Irish pound and sterling parity
O’Leary asked how sterling movements and currency divergence were considered in setting the Irish pound’s EMS fluctuation limits. Colley said sterling appreciation or depreciation had been considered, and the Government intended to maintain one-for-one parity with sterling while feasible under EMS obligations.
asked the Minister for Finance if the improving position of the British £ has been taken into account in settling the limits within which the punt will be allowed to move; if any contingency studies are available on the effect of sharp divergence between the British and Irish currencies in view of the short-term effects on export competitiveness and increasing import bill, depending on the way the currencies move; and if he will make a statement on the matter.
Comment on this
The possibility of an appreciation or depreciation of sterling against other currencies was taken into account in settling the fluctuation limits to apply to the Irish pound in the EMS.
As the Deputy is aware, it is the Government's intention to maintain the one-for-one parity relationship between the Irish pound and the pound sterling for as long as this is feasible in the light of our EMS obligations. The possible short-term economic implications, in the event of a divergence between the rates for the two currencies, have been fully examined. These effects would depend on the direction and size of the exchange rate movements, as well as on various other factors including the speed with which domestic costs adjusted to the exchange rate changes.