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Tuesday, May 18, 1999 Published at 13:57 GMT 14:57 UK


Irish lessons on the euro

Belfast: Home to a new Bank of England office

The close economic relationship north and south of the Irish border should provide useful lessons for the rest of the UK.

One of the UK's leading figures in economic policy said the Irish business scene would provide a key indicator as the debate about the UK's possible membership of the euro hots up.

The Bank of England's deputy chairman Mervyn King told a Belfast audience he would be closely watching what happens as businesses and people both sides of the Irish border trade with one another.


[ image: Bank chief Mervyn King: No words of consolation for hard-pressed exporters]
Bank chief Mervyn King: No words of consolation for hard-pressed exporters
The Dublin government chose to join the single currency whereas the UK did not sign up in the first wave. Northern Ireland's main export market is the Republic of Ireland.

Mr King, who was in Belfast to announce the opening of a new Bank of England office in the city, spoke at Queen's University.

Great expectations

Sterling's strength is making exports from north of the border less competitively priced when they are sold in the republic.

Mr King disappointed Northern Ireland exporters who had been expecting some relief from the added pressures of a strong pound.

"We cannot do something to help Northern Ireland if it is not in the interests of the UK as a whole," he said.

"It(the strong pound) has been a major problem because it has created an imbalance between those sectors of the economy which are already exposed to international competition and those which are focused on domestic customers."

He outlined the dangers of further cuts in the interest rates.

"If we were to cut by another 3.25% and bring the interest rate down to 2%-3% that might lower sterling but it would lead to a much more rapid expansion of domestic demand, push up inflation and manufacturers would start to see their costs rise," he said.

"Costs would start to undermine competitiveness."

The new agency, which will be located in Belfast city centre, is one of 12 Bank of England agencies located around the UK.

The Bank's new office is to provide information for the powerful interest rate-setting Monetary Policy Committee.





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