Ireland signs on to economic union

By Andrew Bushe

DUBLIN – Despite a bruising dispute about who should head Europe’s powerful new central bank, Ireland, with 10 other EU nations, signed on at a summit in Brussels last weekend for an unprecedented economic union with the euro as their shared currency.

Taoiseach Bertie Ahern described it as one of the “most significant and ambitious steps” in the history of Europe and reiterated the Government’s commitment to “tight expenditure and low inflation” to sustain economic growth.

Ahern pledged Economic Monetary Union would work and said membership of the euro area was in Ireland’s long-term strategic interests.

Ireland is now part of a huge economic bloc stretching from the tip of Italy to the top of Finland and to the Aran Islands

There will now be a three-year changeover period before the currency will go into circulation in 2002.

Almost 290 million people will be part of the new trading power, which will control almost a fifth of the world’s commerce – about the same as the United States.

The launch ceremonies were marred by a row between Germany and France about who will head the new Frankfurt-based bank. It will control interest rates and monetary policy.

The euro-compromise to emerge was to give the job to former Dutch central banker Wim Duisenberg, who will step down halfway through his eight-year term and hand over to a Frenchman, probably Jean-Claude Trichet, governor of the Bank of France.

Britain is one of four EU countries which will remain outside and a major concern for Ireland is what will happen to sterling vis-a-vis the euro. The Irish economy has traditionally been closely aligned to Britain and it is still our biggest trading partner.

Economists are also worried that as Ireland’s interest rates fall to European levels, inflationary pressure could build up at home, particularly in the housing sector, and this could fuel wage demands.