Quinn's tough warning on joining euro

THE Minister for Finance, Mr Quinn, last night said that the Government was "pitching" for membership of the euro from its launch, as long as the critical issue of the relationship between the "ins" and "outs" could be resolved.

But, warning of the need to accept the financial disciplines of membership, Mr Quinn said that, in pay bargaining, new constraints would have to be accepted.

"If we join, we have to stay joined. We have to be fit to play not just in the first half, but the second."

Mr Quinn was speaking in Verona, Italy, before today's opening of the informal EU finance ministers' meeting.

He is likely to seek a study of costs for a stability fund to protect members of the euro against shocks to their system.

Britain's freedom to devalue competitively against the euro represents a serious threat to sections of Irish industry which depend on British markets.

Ensuring that sterling is firmly pegged, formally or informally, to the euro is the key challenge facing Mr Quinn.

Although Mr Quinn acknowledged that there could be no "compulsion" for Britain, Sweden and Finland - they all did have obligations already under the treaty, to regard the management of their currencies and economies as a matter of common concern.

"In moving towards EMU we have to deepen and strengthen the spirit of that commitment," Mr Quinn said.

If that was not achieved, the whole single market was "at risk". It was also important to understand that it is in the interests of those outside the euro to ensure that the relationship worked, he said.

They were importers as well as exporters.

He said Ireland would expect more from the "outs" than a simple commitment to sound financial policies. "An acceptance of strengthened monitoring of convergence would have to have an element of enforceability.

"If it doesn't have some strength of enforcement - some capability of being probable rather than possible - then it is going to be weak."

He said it was important to reassure member state that the stability fund would not represent a significant, additional, financial burden and was not simply another redistributive mechanism.

A study of the costs could be based on extrapolating the costs of such asymmetric shocks in the past as German reunification to a new system. When that was done, a real sense of its viability could be gauged.

He warned, however, that Ireland, "if it joins the big league", must develop the ability to handle a lot of negative impacts within its own resources.

Today, the Commission will propose a major reinforcement of the EU's convergence system. The Commissioner for Economic Affairs, Mr Yves Thibault de Silguy, told journalists that the key to stability, after the introduction of the euro, was greater economic convergence.

But he said the Union would also need a system of "monetary solidarity" - code for a new Exchange Rate Mechanism - to prevent the turbulence that could still occur even if the economic fundamentals were right.

Asked how such a system would work if countries like Britain and Sweden refused to join, Mr de Silguy would only say that he could see no reason for a country committed to monetary stability refusing to join.

He said the Commission would like to see a system of strict budget discipline applying to those in the single currency and those outside.