IRELAND will be a winner from EMU but the economic gains will not be dramatic. That is the central message of the long awaited Economic and Social Research Institute report on the single currency, published today. Given its commitment to the single currency, the Government will be relieved that the report came down in favour of Ireland joining.

The report, edited by Mr Terry Baker, Mr John FitzGerald and Mr Patrick Honohan of the ESRI, predicts that joining the single currency will lead to extra jobs, but also points to specific sectors which will be adversely affected. The financial services sector will be the biggest loser, while clothing, footwear and parts of the food industry could also be damaged, depending on what happens to sterling.

The biggest gains, the report estimates, will be because interest rates will be lower inside the single currency than they would be outside. It forecasts that Irish interest rates in the medium term will be about one percentage point lower if we join, although it notes that the reductions will probably be greater in the initial period of EMU. Not joining, on the other hand, could put upward pressure on interest rates.

Overall, industry will gain from EMU membership, the ESRI believes. Lower interest rates will benefit most sectors, and particularly the building industry. Irish small, and medium sized businesses also stand to gain from the lower rates.

Other benefits include reduced costs of currency transactions, although the ESRI believes savings here will be limited, amounting to 0.1 per cent of GNP. The tourist sector will be the main gainer from the elimination of currency transactions and, even if Britain stays out, savings could reach 0.6 per cent of turnover.

Competitiveness will also be affected by membership, although" this may be a cost rather than a benefit if Britain does not join.

Not surprisingly, the report estimates that Ireland would be much better off if Britain also joined. Ironically, the one exception is financial services, which would suffer even more under sterling member ship of the EMS, as it would remove a major source of foreign exchange earnings.

The implications for the financial services are some of the most striking conclusions of the report. Clearly, the banks risk losing substantial foreign exchange transactions up to 10 per cent of their income. But the spectre of a long term decline of Irish bond and currency markets as activity moves to London and Frankfurt is something many would prefer not to envisage.

The report also highlights others concerns. It warns that the inability of individual countries to adjust their exchange rates could result in more pronounced recessions.

Even though the institute claim that the gains to the Union as a whole outweigh the losses, it is not a result to be taken lightly.

The report examines in detail how economic performance might react in EMU with a variety of "shocks", particularly a rapid depreciation of sterling. A key conclusion is that while a sterling fall would hurt the economy, Ireland would still suffer if we were outside EMU.

While the initial impact of a sterling fall would obviously be greater if Ireland was a member of EMU, in the longer term the report says the lower interest rates enjoyed by members should lead to an earlier and stronger industrial recovery, than if Ireland remained outside of the currency union.

The overall gains to the economy outweigh the risk of this "sterling factor", it says.

However the analysis does show that there would be substantial jobs losses in some sectors if sterling fell sharply.

The impact could be significant.

If sterling remained stable, then the net gain in jobs over five years due to EMU membership could be 20,000. Allowing for possible sterling volatility, the job gains over five years would be reduced to 10,000, a relatively modest increase given that net employment growth last year of more than 50,000.

To safeguard the economy against such shocks, the report might have looked at an enlargement of the EU budget to help countries cope with shocks, a point made in a succession of reports from the National Economic and Social Council. However, this does not feature in the analysis.

The report puts the onus of adjustment inside EMU on to companies themselves. It calls for companies to use "hedging" strategies more often, to guard against currency swings. It says that "hedging" is not a panacea for ensuring, firms long term competitiveness. Successful firms will supplement financial hedging with market diversification and other cost control and productivity enhancing measures.

Politicians may be a little disappointed with the conclusion that the gains in income and employment from membership will be "modest".

However, they will also point to the ESRI's assessment that there will be other unquantifiable benefits from membership of the single, currency, including the boost to business confidence and inward investment. The gains will be smaller than from the single EU market and the structural funds, the report concludes, but we would be better off in than out.