Professor Niamh Hardiman:

The decision to go into EMU dates back to the late 1980s and early 1990s. In 1992 Ireland was in a bit of a tricky situation. There were many economists who stated that the architecture of EMU did not look good and that it did not constitute an optimal currency union. They were of the view that, in the absence of a transfer union, a banking union, debt resolution and all of the things we have now learned as so important, it would prove somewhat problematic. Maintaining an independent exchange rate regime was very challenging for Ireland at the time. On the whole, compliance with the requirements to join EMU worked well for Irish economic performance in terms of the policy process. In the early stages, most people expected that upside would be very strong and that integration with the wider European economy would be facilitated by the single currency, that trade would improve, that our export links with other eurozone countries would be intensified and so on. Adaptation to the new policy regime, whereby there was no control over exchange rates and monetary policy, was probably slow in coming because it attached new importance to the domestic capacity to manage by using just cost-containing mechanisms, fiscal policy, etc. What people did not realise was all the perverse incentives that would spill out from having such low interest rates.

That was a shock that was genuinely hard to manage.