Dáil Éireann Debate, Tuesday - 2 February 2010
256 Deputy Thomas P. Broughan asked the Minister for Finance if his Department has carried out any contingency studies or cost benefit analysis on any possible future suspension of Ireland’s euro membership in view of the ongoing difficulties for indigenous exports presented by the strong euro; and if he will make a statement on the matter. [5157/10]
View answer257 Deputy Thomas P. Broughan asked the Minister for Finance if the recent cuts in wages and benefits, the rise in unemployment in domestic industry and the thousands of households in negative equity have prompted his Department to conduct a review of all aspects of Ireland’s membership of the Eurozone in the short to medium term; and if he will make a statement on the matter. [5158/10]
View answerI propose to take Questions Nos. 256 and 257 together.
In the recent Lisbon Treaty referendum the Irish people reaffirmed our place at the heart of Europe. The Treaty sets out the conditions necessary for participation in the euro area, and therefore Ireland's membership of the Eurozone is not in question.
Furthermore, our membership of the European Union and the Eurozone in particular has played a vital role in our response to the current financial crisis. Thanks to the protection of being in a large monetary union, Ireland's currency has not been vulnerable to investor sentiment, as was the case in the early 1990s. Irish financial institutions have also been able to access the European Central Bank's substantial liquidity facilities. The benefits arising from membership of the Eurozone are; lower transaction costs, elimination of exchange rate risk with other euro area countries, as well as lower interest rates and increased price transparency and competition. The importance of these benefits are illustrated by the desire of many of those countries still outside the euro area to join.
258 Deputy Thomas P. Broughan asked the Minister for Finance if he has examined recent proposals from economists for a dual currency system, including the euro, for the Eurozone states which have suffered severe economic shocks in the past two years and which reportedly need transitional monetary policy arrangements to fairly restructure their economies; and if he will make a statement on the matter. [5159/10]
View answerI am aware of the proposals which have been made by some economists recently.
As a member of the eurozone Ireland has benefited greatly over the last decade or so from being part of a large currency area. That said, there is no doubt that membership does mean adjusting to severe economic shocks must be done through improvements to our competitiveness and productivity. Clearly this involves internal adjustment through reducing prices and other costs as well as by enhancing productivity in the economy. I am encouraged that these required adjustments appear to be underway and I expect that we will see the benefits of an improvement in our unit labour cost.
