THE first stirrings of a debate about economic and monetary union are finally emerging. Ruairi Quinn finally threw out the old "it's going ahead and we'll be there" script at yesterday's Dail committee and came up with a new one, which touched on some of the main issues, as did some of the other contributors.
However, the debate is only beginning.
At the European level, the main questions which remain are:
Can enough states meet the EMU timetable? Ruairi Quinn said yesterday that France and Germany must both qualify for the project to go ahead. But with unemployment rising in both states, the necessary cuts in budget deficits will be hard to achieve. Whether growth can revive in the second half of this year will be the key factor.
Can an EMU strategy be married with a plan to create jobs? EMU was first and lore most conceived as a political project. The drive to meet the Maastricht criteria risks damaging job creation in the short term. Mumblings by the EU Commission and some member states including Ireland about increasing the focus on jobs has yet to turn into a concrete plan. In the longer term, a dynamic single market would indeed be a force for job creation, but the EMU plan falls well short of a blueprint for such an area.
So what is the "economic" bit of EMU about? The EMU strategy is not a vision of a fully fledged single economic area, as it has no plans, for example, for a large centralised budget as exists in other large single currency areas like the US and Australia. The advantage of a sizeable central budget is that it would help states hit by particular economic shocks by automatically transferring funds through mechanisms such as social security payments. It would thus help to make a union more stable.
What happens to the currencies not in an EMU? There will be intense discussions on this. Suggestions of some kind of band limiting the movements of the non members look unlikely to be agreed, so some commitment may be sought from those not joining. And what about the countries which do join? Another key issue is the budget rules which will apply to EMU members. The Germans want tough rules, although this would further constrain the ability of members to adjust economic policy.
The issues mentioned above are vital for Ireland. But there are further specific factors of importance for this state.
What happens if Britain does not join? The Government's view is that we should join, even if Britain stays out. However, if our largest trading partner does not join, it lowers the potential advantages to Ireland, as there will be no saving on transactions costs for companies trading in the sterling area. It would also increase the risks for Ireland, particularly from a sharp devaluation of sterling against the new single currency.
What is the alternative for Ireland? Joining or staying out is presented by some as a choice between membership of a dynamic economic bloc or tying ourselves to the sliding fortunes of Britain. However, we have managed a floating currency policy successfully over the last few months and other small countries do likewise. Also, continental Europe is a far from dynamic economic area at the moment and faces long term issues of competitiveness.
What are the advantages if we join? The elimination of currency transaction costs, interest rates set by the union hopefully lower than otherwise and a voice around the table in monetary decisions.
What are the implications for policy?
The Government and the Central Bank will stop at nothing to ensure the economy meets the Maastricht criteria in 1997, as it is performance in that year that will count. In a monetary union, the ability to adjust our exchange rate would be gone and budgetary policy would also have to meet strict guidelines. Other areas of the economy would therefore need to be much more flexible. Yesterday's committee meeting heard calls for new, more flexible wage setting However, this debate is only beginning.
