Dáil Éireann Debate, Tuesday - 23 March 2004
179 Mr. Durkan asked the Minister for Finance the way in which the strength of the euro has affected the cost of imports and the competitiveness of exports; and if he will make a statement on the matter. [9136/04]
Amharc ar fhreagraThe euro is trading significantly higher against the US dollar than when it was introduced in January 2002. The euro's appreciation against sterling has been much less significant. The appreciation of the euro affects the economy in a number of different ways.
The main negative effect of a stronger euro is to make Irish exports less competitive on world markets. This occurs as exports to non-euro areas become relatively more expensive while at the same time imports from these areas become relatively less expensive. Also, firms competing with US and UK firms in markets outside the eurozone will experience competitiveness problems. The reduced competitiveness of the euro area lessens demand for Irish goods and services.
A significant proportion of Ireland's trade is with non-euro countries such as the UK and the US. The recent rise in the euro against sterling and the dollar must be a cause for concern. In my Budget Statement, I specifically highlighted Ireland's vulnerability to sharp falls in the US dollar exchange rate against the euro. That is why competitiveness is a priority for the Government. We must remain vigilant to the risks to our competitiveness, such as wage and price inflation. Otherwise, jobs will be at risk.
On the positive side, a stronger euro lowers inflation by reducing import prices and reduces oil prices, as oil is invoiced in US dollars. The latest figures from the Central Statistics Office show that import prices during the first 11 months of 2003 fell by 5.2% in comparison with the corresponding period the previous year. During the same period, around 78% of our imports came from outside the euro area.
