Written Answers. - Economic and Monetary Union.
Dermot Ahern
Ceist:
89
Mr. D. Ahern
asked the
Minister for Finance
his views on a recent newspaper report (details supplied) which indicated the need for the development by the Government of a strategy for dealing with any sharp fall in the value of sterling after monetary union; and if he will make a statement on the matter.
[5497/97]
I have seen the newspaper report mentioned by the Deputy, which referred to a forthcoming study by the National Economic and Social Council entitled European Union: Integration and Enlargement. I understand that the study in question is at present being finalised. Afterwards its recommendations will be carefully considered.
I am, naturally, aware that should the UK not join EMU from its inception on 1 January 1999, the possibility will exist of a sharp fall at some point in the value of sterling against the euro; and that this possibility is of concern to Irish businesses which face competition from UK companies. Of course, the UK Government has not yet decided whether the UK will join EMU from the outset on 1 January 1999, but rather that the issue will be decided closer to that date.
Membership of EMU will reinforce the need to maintain and improve competitiveness and flexibility throughout the Irish economy. The Government has of course a central role in promoting an economic environment as conductive as possible to business success. The present environment is characterised by low inflation, sound public finances, low interest rates, moderate wage developments under Partnership 2000 and a high level of investment, which together have supported high economic and employment growth. In addition, recent budgets have contained a series of measures designed to improve competitiveness, including competitivenessvis-á-vis the UK. The Government will continue to bear in mind the importance of competitiveness in framing future budgetary strategy. However, it is primarily a matter for firms to equip themselves to respond to changes in the trading environment for their particular products and services.
Under Partnership 2000, the Government is committed to continuing its efforts to ensure that Article 109m of the Treaty on European Union, whereby each non-euro area member state shall treat its exchange rate policy as a matter of common interest, is used to maximum effect, consistent with the Treaty, with a view to avoiding real exchange rate misalignments and excessive nominal exchange rate fluctuations. The principles and main elements of improved surveillance procedures covering all member states were agreed under the Irish Presidency and are now being discussed in detail. As the ECOFIN Council report endorsed by the European Council in Dublin pointed out, these procedures will seek to ensure that the domestic policies of all member states are geared to price stability and sound public finances, thus creating the conditions for keeping exchange rates stable. Member states which do not join the new Exchange Rate Mechanism as the UK has indicated it is unlikely to — will present policies so as to enable appropriate surveillance in the ECOFIN Council and in the General Council of the European Central Bank. ECOFIN and the Commission are considering further the methods for the effective surveillance of exchange rate developments.
