The Central Bank has over £1 billion to give back to the taxpayer after Ireland joins the single currency, according to the previous government's economic adviser. According to Mr Brendan Lynch, the former adviser to Mr Ruairi Quinn, there is almost £87 billion in spare reserves across all EU central banks, and almost £1 billion in Dame Street.
Speaking to The Irish Times at the Dublin Economic Workshop in Kenmare, Mr Lynch said the money should be used to fund infrastructural projects as the structural funds were being phased out.
Legislation and tighter controls are needed if we are to keep public spending in line, two top economists warned at the Dublin Economics Workshop in Kenmare on Saturday.
Mr Lynch also outlined the likely changes in the Central Bank's status in the run-up to monetary union. While the Irish Central Bank will become less important the governor will become a player on the world-stage.
His role and significance will rise dramatically when he becomes a member of the ruling committee of the new powerful European Central Bank.
As a result he will have an enhanced profile and prestige internationally. "Future governments will have to take great care over their appointment of the Central Bank governor," Mr Lynch warned.
He added that in monetary union, the Bank can "comfortably reduce" its financial capital and reserves from its current level of £1 billion to £100 million and still have more than enough capital for its much reduced requirements in monetary union.
He said the Bank had no justification to hold onto a large amount of financial capital in monetary union as its role would be a primarily regulatory one.
A director of the National Treasury Management Agency, Mr Paul Sullivan, also pointed to major changes for that organisation.
According to Mr Sullivan, the NTMA has been busily preparing for the changes the single currency will bring over the past three to four years.
"This is not hitting us out of the blue," he said. The moves into market making and the development of the benchmarks as well as attracting non-resident investors have all helped.
However, one of the biggest changes which the single currency will bring is the move from controlling over 90 per cent of bond activity in the country to suddenly falling to a market share of only 1 per cent of a very large and liquid market.
While access to this enormous pool of funding will bring extra flexibility, there will also be problems, he noted.
The market will become a lot more competitive as the currency risk is eliminated. In addition Irish pension funds are likely to change their asset allocation. It will no longer make sense for them to hold a large portion of their fixed interest investments in Irish Government securities and they are likely to diversify.
On top of this, according to Mr Sullivan, credit risk will be increasingly focused on. The biggest challenge for the NTMA will be to go out and identify the kinds of investors who will buy Irish securities for the small yield pick-up.
