Sir, - Paul Gillespie ("World View", October 25th) accuses those who believe that Ireland should stay out of EMU as advocating "an uncertain relationship with a less influential state which has still to find its role in the post-imperial world". This is nonsense. I, along with a number of other economists, have argued that Ireland should not participate in EMU without the UK. This view does not advocate a relationship with any state, influential or not. Rather it is based on two hard economic facts.
First, the obvious lack of convergence between the Irish economy and those of the core European countries implies that the direction of monetary policy in EMU might not be best suited to Ireland. This is not convergence in the economically trivial sense of the Maastricht Treaty, but convergence in the real sense of synchronisation with European business cycles and is the reason given by Gordon Brown for ruling the UK out for at least five years. Like the UK, Irish economic activity is currently out of sync with that in Germany and France and the type of monetary policy favoured by these economies is unlikely to suit current conditions in Ireland. Would, for example, the Irish Central Bank favour lower or higher interest rates if EMU were to commence today?
Second, "the wait-for-the-Brits" view simply accepts the importance of the UK for Irish trade - imports and exports. It does not, however, advocate a return to any fixed relationship with sterling. Rather it maintains that Irish interests are best served by an exchange rate policy which targets an effective, or average, rate against a range of currencies including the dollar, sterling and the DM. This appears to be the policy which has been followed since 1993. Its success and implications are obvious. If it's not broken, why fix it? - Yours, etc.,
Department of Economics, UCD, Belfield, Dublin 4.