IRELAND would be at greater risk from not joining the single currency if Britain stays out, the Commissioner for Monetary Affairs, Mr Yves Thibault de Silguy, has warned. In an interview with The Irish Times ahead of what he sees as this weekend's key informal finance ministers meeting in Dublin, Mr de Silguy spoke of his confidence that monetary union will go ahead on schedule, and that this weekend's meeting would see agreement on crucial elements of that process.

Only days after a member of the Bundesbank Central Council called for flexibility in interpreting eligibility for the single currency, Mr de Silguy also confirmed that the Commission accepts the treaty allows just that. But he refused to be drawn on whether he believes heads of government will, or should, do so. The priority, he says, is meeting the targets.

Mr de Silguy paid tribute to the detailed preparation of the Council by the Minister for Finance, Mr Quinn, and said he hoped they would get "agreement on fleshing out the frameworks agreed in principle at Verona. In Dublin we will put in the walls, the heating and the plumbing. All that should be left is the decoration and the finishing touches." That would be for the heads of government in Dublin in December.

Mr de Silguy (48) is very much the product of the French administrative rather than the political system. An "Enarque" (graduate of the elite Ecole Nationale d'Administration) who has several degrees in public law, he served for some years in the foreign ministry, interrupted by a spell in Brussels in the 1980s in the cabinet of his predecessor in the economic affairs job, Mr Xavier Ortoli.

A posting in the Washington embassy as economic counsellor was followed by two years as technical adviser to then Prime Minister, Jacques Chirac, and later as adviser on European affairs to prime minister Edouard Balladur.

Conservative on the economy, he has been a passionate advocate of the single currency to the point where observers have wondered whether his directorate's economic projections bear an element of wish fulfilment. He has also been central to the argument that market forces and a mutual commitment to convergence are sufficient binding to shape the single currency structures.

He has opposed the idea of compensation funds to protect "in" countries from the effects of competitive devaluation by rivals outside the single currency, arguing that the logic of the market and convergence makes a strategy of competitive devaluation inconceivable and that the evidence is that it is the devaluer who suffers in the long run.

That case is at the core of his contention that Ireland should not fear membership of EMU if Britain stays out. He says he does not know what the British will do but hopes that they will eventually join. But Ireland's dependence on the British market has declined dramatically with its successful integration in the EU. That process, he says, will continue in EMU. "And the UK does not have any other alternative except to control its public finances so it will continue to converge economically."

Is there not a need for a mechanism that would punish those outside EMU who devalued competitively?

"Firstly, there is Article 109(f) which means that they must regard the management of their currency as a matter of common concern. That reinforces the credibility of the system. Secondly, there is a tendency to see competitive devaluation as a good thing. It's not true. Devaluation is always a disfunctioning, an impoverishment ... It's also true that it is usually accompanied by a rise in interest rates which is not good for investment or jobs.

"We are now in a world of free circulation of capital and the real enforcers of discipline are the markets. So member states, whether in or out of the single currency, have no alternative except to conduct their budgetary policies in a sane manner."

The challenges this weekend are threefold to finalise agreements on a Stability Pact between the "ins" to ensure continued discipline after EMU; to agree the control mechanisms for an ERM2, governing the relationship between the "ins" and "outs"; and to complete work on the legal status of the single currency to ensure continuity of contracts and the free exchange of EMU currencies by the banks.

On the Stability Pact, Mr de Silguy, argues that continued fiscal discipline and adherence to the 3 per cent deficit requirement requires states to know that they will be punished if they step out of line.

He is proposing an initial penalty be applied after some nine months in the form of a substantial, non interest bearing deposit from the offending member state if corrective measures are not put in place. A fine would follow if the state persists, with a scale, he suggests running from 0.2 per cent of GDP to a ceiling of 0.5 per cent. The timeframe and scale of fines have yet to be agreed.

The commissioner acknowledges German hopes that the process would be set in train automatically to remove key decisions from the political arena and give the system credibility. "The treaty gives the Council the right to determine penalties and we can't remove that ... but to get to a sufficient degree of automaticity we had to work on two elements - making sure the timeframe for union action is sufficiently explicit and short - enough for the process leading to sanctions to be irreversible.

"And, secondly, it is necessary for sanctions to be known in advance and sufficiently painful to be effective, but not too high, so they are credible in the markets ... I think we have a balance now which will give us the sufficient automaticity while preserving the credibility of the process."

Verona's ministerial meeting in the spring also put shape on the successor to the ERM. Now acknowledged to be voluntary, the system will involve currencies operating in a wide band around the euro - the width of the band has yet to be agreed, but countries may negotiate individual tighter bands bilaterally with the European Central Bank (ECB). Intervention will take place automatically then when currencies reach that limit.

Crucially the ECB is to be given new powers both in setting the point of entry to the system and in initiating any realignment.

What of the possibility that that the treaty criteria will have to interpreted flexibly in 1998 if the single currency is to achieve sufficient critical mass to start on time in 1999?

Mr de Silguy insists that there can be no question of departing from the text of the treaty because to do so would affect the credibility of the system - "the treaty, all the treaty, and only the treaty," he says.

He refuses to speculate on what heads of government will or should do when they receive the reports from the Commission and the European Monetary Institute on eligibility for membership of the single currency from day one. "That is a matter for 1998. I do not have a crystal ball."

But do they have the right to determine that a country's deficit of 3.2 per cent is "exceptional and temporary" in the terms of the Maastricht treaty?

"Yes, but a decision on whether a deficit is exceptional and temporary will be one for next year."

Is he confident that the Commission's growth predictions, revised down to 1.5 per cent for 1996, are now both realistic and sufficient to produce a critical mass of qualifying countries?

"Yes and Yes... we brought down the predictions in spring and will be redoing the operation in November. Today I have no reason to believe we won't finish 1996 close to our spring prediction. Today, things may be different in two months time ..."

"Secondly, as we said in May, we will have a significant number of member states under the 3 per cent reference value."