Quinn blames rising pound on interest rate speculation

THE rapid rise of the pound against European currencies is largely the product of speculation on a rise in British interest rates, the Minister for Finance, Mr Quinn said yesterday. Such volatility underpinned both the need for an independent Bank of England in London, free from the vagaries of political pressure, and the case for a single currency, he told journalists here.

Mr Quinn, in Brussels for a meeting of finance ministers, refused to be drawn on what he felt would be an acceptable rate for the German mark against the pound, but said that he understood the pain being suffered by companies exporting to the German market.

The problem, Mr Quinn said, was the rapid speed of change in rates, as experience with sterling had shown that companies dependent on the British market could adjust internally to a gradual change. The stability companies sought was precisely why the single currency was needed, he said.

Speaking later to the Brussels branch of the Institute for European Affairs, Mr Quinn said that he also understood the real concerns of those who argued that if Britain stays out of the single currency Ireland should also do so. A "precise and detailed" debate on the issue would be very welcome and the Government would help all it could with figures.

The case had been made, however, he said, by the ESRI in a major assessment of the consequences of just such a scenario, yet, to date economists had not challenged any of the key assumptions of that study.

Mr Quinn rejected claims by the Belgian Finance Minister, Mr Philipe Maystadt, that Ireland was poaching jobs through unfair tax competition.

Referring to the decision last week by the US multinational Boston Scientific to concentrate its production in Ireland, Mr Maystadt said that the firm had availed of "exorbitant financial advantages" offered by Ireland.

Mr Quinn said that the standard 10 per cent manufacturing tax, approved by the Commission until 2020, was largely simply a way of attracting attention. Multinationals were increasingly saying that their real interest in Ireland lay in the skills and multi lingualism of the workforce and competitive wage rates.

The meeting of finance ministers agreed to the procedures for the design of coins for the single currency, They agreed the appointment of a 15 member jury to select a final short list of three sets of designs - Ms Mairead Dunlevy, a keeper in the National Museum was nominated to represent Ireland.