IRISH industry will have to be prepared to cope with sudden drops in the value of sterling after monetary union, a new report on the effects of EMU has found.
The survey, by economic consultants Fitzpatrick Associates, found that sterling could experience a sudden fall against the euro within three years of monetary union beginning in 1999.
It also found that if Ireland had been in monetary union with Germany since 1992, the pound would have traded between 100p and 110p during 1993 and 1994 and up to 117p in 1995.
Nevertheless, the authors of the report, commissioned by the independent business and research unit of IBEC, point out that the overall benefits of joining monetary union outweigh any possible negatives. This is the case even in the "worst case scenario" of Ireland joining while Britain maintains a floating exchange rate.
A decision to stay outside the euro zone would send a negative signal to mobile foreign investment, could have negative implications for Ireland's bargaining power in Europe and effectively places Ireland's decision about when to join in the hands of the British government, it notes.
