The Government will have to decide by next May the value at which the Irish pound will enter the European single currency. EU finance ministers brought forward the date by seven months at a weekend meeting in Luxembourg.
The ministers, meeting here informally, agreed on Saturday that when they name the first participants in the euro on May 1st, 1998, they will also pre-set and announce exchange rates at which the currencies will be locked together on January 1st, 1999.
The Bundesbank president, Mr Hans Tietmeyer, said the decision to make an early announcement on the bilateral rates between participating currencies sent a clear signal to markets and gave them the security they needed. There was also good news for Ireland in hints from a senior British Treasury source that Mr Tony Blair's government is beginning to think seriously about a referendum on joining the euro before the next general election. Although tentative, such hints provide some reassurance that Ireland's participation from the start may not leave the economy vulnerable to British devaluation for too long.
But weekend demands from German and Dutch ministers for rebates on their net EU budget contributions may pose serious problems for Dublin's campaign to ensure continuity in structural and cohesion funding after 1999.
Commenting on the decision to pre-set 1999 conversion rates in May, the Commissioner for Economic Affairs, Mr Yves Thibault de Silguy, said the choice of "credible" rates would mean that the natural forces of markets and the real convergence of the EU economies would align currencies with their conversion rates by January.
The Government's strategy for the over-valued Irish pound is still unclear.
"Whatever view we have we are not going to discuss it in public," the Minister for Finance, Mr McCreevy, told reporters.
Some commentators believe the Irish currency may now face some selling pressure, as the prospect of an early revaluation of the pound's central ERM rate has disappeared.
While refusing to reveal how the entry rates would be calculated, several ministers and central bankers present reiterated their preference for the use of existing bilateral central rates, the rates above and below which ERM currencies fluctuate.
