25 Years of Ireland in Europe: The Graduate

The last 25 years have seen profound changes in our economic, social and political life, beyond what was imaginable at the time of our accession to the European Union. The accession negotiations opened in Luxembourg in June 1970, with a team led by the then minister for foreign affairs, Dr Patrick Hillery, assisted by officials from the Departments of Finance, Foreign Affairs, Agriculture and Industry and Commerce, and were completed in January 1972. Following a referendum, we joined the (then) European Communities on 1 January 1973. Now that we are 25 years a member, it is a good opportunity to review our progress in Europe.

Economic Developments

Ireland's EU membership has been the cornerstone of our economic  development over the last quarter of a century. For a small open economy like Ireland, in an increasingly integrated world economy there are three key prerequisites to sustained economic progress and convergence: free trade, attractiveness to foreign investment and macroeconomic stability. Our EU membership has helped us secure the permanent benefits of unfettered access to the trade and investment flows, while in particular the last decade has helped underpin Ireland's macroeconomic stability, with low inflation, low budget deficits and a declining debt ratio. 

Our achievements over the past 25 years are particularly noteworthy in the context of the structural transformation of the economy over that period. The share of total employment in services, a key measure of economic development, has increased from just under 45 per cent in 1973 to 61 per cent in 1997.  Trade, which amounted to 77 per cent of national output in 1973, has increased to about 150 per cent, one of the highest trade ratios in the developed world. In 1973, about one-quarter of the total number at work in the Irish economy worked in agriculture; now, it is 10 per cent.  Considerable changes have also taken place in the structure of output and employment within the industrial and services sectors.  Notwithstanding the sometimes painful adjustment costs to the rapid pace of structural change in the economy, GDP per head in the economy, estimated at less than 60 per cent of the EU average in 1973, has increased to an estimated 104 per cent this year.

There have been massive increases in productivity across all sectors of the economy, with industrial productivity increasing by over 200 per cent, reflecting both Ireland's success in attracting foreign direct investment in high-technology sectors and the restructuring and consequent enhanced competitiveness of indigenous manufacturing industry.  These increases in productivity are also reflected in real gains in living standards.

Agriculture

One area that has benefited enormously from our EU membership is agriculture. Traditionally, we had neither a domestic market that was large enough nor an assured export market to provide sufficient outlets for production. After joining, Ireland began the process of adapting to the Common Agriculture Policy (CAP). This led to the expansion of production and significant on-farm investment and modernisation. All sectors of the agricultural industry have grown substantially since our entry: milk production increased by 70 per cent between 1973 and 1984 (when milk quotas were introduced), for example.

Transfers from the EU have played a very important part in the development of Irish agriculture and the food industry.  Under CAP, Ireland benefits from market support measures and from a variety of programmes, such as the Rural Environmental Protection Scheme.  In 1996, price support payments amounted to almost £1.5 billion. The agricultural sector also benefits from structural funds, which will lead to a total investment of £750 million between 1994 and 1999.

EU membership has a significant impact on farm incomes. In 1996, gross agricultural output in Ireland amounted to £3.5 billion, and aggregate income from agriculture exceeded £2 billion. Direct income payments, financed or co-financed by the EU, amounted to £909 million, or 44 per cent of aggregate income.

Structural Funds

Between 1989 and 1993, structural-fund receipts of about 4.2 billion ecu co-financed a total spend of 9.5 billion ecu.  Under the current round of funding (1994–99) total expenditure on structural- and cohesion-fund measures and projects will amount to about 12 billion ecu, with about 7 billion ecu of this coming from the structural and cohesion funds.

The extent of the contribution of these funds to our economic growth can be seen from ESRI's mid-term evaluation of the Community Support Framework. ESRI estimates that the combined effect of EU structural interventions under the two rounds is to raise GNP by 3 or 4 per cent above the level it would have been without the EU funding between 1994 and 1999. It estimates that the long-term impact of the two structural-fund programmes will be to raise GNP by about 2 per cent.

Economic and Monetary Union

The EU has a major economic project underway at present: the introduction of the single currency, the euro.  Ireland  meets all the convergence criteria laid down in the Maastricht Treaty for qualification for Economic and Monetary Union (EMU) and will undoubtedly be one of the founder member states.

Ireland's participation in the single currency will yield a net benefit to the Irish economy. The principal benefit is the prospect of a lower trend in interest rates.  Other benefits include the elimination of transaction costs and exchange-rate risk in respect of trade with other participants, participating member states' increased attractiveness to foreign investors, and the promotion of price stability, sound public finances and sustained low-inflation growth.

As minister for finance, I am happy that Ireland is approaching the single currency from a position of considerable strength, in terms of both economic performance and practical preparations.  Meeting the initial economic convergence conditions is, of course, not enough for successful participation in EMU. Stability in the economy must be pursued on an ongoing basis, and the flexibility that will be required to offset the loss of currency discretion must be developed. 

The changeover to the euro necessitates a great deal of practical preparation by all players in the economy.  My department has responsibility for coordinating the preparations of the Irish public administration and has a key role in helping the rest of the economy to prepare itself for the changeover.  An updated and expanded version of our National Changeover Plan has been approved by government and will be published shortly.  Once the decision on EMU membership has been made in May 1998, and assuming it confirms that Ireland is a member,  a Currency Changeover Board will be set up to oversee the detailed implementation of the changeover. 

AGENDA 2000

Looking to the future, there are important and difficult issues arising.  The European Commission has published proposals, entitled “Agenda 2000,” that address how the EU must adapt to cope with its next enlargement and the need for reform of the its policies.  Because of our economic success, we are graduating from the position that entitled us to generous access to the structural funds.  However, we will be insisting on transitional arrangements that are adequate in terms of level and time-frame so as to address our continuing development needs. 

Membership of the European Union has facilitated our unprecedented economic development.  As a nation, we have grasped the opportunities presented, and it is with pride that we can look back on the last 25 years of membership.  Equally, we look forward to the challenges of the future, confident that we can successfully overcome them and will continue to improve the quality of life for all our citizens.