ESRI Report: "The Economic Implications for Ireland of EMU" 

In order to obtain an independent view of EMU's implications for Ireland, the Economic and Social Research Institute was commissioned to carry out an in-depth study of the likely economic implications of EMU for Ireland, with particular reference to employment, including at sectoral level, in the context of various membership scenarios. The ESRI published its report, entitled "The Economic Implications for Ireland of EMU", in July 1996 and it has been widely circulated.  

Both the negative and positive effects which EMU was considered likely to have on the Irish economy were analysed in detail by the ESRI. Its report concluded that membership of EMU would, on balance, be economically advantageous even were the UK to remain outside. The net benefit to the Irish economy from taking part in EMU, without the UK, was estimated by the ESRI to be an additional 0.4% of GNP on an annual average basis over the medium term - allowing for possible shocks to Ireland arising from the UK's non-participation. The ESRI also looked at potential but unquantifiable effects of EMU participation. They concluded that some of these, such as increased attractiveness of Ireland as a destination for foreign direct investment, could be substantial. The ESRI conclusion was endorsed by the National Economic and Social Council in its report "European Union: Integration and Enlargement" (Report 101, March 1997). NESC found no reason to revise its long-standing position that Ireland's strategic interest lay in full economic and monetary union.  

One of the editors of the ESRI report, Terry Baker, in an article in the Irish Times on 4 March 1998, examined the question of whether the conclusions of the report could still be considered to hold true. In relation to external shocks, Mr Baker concluded that the risks were considerably lower than they were in 1996, for three reasons:  

• an increase in the number of prospective EMU participants (as compared with the number expected in the ESRI's report); 
• a massive appreciation of sterling; and 
• a fundamental policy shift by the UK government in favour of eventual membership of EMU. 

To quote Mr Baker:  

"the risks attached to EMU entry have diminished significantly since mid-1996, while some of the risks that would be faced had Ireland opted to delay entry to EMU have tended to increase. With hindsight, it appears that our 1996 assessment underestimated the advantages of initial entry. The balance of risks now seems to confer a clear-cut and substantial benefit to Ireland from the decision to join EMU at the outset."