ordinary people.

Mr. Noonan

They could stand for the Progressive Democrats.

Mr. Rabbitte

We should not mention that word in the presence of the only Minister in the House.

Mr. Durkan

With dual experience.

Mr. Rabbitte

In the words of another Minister, we should leave it out.

Mr. Cullen

My roots are deep and firm.

Mr. Rabbitte

I accept that those who are advising against membership of EMU have a point in highlighting domestic inflationary pressures, but the answer to inflation is not a big hike in the mortgage rate, more expensive lending and a generalised slowing down of economic activity. That is the liberal, free market, anti-social way of dealing with inflation.

The other point the anti-EMU economists make is that we need the freedom to control the exchange rate against sterling. They are really saying they do not want to have a strong currency, but keeping our currency down against sterling is itself an inflationary policy. Are we also to have imported inflationary pressures as well as high interest rates and lower growth? This may make some sense to the mind of a peculiar type of economist but it makes no sense in the real world of ordinary, sensible people.

I listened to Deputy Perry make the argument that the Minister should spearhead a county by county awareness campaign designed for small business. I have no objection to that and Forfás would probably say that is already taking place to some extent, but we are losing the argument on the wider significance of what we are doing — going back to Deputy Noonan's opening remarks about the political and historical derivation of this — if we say it is exclusively a matter for businessmen. Unless we can engage the public to some extent in terms of this project, ultimately it could have serious implications for us.

Deputy McDowell raised the question of the Central Bank and expressed the view that it could have serious implications down the road if Irish people got the impression that the leading core economies in Europe were dictating the pace. That is a real fear. After all, we have not had too much to complain about in the past 25 years or so. The average person in the street is sensible enough to know we have done quite well out of the EU but if the indications are that European institutions will dictate our fiscal policy, and we will provide an additional string to the bow of economists here who would want us to roll back on issues like tax reform, many people might take a different view. We have already heard noises to that effect.

We have not heard the Minister comment on the question of the apparent mishandling of our aspirations in respect of the European Central Bank. We do not know what weight the Minister attaches to the outcome. The reason put forward by the Taoiseach is that we did not have candidates offering themselves for these positions, a most unusual phenomenon in Irish society. In any walk of life it is rare not to find candidates. I am sure the Civil Service would blush at the notion that it could be so reticent that nobody of an appropriate calibre offered for the position, but apparently that was the case. We need to hear the Minister's rationale for the fact that of the 23 top managerial posts referred to by Deputy McDowell, Ireland does not feature among them. What is the significance of that in terms of policies that might be pursued in the future and in terms of responsiveness of the institutions to a small country that is at a different point in the business cycle from some of the lead economies? What is the ability and willingness of the institutions to respond to our need? I do not know the significance of having lost out. I do not know what arrangements may have been made behind the scenes in terms of our being enabled to catch up in the years immediately ahead. We seem to be playing in the second division and that is a matter of concern.

I wish to raise a point with the Minister in terms of the chorus that we are heading into an inflationary spiral which will do serious damage to the economy in the medium term. I know the theory of it, but is it heresy to question whether it is absolutely necessary that we should follow interest rates across the eleven? I am not entirely sure why that is obligatory. If there was a widely diverging interest rate here, some of the ten partners might consider it could be used to attract money from other economies and might not look favourably on it. If we have particular difficulties, are at a different point in the business cycle, and are beginning to go in a different inflationary direction from the rest of Europe, why is it essential we should come into line on interest rates immediately and to the same extent? I would like the Minister to address that point.

It seems to be accepted that if we are in a Single Market not only should we ideally have a single currency but we also should accept the same interest rates. I am not entirely sure that is the case. Some damage will be done if the position gets worse between now and the time the currency becomes effective here. There could be serious wobbles during that period and we ought to hear a statement of policy on that.

When I derided a certain economic point of view earlier I did not mean to dismiss the fact that there are inflationary pressures in the economy. Notwithstanding the view of the Minister for Finance, there is no evidence there will be serious cuts in public spending. From what one reads, the Government has been happy to capitulate to the Garda. I do not know where the Minister for Finance stands on that issue, but presumably it has his sanction. I agree with the views expressed by the Taoiseach that the notion of ring-fencing any such development within the public service is nonsense. That cannot be done because there would be implications.

I am not as confident as my other colleagues about the measures in the Bacon report in terms of tackling the extraordinary price spiral in the property market, which is horrific. I am aware of another challenge by a young couple in my constituency who bought a house on 7 January for £99,950 and in the week before St. Patrick's day the builder withdrew from the arrangement and offered them the house at £135,000, an increase of 35 per cent in less than three months. The same houses, which are in Tallaght, are now advertised in the newspapers at £160,000.

Mr. Noonan

Bacon is not working.

Mr. Rabbitte

That is an extraordinary commentary. Similar circumstances arose in Trim and a major case is pending in the courts against a developer there who inflated the price of an entire estate. Gazumping is still going on. Having derided the anti-EMU point of view, I do not mean to dismiss the fact that there are inflationary pressures. I would appreciate the Minister's reply to that matter.

Last night on the Investor Compensation Bill the question of the consumer was discussed. Most of the preparations are designed to bring business up to speed on the transfer to the euro. There is a consumer interest and, if we are politically prudent, there is a definite consumer dimension to this entire issue. Regardless of what the experts think, there is no doubt that in the mind of the consumer the euro will be implemented in terms of rounding up rather than rounding down. It is important some mechanism is put in place to give public assurance on that issue, and that includes banks. The Minister said there will be no question of banks imposing charges for this service, but I will believe that when I see it. Banks would charge for walking through their swing doors if they thought they would get away with it, and all the evidence suggests they have got away with it up to now.

Minister of State at the Department of Finance (Mr. Cullen)

I wish to share my time with Deputy Gormley.

Acting Chairman (Mr. McGrath)

Is that agreed? Agreed.

Mr. Cullen

I commend the Bill to the House. This is the third Bill to come before the House this year containing provisions relating to EMU and the changeover to the euro. It is designed to provide for changes in monetary law and other changes necessary for the introduction of the euro not covered by the Central Bank Act, 1998, or the Finance Act, 1998. While much of the Bill is technical in nature, it will provide additional legal certainty to the markets, in regard to the substitution from 1 January 1999 of EURIBOR, the euro area reference rate, in place of DIBOR, the current standard for the Dublin market, and also in regard to the redenomination of debt. It will also facilitate companies that wish to redenominate their share capital.

The Bill makes a historic change in our currency through law in that section 6 introduces into the Central Bank Act, 1989, a declaration that by virtue of EU Regulation 974/98, from 1 January 1999 the currency of the State is the euro and the Irish pound unit is a sub-division of the euro. I agree with Deputy Rabbitte in terms of the enormity and significance of the change that is taking place in Ireland and Europe in the context of monetary union.

The euro can be used for cashless transactions from 1 January 1999, but the Irish pound can also be used for cashless transactions during the transitional period from 1 January 1999 to 31 December 2001. Cash transactions will remain in Irish pounds, as euro notes and coins will not be available during the transitional period. Euro notes and coins will be put into circulation on 1 January 2002. The EU legal framework provides that national currency notes and coins may remain legal tender for at most six months after that date, up to 30 June 2002 at the latest. Member states may shorten this period by national law. Thus, section 9 confirms that the Minister may, by order, set a date earlier than 30 June 2002 for the withdrawal of legal tender status from Irish pound notes and coins. It is of course too early to set this date now.

In addition to the provisions I have mentioned, the Bill also includes provisions recognising the role of the European Central Bank in regard to the issue of notes and the volume of coins to be issued, and deals with the two imperfections identified by the European Monetary Institute in its March 1998 legal convergence report. Now that Ireland has qualified for the start of EMU on 1 January 1999, it is timely to complete our domestic legislative preparations for it, and the Bill achieves that.

Our other practical preparations for the changeover to the euro are also far advanced. The EMU business awareness campaign being run by Forfás has had a considerable impact, producing timely and useful information for business on the changeover to the euro, and the planning and preparation required to achieve a smooth transition. As the Minister noted, some 35,000 copies of the Forfás information pack for business have been distributed, in addition to more than 80,000 copies of a short leaflet specifically aimed at small and medium size enterprises. The high quality of the Forfás material has been acknowledged here and elsewhere. As regards information for the public, this month's advertising campaign has focused on delivering clear messages to the general public about the changeover to the euro, and includes a leaflet which is being distributed to every household.

An important feature of the Bill is the provision relating to redenomination of debt in section 23. That section governs the arrangements under which bonds and other tradeable debt instruments may be redenominated during the period from 1999 to the beginning of 2002. It also contains certain provisions to make it easier for the non-tradeable debt of State bodies to be redenominated. It is very important that we should be in a position to redenominate our domestic currency debt into the euro as soon as it becomes possible to do so, namely, from the beginning of 1999. This is because Ireland will be a very small issuer in a bond market with a value equivalent to around $3 trillion and we will need to secure our place and reputation within that market. In this regard, it is important that we carry out redenomination promptly and transparently. The NTMA has announced its intention to redenominate at the beginning of 1999 and has just published an explanation of the method it currently proposes to use. This Bill provides that the Minister will set down by order the method to be used by the NTMA and provides for the use of that method by other bond issuers wishing to redenominate during the transition period.

With regard to Irish Government debt issued under the law of other participating member states, the NTMA will keep the question of redenomination under review. If it is in Ireland's best interest to redenominate the debt, it will do so and the provision for a notification in Iris Oifigiúil will ensure the transparency of that procedure.

Section 23(3) is intended to facilitate State bodies who decide to redenominate their non-tradeable debt. The subsection seeks to eliminate the administrative burden which would otherwise arise when such redenomination was carried out, which would involve the State body seeking renewed consent for existing facilities. This subsection waives that requirement, but subject strictly to the limit on borrowing to which consent has already been given.

The EMU Bill marks another important stage in our preparations for EMU and the changeover to the euro. I commend it to the House.

Mr. Gormley

I suspect this will be one of the last opportunities the House will have to debate EMU. Clearly, it is not a subject that excites the media — as we can see from the empty Gallery — or captures the imagination of the public. The reason for this is that the media is now part of the establishment. As the very fine journalist, John Pilger recently stated the establishment is very pro-EMU. The public does not know any better. It became increasingly obvious that there was overwhelming ignorance on matters relating to EMU during the recent debate on the Amsterdam Treaty referendum. People are ignorant because they are not informed. The political establishment has sought deliberately not to inform members of the public and, where necessary, to mislead them on the question of EMU. A vox pop would reveal that the public believes EMU is simply about a single currency that will be convenient when they go on holidays to Torremolinos or to Italy where they will not have to deal with pocketfuls of pesetas or lira. The public does not realise we are dispensing with the exchange rate mechanism and giving up the power to effect interest rates. They do not understand the gravity of the matter. This huge step is unprecedented. Yet, the level of debate shows we are sleep walking in terms of EMU.

During the debate on the Amsterdam Treaty we witnessed blatant dishonesty from the Labour Party, Democratic Left and Fianna Fáil. In fairness to Fine Gael, it was more up front about the European project. It supports a federal Europe and a European army. It makes perfect sense, therefore, that it should support the EMU. However, other parties claim to be opposed to the creation of a federal European superstate, but also support EMU. Fianna Fáil, along with the Gaullists in Europe, have always supported a Europe of the nations, which is a good idea. However, the Minister for Finance must know that EMU will put an end to that notion.

EMU is first and foremost a political project. The Euro federalists hope it will be the glue that will hold together this artificial superstate. Far from bringing harmony and unity to Europe, EMU will create further political tensions which will result in social unrest and upheaval and the emergence of the extreme right wing elements. While the euro might be a political project, it is also an undemocratic one. If there had been a European-wide referendum on the euro, would it have passed? I do not believe it would.

European leaders are beginning to detect a certain level of dissatisfaction among ordinary Europeans who realise we are seeing the creation of a federal superstate. Consequently, M. Jacques Chirac and Mr. Helmet Kohl wrote to Mr. Tony Blair on the eve of the Cardiff summit stating "it cannot be the goal of European policy to establish a central European state". How hypocritical and disingenuous can politicians become? For simply domestic political reasons, Helmet Kohl is now donning Euro sceptic clothing with which he will dispense after the German elections if he is successful, but I do not believe he will be. This is the great architect of the European Union, the man who wants a federal superstate with Germany in the driving seat and who said "a European army and a European police force lie at the end of the road to European union".

We will eventually see a European army and a European police force — a type of European FBI — and the euro is becoming a reality. This is because we want to be up there with the big guys. We believe we have earned respect because of our Celtic tiger economy, but we should not fool ourselves. Klaus-Dieter Kuhbacher, a member of the council of the Bundesbank, recently made disparaging comments about our economy. He said we depended too much on the EU and he did not see us as part of the euro eleven states. He believes Ireland and Luxembourg are insignificant and that there is a club of only nine member states. We were recently overlooked when the members of the European Central Bank were chosen. This shows we are insignificant players. Deputy McDowell commented on this in his contribution.

The economic consequences of membership of EMU without Britain will not be insignificant and they are already becoming apparent. Today I read in the Financial Times that Mr. Eddie George, Governor of the Bank of England, said the British economy was beginning to overheat. If that is the case, our economy must be on fire and we have given away the fire hoses — control of our exchange and interest rates. We hope the fire will burn itself out.

An unprecedented opportunity for Ireland has become a threat. It is important to reflect on how we achieved this economic boom and what gave rise to it. The phenomenon of the Celtic tiger coincided with the independent exchange rate policy we introduced after devaluing because of the currency crisis and leaving the ERM. Prior to that we were tied to sterling at par. It is interesting to note that the people who said we should not devalue are the same people who are now saying we must join EMU, yet in conventional economic terms we have not looked back since we devalued.

This success is also due to the fact that we started to work together in partnership agreements. However, those agreements are under severe strain because of EMU. Deputy Deenihan spoke about the need for wage flexibility. The Governor of the Bundesbank, Hans Tietmeyer, said we will be on our own if we experience an asymmetric shock. We must then make internal adjustments and we will require wage flexibility. What does that mean?

I have read carefully the statements by the Minister for Finance, Deputy McCreevy, about the opt-out clause in the partnership agreements and competitiveness within EMU. If we have problems, does that mean the Minister will go back to the social partners and say we must renegotiate? Wage cuts would be unthinkable. We are currently experiencing inflationary pressures in certain sectors. Members in this House, for example, cannot get secretaries because of the paltry wages being offered. This matter was brought to the attention of the Committee on Procedure and Privileges. It is also difficult to get chefs, while bricklayers earn £800 a week. These are the fruits of the Celtic tiger.

We also see inflationary pressures in house prices. Some Fine Gael Deputies said the Bacon report was not working. I spoke to an economist recently about this issue. Why are we experiencing such pressures in the housing market? EMU has had an influence on the huge increase in house prices. Young couples cannot afford a house. Our house prices are now comparable to those in continental Europe. We are following the European model where people no longer own a house but live in an apartment. We are trying to ignore the fact that EMU has a bearing on this.

During a previous debate on EMU Deputy McDowell said that it was one thing to have monetary union but we could not have fiscal union. In other words, he had grave concerns about tax harmonisation. I do not know how one can have monetary union without fiscal union. It is unprecedented. Are discussions taking place on tax harmonisation in the future? That is of concern to many Deputies and other people.

I do not agree with Deputy Noonan's statement that the preparation for EMU is precise because there were a number of fudges. As this was a political project, we fudged the criteria to allow people to join. We must be extremely careful as we are in a straitjacket and this will become apparent on budget day. We have already heard the warnings of Professor Brendan Walsh. There would be an outcry if the tax concessions were not delivered on.

Can we still go to an ECOFIN summit and say we want to defer membership for two years to get things in order? I was told by an economist today that if we did that there would be a sigh of relief from many people. We should consider that because it is like a simmering pot which we cannot sustain any longer. We must defer entry because it is absolute folly to go into EMU without Britain.

Mr. Durkan

Unlike the last speaker and a number of other speakers, I and my party are enthusiastic supporters of EMU. There will always be swings and roundabouts in any transition. We must protect ourselves and our consumers from being ripped off by someone who decides in the transition period, as Deputy Rabbitte said, to round up prices instead of rounding them down. Prices should be rounded down because there will be savings.

Economists and financial experts will decry EMU because they have a vested interest. Their influence is being removed and they will not be able to get involved to the same extent as they did. Deputy Gormley mentioned the economist who said there would be a huge sigh of relief across Europe if we deferred our membership of EMU. That would not be the case.

Mr. Gormley

A huge sigh of relief in Ireland.

Mr. Durkan

I do not know his political allegiance or whether he is a politician but as an economist I would have serious doubts about where he is going. When I was about nine or ten years old I received $10 from an uncle in the United States. That was a lot of money in those days. One Irish pound could buy three US dollars at that time.

Mr. Cullen

A guinea.

Mr. Durkan

Today the exchange rate is 1.38. If there is a lesson anywhere in relation to EMU that is it. The one dollar bill which was in circulation in the United States 35 or 40 years ago is still in circulation and a legal tender note while our beloved pound has long since gone and been replaced by a coin. The UK is contemplating replacing other notes with coins. The lesson to be learned is that if there is a multiplicity of currencies with a multiplicity of exchanges, the economies in the relevant countries will pay the piper. We must ensure we do not give carte blanche to the European Central Bank or total control, that was never the intention. There are merits in taking some decisions out of the political arena. For example, in the past 40 years how many times has economic development been stunted by the stopgo system of the political situation? After election all spending ceased; in the run-up to election all spending started. How many times has that seriously affected investment in our economy in the past 40 years? Continuity should flow from EMU. I am not an economist but I know that if we do not plan over a reasonable period we will not get the economic results. If we want proof of this we have only to go back to the 1960s and the programmes for economic recovery of Seán Lemass, which were all based on planning and certain projections over a specified period. If that is not done one does not get results. The effect of those plans was to eliminate some of the doubt so that those who were involved in investing their money in jobs, industry and so on had some indication on where the thinking was leading and it was not likely to be interrupted by a political whim, which is where the danger is involved. That is not to say we should hand over all authority to a European Central Bank or a central bank in any country. There must be a certain amount of accountability, that is important for the future.

Some years ago the chief of the German Central Bank was unfortunate in some of the remarks he made to the effect that the bank ruled all. The bank does not rule all. There are political and human considerations. That is not to say we should have such a flexible system that it can be changed overnight to meet the individual political situations and requirements of each and every country.

Deputy Gormley mentioned renegotiation. That is a very dangerous road to follow for the simple reason that if you allow renegotiation for one country today you will have to do the same for another country tomorrow. When the precedent is set one becomes a hostage to fortune. That is not the way to go about it and should not be talked about. If there is one aspect which is seriously meritorious about the whole concept of EMU it is the concept that everybody moves forward at the one pace. That is not to assume for one moment that there will be considerations in respect of individual countries. The European Central Bank and those in control must be responsive to the needs of all Europeans, not one group, or one country at a particular time.

Chancellor Helmut Kohl has been the engine driving the European movement for several years. There are those who will decry that, for various reasons. I hope this will continue and that he will continue in that vein. If not, the alternatives are not those we would readily contemplate. It is not true to say that whether we join EMU, whether we integrate or whether we continue in the same vein as in the past number of years that Europe will be all right. There are disruptive forces in the field but, unlike my colleague, Deputy Gormley, the way to resolve those problems is through European integration, including economic and monetary union. That is very important. Deputy Gormley referred to those who said no to devaluation in 1992-3. My party leader said yes, agreed to devaluation and we are now saying yes to EMU. What the Deputy has said is true.

Mr. Gormley

Is the Deputy sure about that?

Mr. Durkan

I am absolutely certain. My party leader was the first person to call for devaluation when the country dithered and nobody knew which way to go but it was the right decision. Not everybody since then has said it was a brilliant idea. We owe you for it.

Mr. Gormley

The Deputy has something in common with the Greens.

Mr. Durkan

There is always something we have in common with each other, it is just a matter of sorting it out. I think we will eventually go down the road of tax harmonisation, but not for some time. There has to be a gradual process. Something which will affect economic and monetary union and our economic and political cohesive approach will be the way in which the political system works in the respective countries. For instance, we do not have elections on the same day, there are arguments for and against that. There is merit in having them at different times and during different periods of Government throughout the Union for the reasons already given. EMU will deter political parties and governments from entering into the bargaining, the Dutch option position before elections. Each political party, large or small, will have to have regard to the criteria laid down and the direction in which we are going and will have to measure up to it. I am not so sure it will be a good idea in future for newspapers to publish the day before the election that it is payback time or some similar banner headline. Those people will have to have regard to the criteria laid down by EMU.

It is not only in recent times that newspapers began to enter that arena. I will always remember 1977 which has certain similarities with the present day in relation to inflation. A few days before the 1977 general election there were banner headlines in a major national newspaper which said "Banks say Fianna Fáil deal is on". That was very encouraging for the party in Opposition but it had little regard for the good of the country in general.

Mr. Haughey

That was a long time ago.

Mr. Durkan

Within two years of the Fianna Fáil party going into office at that time inflation rose to 21-22 per cent, interest rates increased to 21-22 per cent, all the ingredients for catastrophe which we spent the next ten years paying for. I hope we will not go down that road again.

I refer to a matter raised by Deputy Rabbitte. A number of people are concerned at the inflationary pressures in the economy, not because of EMU but because of internal decisions made here. The single biggest factor governing the lives of most people here is their right to own a home. There are people who, a year ago, were able to bid £60,000-£70,000 for a house. They now must bid up to £140,000 or £150,000. That means that a young Garda, doctor, nurse or teacher, not to mention a person in the wider Civil Service, is not able to buy a home. That is a serious matter. It has not yet percolated through the respective Government ministries. If something is not done about it soon, there will be inflation of the order of inflation in 1977 and thereafter. If the Members opposite think I am codding, they should visit some of the constituencies where this is happening. I have never had more young people attend my clinics at weekends crying out for houses. The Government's job is to identify the potential for these things to happen and to find out how it can resolve problems. There are ways and means of doing so. One factor about which nobody seems to have thought is that in the past three years an extra 40,000 people who have jobs are in the marketplace looking for houses, services and goods.

Members will also recall that over the past ten years we have all become tired of listening to experts telling us that most schools would close because there would be smaller families. The 2.4 children average would fall to 1.8, 1.7, etc., and eventually there would be schools to burn. Governments went along with that because it meant they did not have to invest in education but they were wrong. Nobody has come forward now to say their projections were wrong, the schools are still full and there is still a high pupil-teacher ratio. In five or ten years they will be shown to be even more wrong because demand will become greater. It appears that the economy will continue to prosper. We should not be surprised at that. For a long time the economy was in a bad state and was dependent on one neighbouring state. That is no longer the case and that is an illustration of the benefits of dealing in the wider arena with more competitors in a more open market.

Ireland can benefit a great deal from EMU and all the other aspects of European integration to date but there is still a long way to go. The people have not yet tested the full strength of the economy. It will unfold in time. I will be disappointed, if in four or five years Members still here will not be able to look back and say joining EMU was a great decision.

I do not wish to compare too often or readily with the US. However, there is something to be said for a continent where about 260 million people enjoy the same currency. They do not have exchange rates. They need not pay somebody to change money to another currency or coin. They have enjoyed that facility for a long time. Their currency has proven by its durability that there must be some merit in it. How could the system continue in Ireland or in the other member states where if one took £100 pounds, travelled the 15 member states and changed the currency at each airport, one would end up with nothing? Obviously there is a huge cost to industry in that area. Deputy Gormley referred to the insignificance of the smaller countries but I do not accept that. The smaller countries have far greater influence and strength in the European Union within EMU than they could ever have as individual players in the wide, open and often rough economic playing fields.

Mr. Collins

I wish to share my time with Deputy Haughey.

Acting Chairman (Mr. McGrath)

Is that agreed? Agreed.

Mr. Collins

The decisions which were taken by the European leaders on 1 May last have finally given the green light to the introduction of a single European currency in 11 member states on 1 January 1999.

Let us be clear and unequivocal about the magnitude of the changes which will be brought about by the new euro currency. Eleven countries will sign up to this new currency from its inception, with four EU member states remaining outside the euro zone. I will refer later to the likely consequences for Ireland of Britain remaining outside the process of economic and monetary union for the time being. It is important that we detail the timeframe for the introduction of a new European single currency for covering a population of more than 290 million people. On 1 January next, a new European monetary policy will begin under the auspices of the European Central Bank headed up by a Dutchman, Mr. Kim Duisenberg. The power of the new European Central Bank must not be underestimated. This bank will control the setting of interest rates within the euro zone, taking away this power from national central banks. I will refer to the effects of this later.

Between 1 January 1999 and 1 January 2002, the euro currency will be in existence in non-cash format only. This means that cheques, as well as the processing of bank drafts and bank transfers, can be written in the euro currency. On 1 January 2002, the euro currency will come into existence in cash format and euro notes and coins will come into daily circulation. Between 1 January 2002 and 1 July 2002, national currencies will be in circulation with the euro currency. On 1 July 2002, all tender relating to national currencies will be withdrawn leaving only the euro currency in operation.

I welcome the recent setting up of the National Changeover Board which is set to advise the Government on the contentious aspects of introducing the new currency. I strongly urge the National Changeover Board to ensure that comprehensive and widespread information campaigns are held so that people are aware of the real value of the euro currency compared to the pound. We are fortunate in Ireland from one perspective; we have recent experience of changing currency when decimalisation was introduced. We must learn from the mistakes of that time and ensure that such errors do not recur. Information through dual pricing campaigns is the key to guaranteeing that no confusion arise in the minds of people who are set to use the new currency and this must particularly be the case with regard to older people.

I have been in business for many years and I can only urge businesses to start the process of preparing for the new euro currency now. Economic and monetary union means that companies must review all their internal operations to ensure a smooth transition to the new currency. All aspects of one's business operations must be reviewed from the accounting, purchasing, marketing, production management and training areas.

In assessing how accounting procedures for a company will change as a result of the new euro currency, the following matters would arise: the choice of changeover times for accounting systems; the need to interface with suppliers and customers; treasury management issues; banking services requirements; the implications of the changeover for training; budget planning for the changeover; and cash handling operations, including the preparation of the new euro notes and coins. The Government must play its part in informing Irish business of these likely changes. Other organisations such as IBEC, Forbairt and local chambers of commerce must continue their good work in ensuring that businesses are fully prepared for the new European currency.

From an Irish perspective, it is important that we join the new European currency at the earliest opportunity. The Economic and Social Research Institute came to the same conclusion when commissioned to carry out an in-depth study of the likely sectoral impacts of the single European currency in Ireland, even if Britain opted out of EMU. The ESRI concluded that it was in Ireland's medium to long-term interests to join the single currency at the earliest opportunity. It stated that as an exporting country it would be foolish not to take advantage of a European trading zone comprising 290 million people where there will be a complete elimination of transaction costs for export and import of goods and services as a result of the new currency arrangements.

The arrival of the new currency will result in a reduction in interest rates which will be good news for homeowners and people involved in small and medium sized companies. Lower interests are good news in general for the economy. However, we must ensure that prices remain stable so we can guarantee that our national economy remains competitive and that inflation does not begin to venture into its workings. The new European Central Bank will set interest rates in the euro zone and it will not change that rate for Ireland if inflation begins to creep into the economy. For this reason we must be doubly careful to continue to run the economy in an extremely sensible manner.

Mr. Haughey

I send my sincere congratulations to Mr. Gerard Collins, MEP, on his election as Vice-President of the European Parliament.

I welcome the introduction of the Economic and Monetary Union Bill, 1998, another landmark in the process of European integration. It gives us an opportunity to welcome Ireland's participation in EMU and the single currency. Credit is due to the Government and its predecessors for not seeking, as did the UK, an opt-out clause from the provisions of the Maastricht Treaty relating to EMU and for ensuring that we met the Maastricht conversion criteria and qualified for membership of this exciting project.

EMU will involve 11 countries, a population of 300 million people, the second strongest world currency next to the US dollar in the second largest economy in the world. As other Members stated, the project is politically driven but it makes good economic sense. I agree with Deputy Rabbitte that the Minister should have shown a greater sense of history in his contribution. His speech, like the Bill, was extremely technical in nature and I believe we have a duty to appreciate the historic nature of events surrounding EMU and the single currency. Many benefits will accrue from membership of EMU. For example, there will be a reduction in interest and inflation rates in the long term, an elimination of exchange risks in trading with Europe, a reduction in foreign exchange transaction costs, easier comparability of market prices across Europe, dealings with end customers on the Continent will be simplified, etc.

I take this opportunity to comment on the recent vote on the Amsterdam Treaty. Much has been said about the high level of the "no" vote in the referendum on the treaty. In 1972, 83 per cent voted in favour of EEC membership; in 1987, this figure decreased to 70 per cent in respect of the Single European Act; in 1992, it decreased further to 69 per cent in favour of the Maastricht Treaty; and in 1998, it decreased again to 62 per cent in respect of the Amsterdam Treaty. The political establishment in Ireland and the EU must assess this trend. However, I suggest there is no need to become hysterical about it. One thing is clear: the Irish people do not wish to become involved in a military alliance. There is also no support for federalism and any further European integration will have to be clearly justified.

In my opinion, the people believed they did not receive enough information in respect of the issues surrounding the Amsterdam Treaty. The fact that it is a complex and legalistic document did not help. Traditionally, the Irish have seen the EU as an endless source of funds and the begging bowl image was predominant. However, new-found prosperity and confidence have resulted in our casting aside our national inferiority complex. Europe is no longer perceived merely as a gravy train. Voters want to examine the issues in greater detail, they expect involvement and accountability and they do not want the EU to be remote or elitist.

The challenge for Members will be to raise interest in European affairs and ensure that all the issues are adequately debated. The discussion can no longer be confined to the amount of "dosh" we receive from the European Union. Much as I regret Deputy Gormley's doom and gloom comments, I accept that he is contributing to a much needed national debate on European issues. If one thing emerged from the vote on the Amsterdam Treaty it is that people want to debate the issues and they require full information.

With regard to the European Central Bank and the new role of the Governor of the Central Bank of Ireland, will the Governor be a free agent at European level in respect of his decisions and to whom will he accountable? I do not believe he will be accountable to ECOFIN. We must consider recent decisions regarding the managerial team of the European Central Bank and the failure to have a senior Irish professional appointed to it. Members of the public want these issues to be addressed and they want to ensure that the European Central Bank is accountable and transparent.

What will be the role of the commercial banks in this process and what criteria will be used vis-à -vis the conversion of Irish punts to the euro and vice versa? We have been informed that the conversion will be carried out free of charge. However, cynical members of the public are seeking guarantees in that regard. They are also eager to discover how the banks intend to recoup the money spent on this process. Will they increase charges elsewhere in their system to compensate? Most people are of the opinion that the banks are only interested in profit and they do not believe that these services will be provided free of charge. Assurances are required in that regard. Consumers are also seeking assurances that they will not be ripped off when euro notes and coins become available in 2002 as they were when decimalisation was introduced. Information must be provided in respect of the methods that will be used to ensure that consumers are not ripped off.

With regard to the withdrawal of our existing currency in 2002, some time ago serious complaints were made about the state of Irish banknotes, particularly the £5 note, which tends to become extremely grubby and unhygienic.

Mr. Durkan

It does not go very far either.

Mr. Haughey

The situation could become worse if inflation continues to rise. As the year 2002 approaches, I hope the Central Bank will not wait to recall these banknotes and that, despite the deadline for the introduction of euro notes and coins, new notes will be printed. We should commemorate 1 January 1999 and 1 January 2002. It is a politically driven and historic occasion which should be commemorated in an appropriate way. The public needs to be fully engaged in the process of the changeover. We do not want members of the public to say they knew nothing about it. An important public information programme is to get under way and I am aware agencies are in place to implement it. We must ensure the public supports passing this legislation.

Mr. M. Higgins

I can only offer a preface to what I intend to say in more detail on the next available opportunity to debate the economy. I profoundly disagree with Deputy Durkan's view that there are matters which should be removed from the realm of the political and given a neutral economic construction. That is the root of the considerable public disquiet on the debate on the Amsterdam Treaty, where people were of the view there was a considerable amount of bad faith. For example, in the two previous treaties which established the market and removed the impediments to a free market people thought that, with the removal of State inhibitions to the free market place, the problems of concentration of ownership and oligopoly, both internationally and economically, would be addressed. We all know the direction on that has been put on the back burner. People have asked me repeatedly if this is what they voted for.

The root of this is a discourse that suggests the problems in the economy are due to political activity. Yet, we are debating a Bill in Parliament in a short period. It is profoundly anti-democratic for those who argue that there should, for example, be statutory or constitutional limits on growth. I read this view in the most recent article in the Irish Banking Review by Gerry Boyle who wrongly claims there were pressures on the last Government which made it impossible to curtail spending.

As someone who taught economics 30 years ago I am aware there is nothing wrong with economics as a science. The problem is with the version of economics. Some economists who contribute to the international world of economics, led by people like John Kenneth Galbraith, speak of how economic growth can be enhanced by changes in mechanisms of redistribution and that redistribution can create rather than inhibit growth. Yet, that discourse never penetrates what is read here.

I could only describe what Professor Brendan Walsh wrote recently, which was later corrected, as the view of the Dublin school of economics and supported by those like Moore McDowell, who refers to the ordinary citizen as Joe Sixpack. While it could perhaps be misconstrued unfairly it would not be too wrong to say the argument built around the wage aspirations of building workers and those who have not participated in growth is that when the largest pigs have been to the trough there must not be anything left for the piglets.

Some tax reforms have been regressive in character and widened the gaps in income and in participation in society. It is monstrous to suggest that such political considerations, which might reflect democratically the feelings of the people in Ireland or Europe, should be removed and handed over to a neutral body. The assumption, based on a fallacy as poverty stricken intellectually as it is unsupported in the theoretical literature in economics, is that the economy is a self regulating mechanism capable of being over heated or cooled down by sets of measures which are not politically accountable. This is a patent distortion of the work of serious international economists and is theoretically shabby.

For this reason I will strongly resist suggestions that politicians do anything other than operate responsibly. If, for example, people in the political process from whichever side of the House take decisions on public expenditure they are accountable for it. Equally with regard to management. However, the suggestion that all one needs to do to solve the problems or to cure an inflationary surge in the economy is to remove the political input is as ignorant as it is undemocratic. People are worried about putting a frame of accountability around the new central bank in Europe. Perhaps the Minister may address that in his reply.

Minister for Finance (Mr. McCreevy)

I thank Deputies for their contributions and I look forward to further discussions on the Bill on Committee Stage where a number of the issues raised will perhaps be better addressed. Deputies Rabbitte and Haughey suggested my speech should have mentioned more of the history and politics of the Bill. EMU was debated in this House and in the Seanad in early April and during deliberations on the Central Bank Bill, 1998, last March. In addition there have been a number of other debates on economic and monetary union.

Deputy Noonan asked about the length of the period in which the dual circulation of the Irish pound and the euro would last. The legal framework provides that it can last for at most six months from 1 January to 30 June 2002, but that member states may shorten it. It is too early to set a date, but section 9 provides for an early operative date to be set by the Minister, by order. However, it is likely that the date set will be a good deal earlier than 30 June 2002 since the main purpose of this period is to facilitate the withdrawal of Irish pound notes and coins. In addition, other countries are looking at the question of shortening the six months period.

Deputy Noonan suggested that supermarkets should be used to sweep up existing Irish notes and coins. A similar exercise took place in the conversion to decimalisation. The Bill gives the Minister the power to at least leave the option open in this regard. The job in Ireland will not be as big as in some of the larger countries, which is why the six months period was provided, even though it will be a major operation.

Deputy Noonan also raised the question of the availability of credit cards in euros and whether tourists would be able to use them abroad. Credit cards are run by international organisations rather than by national ones. The extent to which they will be available in euros and the timing of that availability will presumably be driven by commercial considerations, especially with regard to the likely extent of demand. When they are available they will presumably be usable anywhere in the same way as credit cards. The Deputy may be aware of a recent newspaper report of an Irish based company which claims to have developed the first euro compliant credit card software to the standards of one of the big credit card companies.

I agree with Deputy Perry's emphasis on the importance of communicating information on the euro to schools. I confirm my Department is working with the Department of Education and Science on the development of a suitable programme.

The question of whether there will be a national face or feature on euro banknotes is, under the treaty, a matter for the European Central Bank. My understanding is that euro banknotes will not have any national aspect. The euro coins will have one common face and one with a national symbol. I have already announced that the national side of euro coins issued here will show the 12 stars of the EU flag, the year of issue, the harp and the word "Éire".

Deputy Noonan asked about the switch between domestic and foreign currency debt within the Irish national debt and how the balance sheet would appear. At present 27 per cent of our debt is denominated in currencies other than the Irish pound. The precise breakdown constantly changes, but around half of that 27 per cent is denominated in the currencies of participating member states. Our debt denominated in the currencies of those participating states will become euro debt after 1 January 1999, although still denominated in deutschemark or French franc denominations of the euro. Consequently, from 1999 foreign exchange risk will no longer arise on this debt. The reduction in foreign currency exposure will be a welcome development.

Deputy Noonan also raised the question about the share capital structure of companies. I can confirm that during the transitional period renominalisation of company share capital is optional. The 10 per cent limit mentioned by Deputy Noonan refers to the extent to which a company can adjust its capital when renominalising the nominal par value of shares pursuant to section 26(4)(a). In other words, the total capital of the company effectively remains the same, but it will now be split between share capital and a capital conversion reserve fund. A 10 per cent limit on the size of the reserve fund is a requirement of the second company law directive.

Deputy Noonan also asked when businesses would be obliged to accept settlement in euro. There is no general obligation in law to accept payment in any form other than in legal notes and coins. Thus, businesses will be obliged to accept payment in euro notes and coins once they become available on 1 January 2002. During the transitional period banks will automatically convert payment in euro or in Irish pounds to the currency of the account. I dealt with that in my Second Stage speech. Banks will not charge for the conversion. In other words, the transaction charge, if there is one, will be the same whether the transaction involves a conversion from the euro into Irish pounds or vice versa.

Deputy Noonan also raised the question of dual pricing, about which the European Commission issued a recommendation in April. The Commission favours a voluntary code of conduct in this area. The Director of Consumer Affairs recently indicated that he agreed with the Commission's view. The food, drink and tobacco confederation of IBEC has published dual pricing guidelines for the grocery trade which the Office of the Director of Consumer Affairs was involved in drawing up. In addition, the Department of Enterprise, Trade and Employment is working with the Office of the Director of Consumer Affairs on the preparation of a national code of practice on dual pricing. There will be full consultation with the consumer and other interests to ensure that code has the maximum support of consumers and retailers.

As regards any attempt to use the changeover to mass prices, I agree with Deputy Noonan that a very careful campaign of information for consumers will be needed to keep them well informed about the changeover. There will be three years for consumers to get used to the idea of the euro before euro notes and coins come into use on 1 January 2002.

Retailers know they will have to maintain consumer confidence during the changeover and consumers will be extra vigilant at that time. Wise retailers will be anxious to demonstrate to their customers that they will implement the changeover fairly and will make a virtue of the fact.

Deputy Noonan referred to an article by Dr. Garret FitzGerald which I referred to on a previous occasion. As I said previously, we can neither contradict nor agree with him on that matter. He may be right or wrong, but I agree with Deputy Noonan that we all believe that is what happened then and the customer believes it also. We should leave it for historians to work out what happened, but I agree with Deputy Noonan regarding the perception.

Deputies Deenihan and Perry mentioned the Forfás business awareness campaign. There is a consultative committee which advises the campaign and the committee has representatives from more than 30 organisations including a number dealing with small businesses. Organisations representing small businesses are very active in distributing the Forfás material to their members and in promoting knowledge of EMU and the euro in other ways. It is not only Forfás and the representative bodies which are telling companies about the euro, the banks are also actively doing that. Forfás sent out more than 80,000 copies of a short leaflet to small businesses. I also mentioned the Forfás campaign leaflet which will be sent to all households. There is plenty of information available and small businesses which have not yet begun to prepare for this changeover should do so now.

Deputy Deenihan suggested that there should be a fund to help retailers manage the changeover. I referred to this in a reply to parliamentary questions and to questions from the media post ECOFIN Councils. I have no plan to provide special help for businesses to make the changeover and, as far as I am aware, neither has any of other ten countries in the euro eleven nor is it their intention to so do. Forfás will launch a leaflet especially for retailers in the coming weeks. The leaflet was drawn up in consultation with the Forfás retailers group which includes representatives from a wide range of retail groups. Forfás will also publish a document on information technology in the coming weeks.

Deputy Rabbitte queried whether interest rates must converge. It is true that the precise timing of interest rates convergence before 1 January 1999 remains to be determined, but there is no question of any significant interest rate differentials remaining after 1 January 1999. If depositors in the wholesale banking market were to seek significantly higher rates here, borrowers would go elsewhere to borrow and could do so without any exchange rate risk or legislative constraints. The rate at which the Central Bank will make funds available here will be determined by European Central Bank guidance. A single interest rate is an integral part of a single currency. There will be no mechanism for sustaining significant differentials in a single currency area.

Deputy McDowell referred to speculation that the euro bond market will not constitute a friendly environment for Ireland to issue bonds. It is true that the NTMA faces a challenge in seeking to issue Irish bonds into this large bond market, but we can anticipate many substantial advantages for Ireland in that bond market as well as certain difficulties. One of the main advantages accruing to us in anticipation of monetary union has been the convergence of Irish bond yields towards German bond yields. This has already provided substantial savings for the Exchequer in terms of its debt servicing cost. Those benefits are being reinforced by votes of confidence in Ireland by the credit rating agencies which have repeatedly improved our credit rating in response to our strong growth performance.

Regarding the difficulties for any small issuer in this market, we should benefit greatly from having set up the NTMA in 1990. The NTMA has had the opportunity to build up significant expertise in the marketing of Ireland's debt and it is working actively to ensure that the large European financial institutions are fully aware of the attractiveness of Irish bonds. It has already begun the process of marketing our bonds and developing the various technical features which will make them competitive.

Deputy McDowell asked if cheques in euro will be accepted abroad. Acceptance of cheques is a matter for the person accepting them. The fact that a cheque is in euro is unlikely to change other aspects of a retailer's willingness to accept it. For example, one consideration is whether he knows the person presenting the cheque. There is no euro-wide clearing system for retail cheques. People travelling abroad would be well advised to consider other options for making payments and getting cash abroad.

Several Deputies raised the question of sterling. Speculating about sterling is like speculating about the Irish weather. It is impossible to know from one week to the next what will happen. At some time in every decade for the past 50 years sterling has devalued. An example of what has happened sterling in the past six months should teach people how difficult it is to speculate about it. The value of sterling to the deutschemark increased from DM 2.17 in l995 to DM 3.09 or DM 3.10 a few months ago, but in the past few weeks has fallen fairly steadily to under DM 2.90. In the past ten days it has risen in value and this evening it is equivalent to DM 2.97. Consequently the value of sterling to the Irish punt has fallen and increased. There is no point speculating about sterling; we will have to take what happens on the chin. Most people, including the Governor of the Bank of England, would accept sterling's equilibrium rate and that it would have to fall a long way before it could be regarded as presenting an economic shock. However, I do not intend to speculate on sterling. There are other issues which I have not been able to deal with due to time constraints, but I will deal with them further on Committee Stage next week. I thank Deputies for their contributions.

Question put and agreed to.