RUAIRI Quinn was reported this week as saying economists had not challenged any of the key assumptions behind the ESRI report, Economic Implications for Ireland of EMU, published last July. This is not true.
Several economists, myself included, have not only challenged the ESRI's key assumptions (notably those relating to interest rates), but have also argued that the analytical framework, used by the ESRI, is an inadequate basis for assessing the economic implications of Ireland's participation in the single currency.
Mr Quinn also said that a "precise and detailed debate" on the issue would be very welcome. Such a debate has already commenced, even if the contribution made by one set of protagonists has fallen on deaf ears. A second and more important point is that the position adopted by the policy making establishment on EMU is designed to discourage the development of that debate.
For the past 12 months or so, the Government has argued that it is irrevocably committed to Ireland's participating as a founder member of the single currency from January 1st, 1999, that this commitment is unconditional on the British position, and that the question is now closed. This is a clear invitation to people to draw the inference that debating the issue is a redundant exercise, or at best an academic one.
The business community has taken its cue accordingly. Even among those whose livelihoods will be put at greatest risk if Ireland participates and Britain does not, there is no longer an inclination to debate the issue. Better, they say, to accept the inevitable and concentrate on preparing for it. One cannot help feeling that this type of fatalism is precisely what the Government has set out to cultivate.
From what authority does the Government's commitment to become a founding member of the single currency derive? The official view is that it derives from the people's decision to ratify the Maastricht Treaty in the 1992 referendum. That decision is represented as a binding mandate on the government of the day to join the single currency in 1999, provided Ireland meets the four convergence criteria specified in the treaty in respect of inflation, interest rates, currency stability and the public finances. This begs some questions about the context in which the 1992 referendum was held, the proper interpretation of the text of the treaty, and the changes that have recently been made by way of elaboration of certain of the treaty's provisions.
As far as interpretation is concerned, the treaty obliges Ireland to join the single currency when it is deemed eligible to do so. But qualification is not a straightforward matter. Careful reading of the treaty indicates that meeting the four criteria is neither a necessary nor a sufficient condition for a country to be deemed eligible the treaty provides that a country's performance in respect of the criteria will be but one of numerous factors (some, but not all of which are specified) that will inform decisions about who will qualify.
The treaty was drafted with a view to ensuring that the process of selecting participants could be carried out with a degree of flexibility. Regarding Ireland, there is a strong primafacie case for contending that the substantial economic risks that would attach to participation in the single currency without Britain should quite properly be regarded as one such consideration.
I do not believe that deciding it would be inappropriate for Ireland to join the single currency without Britain would be at variance with the treaty, or with the view expressed by the people in 1992. Indeed, one could argue that the people would expect their Government to use its discretion in this regard, and to make a decision on the basis of an open, balanced and informed assessment of the risks involved rather than blind political commitment. The risks that attach to joining are of an entirely different order to those that attach to postponing membership. The future decision can be reversed the former cannot.
Even if one allows that the 1992 referendum result may be interpreted as an endorsement of Ireland's participation as a founder member of the single currency without Britain, there is the important matter of context. The referendum took place at a time when sterling was in the ERM and Britain looked much less likely to exercise its opt out than it does now. It also took place against the background of a five and a half year period during which sterling's behaviour caused us little difficulty and awareness of the damage that sterling volatility could inflict on the Irish economy was correspondingly muted.
Finally, there is the matter of the elaboration of certain treaty provisions that has occurred since 1992. Most particularly a Stability and Growth Pact has been agreed, which requires single currency participants to limit their budget deficits to a maximum of 3 per cent of GDP, or face sanctions and fines. Adherence to this pact will be an inextricable part of single currency membership. However, it was not part of the treaty that the people ratified in 1992. Is there not a case for them to be afforded the opportunity to register their opinion about it?
