The Government is justifiably confident that Ireland is on track to be among the founding members of monetary union (EMU) in one year's time. This time next year, the euro, the new single currency, will have been born. Ireland looks certain to be among some eleven EU states to qualify. Such is the momentum behind the monetary union project that it is now most unlikely to be derailed. Over the past year, EU governments have overcome a series of crucial obstacles - thus eliminating any remaining uncertainty that the single currency will proceed on schedule.
Some key decisions still remain to be made. The membership of the euro club will be decided on the first weekend in May by EU leaders. And a compromise has still to be reached on who will be the first president of the EU central bank. But EU governments will know that they must hammer out agreements in these and other outstanding areas and that any prolonged delays will be seen as a signal by the financial markets, which could in turn lead to damaging currency speculation. The Government has made it clear that Ireland will join monetary union with the first group, even though Britain is remaining outside. And the economy meets the entry criteria. The latest figures from the National Treasury Management Agency show that the ratio of national debt to Gross Domestic Product fell again last year - as the Treaty requires - and Ireland also qualifies under the inflation, currency and interest rate criteria.
With qualification now guaranteed, Government and business interests must assess the implications of membership. Some of this work is already well underway. Government officials and central bankers have worked closely with their EU partners in planning the vital mechanics of the changeover to the single currency and the precise way that monetary union will operate. Many businesses have already undertaken detailed studies on what the single currency will mean for their operations and their strategy.
However much remains to be done. Both the Government and business need to look closely at the longer-term competitive pressures which will be a part of monetary union. The economy has performed strongly in recent years and 1998 should be another year of rapid growth and rising employment. The single currency will bring new challenges, however, and if these are to be met, then the progress of recent years must be built upon. Membership of the single currency will also place a much higher premium on flexibility in many areas of the economy. Interest rates will be set centrally in Frankfurt, removing the limited room for manoeuvre in this area, and the pound's rate will be fixed against other member currencies. This will mean that economic pressures which in the past might have been absorbed by changes in interest rates or the value of the pound, will more directly affect the real economy. The most obvious risk would come from a sharp fall in the value of sterling. In the past, the pound could have fallen in tandem with the British currency, removing some of the pressure on exporters. But once inside monetary union, it will be up to companies themselves to deal with the swings in sterling. If they cannot cope, then either employees will have to accept lower wages, or jobs will be lost. Membership of the single currency can bring substantial gains and opportunities for Ireland. However, if we are to make the most of monetary union, then urgent consideration must be given to the many implications for the way our economy operates.