Michael Noonan (Limerick City, Fine Gael)

The overriding objective of the single currency is to enhance the living standards of the citizens of all participating member states. This is achieved inter alia by greater levels of trade, a deepening of the Single Market and increased financial integration within the EU, all of which are facilitated by the single currency.

While it is fair to say that the euro has been successful in this regard, a number of design flaws have become evident in recent years. Perhaps the most obvious example is the greater capacity for spillover effects and unfortunately, we have seen the impact of inappropriate policies in some member states affecting other member states.

In order to address these difficulties, a number of important institutional and governance reforms have been implemented in recent years. These include the so-called six pack of legislative reforms, the euro plus pact and the European semester. All of these reforms are designed to ensure that member states implement appropriate and sustainable economic and fiscal policies which take into account the euro area dimension.

This retrofitting of the monetary union with the tools to make it commensurate with an economic union is a positive development and I would not understate the importance of the improvements that have been made. However, it will clearly take some time for these reforms to bear fruit. In addition, a five-point strategy is being implemented in order to maintain the euro area on a sustainable path. The main elements include addressing the difficult situation in Greece, recapitalising European banks and implementing structural reforms to boost growth.

From an Irish perspective, a major study of the costs and benefits of membership of the single currency was undertaken by the ESRI in the mid-1990s. The research concluded that Ireland would benefit from participation in terms of lower interest rates and reduced transaction charges.

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