asked the Minister for Finance his views on the Meade recommendations in regard to alterations in the European Monetary System; and how their implementation might affect Ireland.
Ceisteanna—Questions. Oral Answers. - European Monetary System.
1.
I understand that Professor Meade addressed a meeting in Brussels on the subject of international co-operation in macro-economic policies. The meeting was an internal EEC Commission seminar, the proceedings of which have not been published, and I would not consider it appropriate to comment on it at this time.
They may not have been published but they were outlined in full two weeks ago in the Financial Times in an article by Nobel economics prize winner, Samuel Britten, so I am surprised, if that particular newspaper had the proposals in full, that they are not available to the Government. Basically the proposals, are to try to achieve some form of smoothening of changes within the EMS. Will the Minister make it his business to study the proposals? Does he agree in general that exchange rates stability is desirable? If the Minister has not actually seen the proposals will he have a look at them to see if they can contribute to exchange rate stability? Other countries seem to feel that they can contribute to exchange rate stability. We have had seven or eight devaluations in the EMS and these proposals offer a way whereby we can avoid that situation in future. Will the Minister have a look at them?
I am in a little difficulty here because I am in a position to say to the Deputy that the proposals were not outlined in full in the article to which he refers. With regard to his specific question, I agree with the Deputy that exchange rate stability is not only desirable but essential for the orderly conduct of business, particularly within the European Community. I have been concerned to ensure the maximum stability in exchange rates and specifically in our effective exchange rate. I have some doubts about some of the particular proposals which apparently have been put forward by Professor Meade, but on the general objective of stability in exchange rates with the qualification of effective exchange rates I am in agreement with the Deputy.
Will the Minister agree that the continuing absence of Britain and the British currency from the system is putting pressure on the system and on the member states, as happened last year in our case when the Government devalued our currency within the EMS to achieve a realignment of our relationship with sterling? Would the Minister agree that it is vitally important in any discussions which take place that Britain is encouraged in the strongest possible way to join the system? Would he be able to comment on the progress that has been made towards establishing the ECU as the basic unit of currency within the system, which is in fact the second chapter of the proposal for the EMS introduced some years ago?
As I said to the Deputy on previous occasions here, I would consider it highly desirable if we could arrive at a point where the pound sterling could be brought within the EMS. As I also said to the Deputy on previous occasions, we have made it as clear as we could, in the discussions that have been going on in regard to the system, that this is a result we would wish to see. It is not, as the Deputy appreciates, a result which we on our own can bring about.
With regard to the second part of his question about progress towards the second stage of EMS, this, in my view, has been regrettably slow. There is an ongoing discussion and examination of measures that could be applied in order to bring us to the point where we would progress to the second phase of EMS; but the matter to which the Deputy first referred, the position of sterling, is a fairly substanial stumbling block on the road to making that transition. I agree with the Deputy that the position of sterling vis-à-vis the EMS has created some difficulty for us in the past and our management of exchange rate policy has been designed as far as we can to offset those effects.
I appreciate the Minister acknowledging the difficulty that has been created for us. In view of that acknowledgement that it poses for us, particularly all member states in the system, a grave problem, as was evident last year when we had to realign within the EMS because of the Government's stated intention to reduce the value of our currency against a currency outside the system, will the Minister try to win every possible support from his colleagues to ensure that the stability of the system, the purpose of the system and the cohesion of economic and monetary stability in Europe, which is central to all this, is brought to bear particularly on the British Government as a matter of urgent priority, otherwise the possibility of achieving any of the aims of the system cannot be realised?
I told the House what my feelings on the matter are and what the Government's feelings are in relation to the basket of currencies that are actually in the EMS. I am sure the Deputy will understand if I tell him that I do not want to go any further in being specific publicly about the efforts we will make. I believe we are agreed on the desirability of bringing about the kind of change in the system to which he refers. I am sure the Deputy will also agree that there are some parts of the effort which are probably best not conducted in public. I believe we are agreed essentially on the objective. That was reflected in the action we took last March, which, as I said then and I repeat now, was based on our particular concern with bringing about the result we need in terms of our effective exchange rate.
Would the Minister not regard as a major error of judgment in hindsight the decision to adjust the currency last March which has cost us over £800 million in our external debt?
No.