Euro protected us — but discipline vital

IRELAND escaped the worst of the global recession thanks to its membership of the European Monetary Union (EMU); but it must still become more disciplined as a eurozone member, according to a new report.

The study into the effectiveness of single currency membership for Ireland by the National Economic and Social Council (NESC), said that being part of the euro has been, in themain, beneficial to Ireland and if the country had not joined “it is likely to have fared worse in the crisis of the past two years”.

However, the NESC study also attacked Ireland’s fiscal behaviour during its 10-year membership; saying that it hasn’t always acted as if it were an inclusive member.

“In the past decade, Ireland’s approach to fiscal policy, prices, costs and financial regulation weren’t sufficiently adapted to the disciplines of a single currency,” the report stated.

“To succeed within the euro Ireland must ensure that future fiscal policy is counter-cyclical and sustainable, prices and costs maintain the country’s competitiveness and financial supervision prevents irresponsible banking practice.

“At both EU and national level, the success of the euro requires greater political and popular buy-in and acceptance of the need for mutual surveillance, benchmarking and learning,” it added.

The head of the Central Bank, Patrick Honohan, stated last week that despite the eurozone slipping into a period of deflation in June — for the first time in its existence — Ireland was not at risk of following suit, simply due to its membership.

The NESC said that fiscal reform within the eurozone — aimed at protecting the single currency and addressing debt and deficit problems of individual member states — will prove worthwhile; adding that Ireland’s interest lies in the reform process “being open enough to address all the problems as they arise and moving towards a successful resolution”.

“The future effectiveness of the single currency will depend on a higher degree of political and popular identification with the euro and understanding of the disciplines and responsibilities inherent in membership.

“This requires that the member states and the EU institutions are seen to address the challenges facing the euro and the European economy,” it added.