In relation to the financial services sector, the 1996. ESRI report entitled The Economic Implications for Ireland of EMU concluded that this sector will have to meet significant, non-recurring, conversion costs with the introduction of the euro. The report also concluded that this sector will suffer the ongoing loss of a proportion of its foreign exchange business, which, of course, is the counterpart of the transaction cost savings of other sectors. The report pointed out that the losses arising from a reduction in the size of the foreign exchange market would be reduced by a UK decision not to join EMU from the outset. The report also considered that, assuming economic activity generally increases as a result of the single currency, much of the losses could be expected to be offset by the resultant increase in business in the financial services sector so that eventually the net change in employment should be relatively small.
EMU will significantly enhance the size and liquidity of the financial markets and facilitate the completion of the internal market in the financial sector. The financial sector will be in the front line of the changes arising from the introduction of the single currency. An efficient financial sector is vital not only to secure its own future growth but also to transmit the full benefits of the single currency to the economy generally. The efficiency of the financial sector is a crucial component in the competitiveness of the Irish economy.
The primary macroeconomic objective of the Government is the continuation of sustained economic and employment growth supported by social partnership, low inflation and prudent budgetary policies. This is essential to ensure Ireland's successful participation in stage 3 of EMI and is critical to a continuation of economic and social progress. Such stability-oriented policies will provide a sound footing for all sectors of the economy, including the financial services sector, to meet the challenges and take advantage of the opportunities arising from the introduction of the euro in about two weeks time.
With particular regard to the International Financial Services Centre, the IFSC Clearing House Group, a working group under the aegis of the Taoiseach's Department, and made up of private and public sector representatives, including representatives from my Department, is currently preparing a strategy for the development of the international financial services industry in Ireland.