Vol. 466 No. 4
21 Mr. McCreevy asked the Minister for Finance his views on recent reports which suggest that in excess of 56,000 Irish jobs could be vulnerable as a result of Ireland joining a single currency and Britain staying out of such a currency system. [11612/96]
The reference to 56,000 jobs mentioned by the Deputy is contained in the recent Forfás report Shaping Our Future: A strategy for Enterprise in Ireland in the 21st Century. This states:
Forfás data in 1995 indicated that some 673 manufacturing firms employing more than 56,000 people would be sensitive to a disimprovement in competitiveness against UK competitors. These firms received support under the Market Development Fund during the previous currency crisis or have 30 per cent or more of their exports going to the UK.
The report goes on to point out that the importance of the UK market must be balanced against the wider benefits of economic and monetary union.
I am aware of the concerns of firms with a high exposure to competition from UK producers, including in the UK market. However it must be recognised that the future prospects for these firms, and for the people they employ, depend upon a range of factors in addition to their competitiveness vis-à vis their UK counterparts. This holds true whether or not the UK stays outside the single currency area and Ireland joins.
The range of factors to be considered includes, in addition to the UK decision on economic and monetary union, the overall strength of the Irish economy (including our competitive position relative to the UK) when stage 3 of economic and monetary union comes into being; the level of interest rates in Ireland as compared with the UK; the performance of sterling: and the extent of diversification of these firms to other markets. The arrangements to be put in place at EU level to regulate the relationship between the euro and the currencies of member states not participating in the economic and monetary union from the outset are also of importance. This relationship is of concern to all member states and the matter has been under discussion at EU level over the past few months, including at recent meetings of the Ecofin Council. As President of Ecofin over the next six months I look forward to making further substantial progress, with a view to presenting, if possible, conclusions to the European Council in Dublin in December.
In addition, I would point out that the UK Government has never said the UK will not participate in economic and monetary union. Rather it has indicated that the UK will not do so in 1997, but that if economic and monetary union commences at a later date, a decision on UK participation will be made closer to that time. The agreed commencement date for economic and monetary union is now 1 January 1999. As the Forfás report says:
The best policy approach, at this point, is for Ireland to take whatever measures are necessary to be fully prepared to join the European Monetary Union when the time comes.
In this context the Deputy will be aware that I have commissioned, on behalf of the Government, an in-depth study by the ESRI of the likely economic implications of economic and monetary union for Ireland. The study will assist us to deepen our understanding of how the Irish economy interfaces with its trading partners. By having more detailed information, we will be better prepared to plan our national policies with a view to economic and monetary union — both in preparation for it and in order to participate successfully in it. The study is due for completion by the end of this month and its findings will be made public.
In the past ten days or so the Minister has quoted from a study which reports favourably on Ireland's prospects of proceeding to economic and monetary union. Would he not agree, however, that there are conflicting views on this matter and it depends on whose report he reads? As the Minister will be aware exporters have one opinion, depending on which branch they come from, and trade unionists and academics also have separate viewpoints.
When will the study the Minister commissioned on behalf of the Department of Finance be published? I read recently that only a summary of the report would be published but I suggest the report in its entirety be published. When will it be published so that we can have an overall view of the matter?
I will deal first with the second part of the Deputy's supplementary question. It is my intention to publish the report as soon as practicable. I am not aware of nor have I seen the reference to which the Deputy alluded regarding the publication of a partial report. I understand we will get the full report and we are committed to publishing it. As far as I am concerned I will publish the full report.
With regard to the earlier part of the Deputy's question, there has been speculation for some time that in the event of Ireland joining in economic and monetary union and Britain staying outside it there would be a rapid deterioration in the value of sterling and of employment prospects in this country. There is nothing to suggest, however, in the logic of that argument that if we choose not to join in economic and monetary union and the UK chooses to stay outside the euro zone that sterling of itself would not fall because the cause of the fall in the relative value of sterling vis-à-vis the euro would not be determined by whether Ireland was a member but by how the markets perceive the relative value of sterling in the medium to long-term against the new family of currencies that go to form the euro. Our decision to join in economic and monetary union will not in any way alter the negative fall or positive rise in sterling. I do not think the people who are arguing this case have thought out the consequences of their opening position.
What we have to do is ensure that Irish firms maintain and preferably improve their competitive position generally but specifically within the UK economy. We have tried to address that issue in a number of ways.
Given that we discussed this matter on a number of occasions, what progress, if any, is being made at the Council of Ministers regarding the arrangements to guard against predatory devaluation policies by currencies outside economic and monetary union? If the UK stays outside economic and monetary union, it is essential for the Irish economy to put in place strict arrangements which guard against predatory devaluation policies. No matter what way one looks at figures for exports between Ireland and the UK, it is our largest trading partner in volume, manufacturing and employment terms.
Is it the Government's intention to have this matter sorted out during the Irish Presidency? It is a worry for all Irish people.
Arising from Monday's meeting of Ecofin in Luxembourg it is the intention that we have a definitive document that would be agreed to at the Dublin Summit in December and that inter alia the document would provide for a new currency exchange rate mechanism between the ins and outs, as it is known.
The Deputy asked about predatory devaluations, more commonly known as competitive devaluations. Other than the fallout from Black Wednesday in September 1992, there is no sighted evidence of a specific competitive devaluation undertaken by a member state. Hypothetically the case exists but from market behaviour by various Governments since September 1992 or when the currency settled down in the following July-August 1993 and the expanded band of 15 per cent was brought into place, there is no evidence of competitive devaluation of the kind that people have been speculating about. When we see the final form of ERM Mark 2, as I refer to it, we will have a clearer picture. It is my intention to try to make as much progress as possible in that regard during the course of the Irish Presidency.
