Skip to main content
Normal View

Dáil Éireann debate -
Thursday, 17 Dec 1998

Vol. 498 No. 6

Written Answers - Financial Services Sector.

Bernard J. Durkan

Question:

35 Mr. Durkan asked the Minister for Finance the strategy or strategies, if any, he proposes to ensure the continued success in the financial services sector after the introduction of the euro and in view of the United Kingdom remaining outside the EMU; and if he will make a statement on the matter. [28138/98]

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.

This strategy, building on the success of the IFSC, will focus on the need to maximise the level of sustainable economic activity and employment in international financial services in Ireland. Steps have already been taken in this direction, of course, with the decision made by the Government to apply into the future a single 12.5 per cent rate of corporation tax on company profits, generally, in place of preferential tax regimes such as the IFS which will come to an end in a few years time. Other issues which the strategy being developed will address include: measures necessary to further enhance the competitiveness of international financial services activities in Ireland; the future marketing and promotion of the sector; measures to ensure a continued supply of skilled employees for financial service companies; the implications of the introduction of the euro; new business opportunities based around the existing level of financial services activity in the IFSC, and the future location of international financial services companies and the provision of infrastructure for the continued growth of the IFSC.
In short, appropriate structural policies for the development of the competitiveness of our economy, as well as prudent budgetary and incomes policies will be the key to ensuring that we cope successfully with the challenges of EMU and take maximum advantage of the new opportunities which will emerge.
Top
Share