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Thursday, 13th August 2020
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McCreevy calls for longer term view on euro Back  
Minister for Finance Charlie McCreevy gave a strong vote of confidence in the euro when he addressed the Davy Stockbrokers conference ‚€ėEMU - Is it working‚€ô

In his opening speech McCreevy said the euro was knitting together the financial systems of 11 countries and was adamant that EMU‚€ôs success should not be judged in terms of short-term inflationary pressure. Here is an extract of that speech.

‚€ėIn the short period since its launch, the euro is already having a remarkably beneficial effect on the Euro-zone, impacting on all financial markets and the banking sector. It is knitting together the financial systems of 11 countries - creating broader, deeper and more liquid markets covering the whole of the euro-area.‚€ô

It makes it impossible for euro-zone countries to boost competitiveness by manipulating monetary policy. Instead, they must cut taxes, streamline social security systems and make other structural reforms.

Tax reductions are an integral part of the Government‚€ôs strategy to maintain and improve competitiveness and to encourage the take up of employment. We have made considerable progress in this regard through a balanced strategy of removing more of the low-paid from the tax net, by reducing tax rates, by ensuring that a large majority of taxpayers are subject to no more than the standard rate of income tax and by completing the transition to a more progressive system of tax credits. These policies have contributed to the record numbers of people at work at the present time.

The European Commission has commented favourably on the significant reduction of taxation on low paid earners in Ireland in recent years. Their report concludes that our tax system is one of the most progressive systems in the world, because the burden of tax that we place on the low paid is one of the lowest in the world.

Further efforts must be undertaken to remove the remaining segmentation of financial markets and harmonise accounting rules and tax treatment. Several initiatives are already underway and progress is being made on the harmonisation of market practices.

Here for example, the European Commission‚€ôs ‚€ėFinancial Services Action Plan‚€ô comes to mind, and national governments and European market organisations have been working toward the goals set out in the Action Plan. An important initiative was the decision of the ECOFIN Council to establish a Committee of Wise Men in order to identify the obstacles which stand in the way of a single market in securities and consider how they might best be removed.

One should not measure the success of EMU by reference to the exchange rate of the euro and short term inflationary pressures. This is to misjudge the nature of monetary union and to overlook some of its most important effects. EMU is a very long term project. Its main benefits will be structural in nature and their magnitude will only be possible to assess over time.‚€ô

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