THE Minister for Finance, Mr Quinn has commissioned a special report on the impact on the Irish economy of a rise in the value of sterling against the euro, if Britain remains out of the single currency.
The ERSI impact study on Euro entry had been based on the dangers of a weak sterling, but now the issue had changed and more information is needed on a new situation, Mr Quinn told a conference organised by the Irish Farmers Association yesterday.
Mr Quinn said he was sure the British will join the system before the year 2002, when the euro notes and coins come into circulation.
Addressing the fear of the agriculture lobby - which is against joining the system if the British stay out - Mr Quinn said the reservations expressed have to be carefully analysed in light of the new circumstances.
Concerns have been expressed by the IFA president, Mr John Donnelly, that Britain might seek to devalue sterling against the euro to give itself a competitive advantage. But Mr Quinn said this could not happen with the independence being given to the Bank in England by the new Labour government.
The Minister also said that it was likely that the CSO's figures for growth for 1996 may have to be revised upwards. He said a figure of 8 per cent had been mentioned in some publications.
The IFA president, Mr Donnelly, said he wanted to send a clear message to the new Government that a revaluation of the Irish pound central rate in advance of entry, or entry above the current central rate, is totally objectionable to the IFA. There has been some speculation among market analysts of a revaluation in the months ahead, although official sources have played the idea down.
Mr Donnelly said the exceptionally strong growth rate in the national economy in recent years had clouded the fact that public expenditure has been growing at an unsustainable rate.
Mr Pat Mc Ardle, head of strategic and economic planning at the Ulster Bank Group, said it had been suggested that the £5 billion invested in Irish Government bonds by foreign investors will be withdrawn if Ireland did not enter the system.
This withdrawal and the greater uncertainty which would ensue would see Irish interest rates rise sharply from the low levels they are currently pitched at.
"Take this away and interest rates would be at least three percentage points higher in the morning. In a single currency contest, freedom to vary interest rates can only mean one thing, higher rates," he said.
"Higher rates would certainly stop the current housing boom but what would we do afterwards? Outside the single currency, rates in Ireland would stay permanently well about the rest of the euro zone. Certainly, this has been the historic experience. Is that what we really want?" he asked.
