Northern Ireland needs to focus more on flexible labour markets and industrial policies to ready itself for monetary union, the Northern Ireland Economic Council has warned.

The council has published a monograph on the implications of the single currency on Northern Ireland. It warns that the benefits of monetary union are likely to be small and that significant costs could arise if labour markets in the EU are unduly rigid. "The push for EMU is thus partly explained by political rather than economic factors," it states.

The council also found that there was no convincing case either way for British entry and that the recent report by the Treasury justifies the postponement of entry until the economy is more in line with its European neighbours.

However, it also found that Northern Irish companies would be particularly affected as the Republic was entering the single currency in the first wave.

The study also found that entering the single currency placed a premium on any region's ability to respond to shocks. However, the Northern manufacturing sector has a tendency to weakness given its older technologies, a low rate of productivity, relatively high labour intensity and a tendency for local production units to be relatively small.