Quinn says single currency will lead to decline in prices

The introduction of a single European currency will put further downward pressure on prices and reinforce the deflationary trends in the Irish economy, a leading business figure has predicted.

Mr Lochlann Quinn, chairman of AIB and chief financial officer of domestic appliance giant Glen Dimplex, said the introduction of an euro price sometime next year will increase transparency and make it easier to have a standard price for standard products in Europe.

"EMU is only going to reinforce the competitive or deflationary aspects of our economy," he told the Association of Chartered Certified Accountants (ACCA).

He said we now live in a much more competitive world and this was the reason why all the repeated estimates for Irish inflation over the past three to four years had been wrong.

"We have never spoken so much about inflation as in the last six years and have never had so little," Mr Quinn said, adding that there were two reasons for this.

Firstly, inflation is not measured correctly as the focus is almost entirely on traded goods. It only takes account of the cost of a mortgage, not of houses, while it also fails to measure the cost of labour, especially in areas where there are skill shortages and massive wage inflation.

Mr Quinn also said that the economic model on which inflation predictions are being made has changed in recent years. It was only possible to raise prices nowadays if a company had an effective or de facto monopoly, he said, noting that Glen Dimplex has reduced its selling price by 11.5 per cent each year of late.

Mr Quinn said fears that the sharp fall in the value of the pound against sterling would feed through to higher prices had not materialised because of the ease with which new suppliers can be found.