Trevor Sargent
Question:79 Mr. Sargent asked the Minister for Finance his views on the recent appreciation of the euro against sterling and the dollar; and if this rise carries particular risks for the economy at this stage. [14669/03]
Written Answers. - Currency Strength.
Joan Burton
Question:108 Ms Burton asked the Minister for Finance his Department's assessment of the implications for the economy of the increase in the value of the euro against the dollar and sterling; and if he will make a statement on the matter. [14629/03]
I propose to take Questions Nos. 79 and 108 together.
The euro is currently trading higher against the US dollar and sterling than at the same time last year. The appreciation of the euro affects the economy in a number of different ways.
The main negative effect of a stronger euro is to make Irish exports less competitive on world markets. This occurs as exports to non-euro areas become relatively more expensive, while at the same time imports from these areas become relatively less expensive. Also, firms competing with US and UK firms in third country markets will experience competitiveness problems. In addition, by diminishing the competitiveness of the euro area, it lessens demand for Irish goods and services in the euro area. As a significant proportion of Ireland's trade is with non-EU countries such as the UK and the US, this recent rise in the euro against sterling and the dollar must be a cause for concern.
That is why competitiveness is a priority for this Government. We must remain vigilant to the risks to our competitiveness, such as wage and price inflation, otherwise jobs will be at risk.
On the positive side, a stronger euro lowers inflation by reducing import prices and reduces oil prices, as oil is invoiced in US dollars.