Thursday, 12 February 2004

Questions (121)

John Bruton

Question:

117 Mr. J. Bruton asked the Minister for Finance if he will make a statement on the implications for Irish business, exports and inward investment of the rise in the euro relative to the dollar; his views on the reason this currency adjustment is taking place; and whether the global imbalances underlying it are likely to be rectified in the medium term. [4395/04]

View answer

Written answers (Question to Minister for Finance)

As Minister for Finance, I have not commented in the past on the euro exchange rate and I do not now propose to make any specific comment on it.

In terms of the impact on the Irish economy, the recent appreciation of the euro against the dollar, if sustained, may affect our capacity to achieve the growth rates projected in the budget. However, it is worth noting that the very limited movement in the euro and sterling exchange rate would tend to mitigate some of the potentially negative effects of an appreciation of the euro on the Irish economy.

The euro-dollar appreciation has a number of impacts. On the positive side, it lowers inflation by reducing the cost of imports priced in dollars. On the negative side, it reduces the competitiveness of Irish firms exporting to non-euro and sterling countries and demand for Irish goods in the euro area. That is why competitiveness is a priority for this Government. We must remain vigilant to the risks to our competitiveness, such as domestic wage and price inflation, otherwise jobs will be at risk.