John Gormley
Question:42 Mr. Gormley asked the Minister for Finance his views on the likely effects on the economy of the appreciation of the euro. [30073/03]
Written Answers. - Economic Competitiveness.
The euro is trading higher against the US dollar and sterling than at any time since it was introduced in January 2002. 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 markets outside the euro zone will experience competitiveness problems. The reduced competitiveness of the euro area lessens demand for Irish goods and services.
A significant proportion of Ireland's trade is with non-EU countries, such as the United Kingdom and the United States. The recent rise in the euro against sterling and the dollar must be a cause for concern. In my Budget Statement I specifically highlighted Ireland's vulnerability to sharp falls in the US dollar exchange rate against the euro. That is why competitiveness is a priority for the Government. We must remain vigilant to the risks to our competitiveness, such as wage and price inflation. If not, 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.
Question No. 43 answered with Question No. 18.