asked the Minister for Finance if he has had any contact with Mr. Heath or the British Chancellor of the Exchequer on the fluctuation of the £ sterling; and if he will make a statement on the matter.
29.
Ceisteanna—Questions. Oral Answers. - Floating of £.
28.
andMr. Fox asked the Minister for Finance whether any prior intimation was given to his Department by the British Government of its intention to float the £1 sterling; and, if so, if he will state the nature of such intimation.
30.
asked the Minister for Finance if he will make a statement on this country's position in relation to the decision of the British Government to float the £1 sterling.
31.
asked the Minister for Finance the present par value of the Irish £1 in relation to (a) the £1 sterling, (b) the Franch franc and (c) the German Deutschemark; and if, in the light of the present monetary uncertainty, any consideration has been given to either a devaluation or a revaluation of the Irish £1.
32.
asked the Minister for Finance if the Government were advised or consulted prior to the decision of Britain to float the £1 sterling; and if he will indicate the effects, if any, the action has had on the Irish £1.
I propose, with your permission, a Cheann Comhairle, to take Questions Nos. 28, 29, 30, 31 and 32 together.
The Chancellor of the Exchequer informed me, in advance, of the British Government's decision to allow the £ sterling to float temporarily.
Following notification of the British decision, the action to be taken as regards our currency was considered carefully and, as I announced in a statement issued on 23rd June, the Government decided in the interest of the economy to allow the Irish £ to float in line with sterling. In reaching this decision the Government were concerned to ensure that the cost of Irish exports to Britain or other countries and of tourism in Ireland vis-à-vis other countries should not be increased through a rise in the value of the Irish £ in terms of other currencies. Because the bulk of our trade and payments are with Britain, I am satisfied that the best course in the circumstances is to maintain the traditional parity of the Irish £ with sterling. This will ensure that the pattern of prices between Ireland and Britain will not be upset by variations in exchange rates between the two currencies. The exchange value of the Irish £ vis-à-vis the French franc and the German Deutschemark will depend on the day-to-day market dealings while the period of floating lasts. The floating is intended as a temporary measure and it is the Government's intention to return to a fixed parity as early as circumstances will enable this to be done with safety. In the meantime, I do not expect any adverse effects on the Irish economy. Looked at overall, I would expect some net gain to us.
As the House knows, I have been in consultation with the British Chancellor and with the Finance Ministers of the Six and other acceding countries. There is a full understanding of the Irish position amongst the other Finance Ministers. Our currency is in a sound position and is supported by substantial external reserves.
On what basis is the Minister hopeful it could be to our advantage?
He said "net gain".
I also said the bulk of our trade is with Britain and that that will not be affected but with other countries our exports will be increased while the Irish £ is at a lower value than it has been up to now. Allowing for that, and the increased cost of imports from countries other than Britain, the sum works out as a net gain.
How can that be when our exports are greater than our imports?
I mentioned tourism, and there are other factors.
Can the Minister explain the nature of the mechanism that suggests that our £ should be floated in line with sterling. It is one thing to have it floating independently. There must be some more complex reason than the Minister has given and would he explain what exactly is involved, because there is confusion on that point?
I do not know why there should be confusion on it. What most people are concerned with is the result and not with the mechanism.
The Minister has made it clear that our £ is backed by strong reserves and in other statements he said the natural level of our £ would be higher than sterling. Therefore, some other mechanism than he has mentioned must be operating to bring down the value of our £ below its natural level to that of sterling, but the Minister said——
It is operated through the Central Bank. I do not think the Deputy can reasonably expect me to give precise details of the mechanism on a day-to-day basis.
What is the nature of the mechanism?
It is the same mechanism as that used before the floating of the £ in exchanges within the EEC, operated by the various central banks to keep currency at a certain level— intervening at the appropriate stage depending on what the market price is showing.
The Minister is not able to tell us the nature of the intervention. I asked him what is the nature of the mechanism. That is a simple question even if the answer may be complex.
What does the Deputy mean by the nature of the mechanism?
Who does what to achieve this result?
I told the Deputy the Central Bank intervened.
How?
What does he mean by "how"?
The Minister either knows the answer or he does not.
I have already said it in the same mechanism as was used in the central banks of the EEC in the weeks preceding the floating of the £.
Have the Central Bank here independent connections with Europe or must they go through the London Foreign Exchange?
They have independent connections with the central banks of Europe. The problem for the Central Bank here is relatively minor compared with others because the amount of dealings of this kind on the Irish market is quite small.
What is involved in the Central Bank holding the Irish £ steady? When will the Minister be able to tell us the net situation?
How much did we off-load from the Central Reserve?
We could not know until the floating ceases. What is Deputy Desmond sneering at? Would the Deputy have a little sense? How could we know the cost until it is finished and how could the figure be known when it is not finished?
It is done on a daily basis.
The question was not how much it was per day but what would it cost and when would we know. Would the Deputy pay a little more attention before asking such questions?
This is not a kindergarten.
Are the Government opposed to floating exchange rates with the EEC because of the detrimental effects they will have on common agricultural policy?
Yes.