Ceisteanna—Questions. Oral Answers. - Monetary Crisis.

Thursday, 19 July 1973

Dáil Eireann Debate
Vol. 267 No. 9

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93.

Dr. O'Connell: Information on John F. O'Connell  Zoom on John F. O'Connell  asked the Minister for Finance if any discussion is taking place with the British and other governments on devaluation of the Irish pound in the light of the present monetary crisis; and if he will make a statement on the matter.

Mr. R. Ryan: Information on Richie Ryan  Zoom on Richie Ryan  The answer to the Deputy's question is in the negative.

[1497]Dr. O'Connell: Information on John F. O'Connell  Zoom on John F. O'Connell  Does the Minister consider that a discussion should take place?

Mr. R. Ryan: Information on Richie Ryan  Zoom on Richie Ryan  As the Deputy will appreciate, the Government are involved in discussions with the other Ministers of Finance in the European Community. This is the level at which these discussions are taking place, and there are also on-going discussions with the Governors of the Central Banks of Europe. Later this month I will be in discussion with the Ministers of Finance of 20 nations in Washington, but we are having no direct discussions of the type envisaged by the Deputy.

Dr. O'Connell: Information on John F. O'Connell  Zoom on John F. O'Connell  Would the Minister be in a position to give us details of the extent of devaluation of the £ since it was first floated in July last year?

Mr. R. Ryan: Information on Richie Ryan  Zoom on Richie Ryan  It would be important—and I am sure the Deputy would agree with me on this—that people should understand that the Irish £ is not itself depreciated as against sterling because it is operating on a £ for £ basis with the £ sterling, and there is no disadvantage as far as the Irish £ is concerned vis-á-vis the £ sterling.

Dr. O'Connell: Information on John F. O'Connell  Zoom on John F. O'Connell  What is the £ sterling?

Mr. R. Ryan: Information on Richie Ryan  Zoom on Richie Ryan  I have not got the precise figure here, and I would not like to give it off the top of my head. It varies, as the Deputy will appreciate.

Mr. Haughey: Information on Charles J. Haughey  Zoom on Charles J. Haughey  Would the Minister, in order to clear up some public misinformation on this subject, be prepared to state that if the Irish £ were to be divorced from the £ sterling it would, in all probability, go to a premium?

Mr. R. Ryan: Information on Richie Ryan  Zoom on Richie Ryan  I agree with the Deputy that the position about the Irish £ is that if it were to float free of the £ sterling it would be at a premium compared with the £ sterling. However, there are in the present monetary situation more advantages flowing to us from this link with [1498] sterling than there would be if we were to part from it.

Mr. Haughey: Information on Charles J. Haughey  Zoom on Charles J. Haughey  I accept that, but it is important that the other fact should be stated.

Mr. R. Ryan: Information on Richie Ryan  Zoom on Richie Ryan  I agree.

94.

Dr. O'Connell: Information on John F. O'Connell  Zoom on John F. O'Connell  asked the Minister for Finance if he will make a statement on the likely effects, if any, that the present international monetary crisis will have on the economy.

95.

Dr. O'Connell: Information on John F. O'Connell  Zoom on John F. O'Connell  asked the Minister for Finance if he will give an estimate of the increases in the cost of imports resulting from the revaluation of the German mark.

96.

Mr. Lemass: Information on Noel T. Lemass  Zoom on Noel T. Lemass  asked the Minister for Finance the estimated extent to which the fall of sterling against EEC currencies will affect the cost of living in this country.

Mr. R. Ryan: Information on Richie Ryan  Zoom on Richie Ryan  With your permission, a Cheann Comhairle, I propose to take Questions Nos. 94, 95 and 96 together. Since the one-for-one parity of the Irish pound with sterling is being maintained and there has been little change in the rate of exchange with the US dollar, the bulk of our trade is not directly affected by the exchange rate changes which have taken place.

The depreciation of the pound against a number of Continental currencies increases the competitiveness of Irish goods and services. This should lead to an increase in our exports to these countries and tend to reduce our imports from them. The increase in the cost of imports due to the German revaluation will depend on the pricing policy adopted by German exporters.

The overall effect on the cost of living of the depreciation to date of sterling and the Irish pound against EEC currencies is not likely to be significant.

Dr. O'Connell: Information on John F. O'Connell  Zoom on John F. O'Connell  By how much was the pound sterling devalued since July, 1972? Are there any figures on that?

Mr. R. Ryan: Information on Richie Ryan  Zoom on Richie Ryan  The overall depreciation of the pound since the floating commenced in June, 1972, taken in [1499] combination with the pattern of external trade, would be about 4½ per cent.

Dr. O'Connell: Information on John F. O'Connell  Zoom on John F. O'Connell  Is the Minister aware that a surcharge of 5 per cent has been put on the contracts of people going abroad on holiday travel? If the depreciation is only as the Minister says, does he not think that this 5 per cent increase is unwarranted?

Mr. R. Ryan: Information on Richie Ryan  Zoom on Richie Ryan  The difference between 4½ per cent and 5 per cent is not so very great.

Dr. O'Connell: Information on John F. O'Connell  Zoom on John F. O'Connell  It is only in the last three or four weeks.

Mr. R. Ryan: Information on Richie Ryan  Zoom on Richie Ryan  The situation varies greatly from one country to another. For instance, the depreciation against EEC currency varies from 1 per cent in the case of Italy to 25 per cent in the case of Germany, and 15 per cent to 20 per cent in the case of other countries in the EEC. When it is considered that the principal factor in our external trade is our trade with Britain, where we have parity with the pound sterling, it will be seen that the overall consequences are of the order of 4½ per cent. Where a person might be going on holiday to a country which has revalued considerably as against our own currency, the factor could be of the order of 5 per cent or in some cases a good deal more.

Dr. O'Connell: Information on John F. O'Connell  Zoom on John F. O'Connell  The depreciation was after the pound was floated in June, 1972. Has there been any significant increase in the extent of depreciation of the pound sterling in recent weeks?

Mr. R. Ryan: Information on Richie Ryan  Zoom on Richie Ryan  There has been some deterioration in the position of the pound sterling in recent weeks and some improvement. As the Deputy knows, there was a revaluation of the German mark which significantly increased the cost of holidays in Germany.


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