Finian McGrath (Dublin North Central, Independent)
Link to this: Individually | In context

Question 5: To ask the Minister for Finance if the Euro was adopted without proper evaluation of its merit. [25726/12]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context

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.

Finian McGrath (Dublin North Central, Independent)
Link to this: Individually | In context

I thank the Minister for his response to my question. Will the Minister accept there is genuine concern in society about the future of the euro and its impact on the economy? Does the Minister accept that the political and economic landscape is changing on the day? Is there a plan B to deal with these situations?

I ask for the Minister's response to a statement by the Nobel prize-winner economist Paul Krugman that Europe has had several years of harsh austerity programmes and the results are exactly what students of history said would happen. Such programmes push depressed economies deeper into depression.

Is this the current situation in the European Union? Was the euro too much of a political project rather than an economic project? I note the Minister in his reply accepted that there were design flaws. Did it remove a critical shock absorber to cope with the economic imbalances? Did all the experts and the people in the ESRI tease out that situation comprehensively?

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context

I thank the Deputy for his questions. I have said on numerous occasions, both in the House and outside, that when the euro was put in place the architecture to defend it in times of adversity was not put in place. What has been happening for the past couple of years is an attempt to retrofit the defence mechanisms for the euro and this continues. The Deputy will know the flaws in the original design and he will know about the current attempts to put the architecture in place.

Deputy McGrath referred to remarks by eminent economists. The debate in Europe is not unique as there is an even hotter debate in the United States about whether to stimulate the economy or to balance budgets and reduce expenditure. Views are divided strongly on political lines in the United States where there are very eminent economists on both sides of that argument. We have to rely on authorities nearer home and take cognisance of their advice.

In my view, the euro was an excellent project. There is not a lot wrong with the euro but the problems are in certain areas of the eurozone. For example, the level of the euro relative to the dollar at which the euro was introduced has been exceeded and despite all the difficulties, it is still at a higher value than when it was introduced. Second, inter-country trade in Europe since the introduction of the euro, has grown by 50% and the euro is still being held as a reserve currency by many countries outside the euro area. The euro is pretty sound but it has to be underpinned by actions which are now being taken.

Finian McGrath (Dublin North Central, Independent)
Link to this: Individually | In context

Does the Minister accept the recent statement by economist and journalist, David McWilliams when he said that unless Germany is prepared to diffuse money to the periphery for the foreseeable future, there is a very good chance that the euro will break up? The Minister referred to the inappropriate actions of governments in the eurozone as being the cause of this crisis. Does he really believe that the six pack reforms will resolve this issue and keep everybody on track?

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context

There is no silver bullet that will resolve everything but they are a series of actions which taken together or in sequence can help to underpin the euro. Much of the work is already underway. The treaty is very important as a foundation stone and also the corrective action being taken in many European countries is very important. However, I also believe the change of emphasis in the debate now to have a programme of sustainable growth across Europe, is also very important. Taken all together and if we keep driving forward, I believe matters will stabilise. However, we all know there are extreme difficulties at present.