The Minister for Finance, Mr McCreevy has stated that while the Government was aware of the difficulties generated by the current level of exchange rates, it remained committed to European Monetary Union even if sterling remained outside the single currency.

Speaking at the presentation of the annual report of the National Treasury Management Agency, Mr McCreevy said EMU entry in the first wave remained the cornerstone of the Government's economic policy and said emphatically: "I don't want to give the impression otherwise, the decision has been made."

The NTMA chief executive Dr Michael Somers said that the debt/GDP ratio - a key element in the criteria for membership of EMU - fell from 81.4 per cent to 72.4 per cent last year, aided by the strength of the pound.

This year, the fall in the debt/ GDP ratio would be more modest, but Dr Somers said he expected a fall of three to four percentage points - suggesting debt/GDP of less than 69 per cent. This compared with a debt/GDP ratio of 161 per cent at the end of 1991 means that Ireland's debt as a proportion of national wealth was now marginally under the EU average.

Interest payments on the national debt last year were just over £2 billion, similar to the level of interest payments in the previous five years. But with the increase in the income tax take, the interest bill as a proportion of total income tax revenue has fallen from 87 per cent in 1985 to less than 44 per cent last year.

Dr Somers warned that the onset of the single currency posed difficulties and challenges for the Irish bond market. "EMU will reinforce the trend already in place whereby domestic as well as international investors are increasingly free to move their capital into and out of particular markets, underscoring the ongoing need to ensure that the Irish government bond market is as efficiently structured and effectively marketed as possible," he stated. "We'll be 1 per cent of a large market and all competing for the same funds," he added.

Dr Somers expressed concern at the current absence of hedging instruments for investors in Irish bonds and said that smaller European bond markets like the Irish market would have to ensure that there were futures contracts to allow investors hedge their exposure.

The NTMA annual report said that last year Davy had a 30 per cent share of the primary dealers' market, followed by NCB with 27 per cent, Riada with 22 per cent, Goodbody with 15 per cent, UBS with 4 per cent and CSFB with 2 per cent.

In terms of their share of NTMA funding through taps and auctions, NCB was the leader with 29 per cent, followed by Davy with 27 per cent, Goodbody with 20 per cent, Riada with 12 per cent, UBS with 7 per cent and CSFB with 2 per cent.