The Programme for Prosperity and Fairness may have outlived its usefulness, an EMU conference heard yesterday. Mr Samuel Brittan, Financial Times columnist, said the deal should not be allowed to prevent wages rising to a natural level.

"The normal way in which a boom was curbed under the gold standard was that, as labour shortages developed, wages rose at the expense of profits and the incentive to invest declined, bringing with it an economic slowdown and an end to inflation. If the Irish pay accord prevents this from happening, it may have outlived its usefulness," said Mr Brittan at the conference: EMU - Is It Working?

A partial safeguard against inflationary overheating in the labour market had been the influx of returning Irish workers, which had helped deal with inflation by increasing supply to meet the rise in demand, said Mr Brittan. "But this safety valve may no longer be sufficient, unless Ireland adopts the fully liberal course of opening its borders to immigrants of any description, unskilled as well as skilled.

"The real question for the Irish economy is not the euro, about which you cannot do much, nor British membership of the euro about which you can also do rather little. It is, in the last analysis, about population density and migration," he said.

With very little unused domestic labour left and with the productivity trend unlikely to change much, growth prospects depended on whether net immigration would continue and to what extent, said Mr Brittan. A key reason for encouraging immigration was that the population density was still very much less in Ireland than in other parts of Europe, he said.

But he warned against the present Irish policy - like that of many other European countries - of recruiting only immigrants with advanced skills, especially in IT, predicting "a plethora of computer specialists" with real shortages in the traditional service trades. The conference was also told that EMU was contributing to stable economic growth, price stability, price transparency and efficiency, and the integration of EU financial markets in the euro area.

"The euro is already having a remarkably beneficial effect on the euro zone, impacting on all financial markets and the banking sector," said the Minister for Finance, Mr McCreevy. Mr Mark Wynne, senior economist with the Federal Reserve Bank of Dallas, said it was too early to tell if EMU was working. But he added: "I think it is clear that two of the major economic objectives of EMU were to deepen and strengthen the single market, and to create a Europe-wide zone of price stability. I would argue on both counts that EMU should be judged to be succeeding."

There was no evidence to suggest that Europe's economy as a whole would be better off today without the euro, Germany's former finance minister, Dr Theo Waigel, said.

"There are many reasons to believe that, without the euro, we would have been exposed to strong currency fluctuations within Europe over the last 24 months, with all the negative repercussions those could have for both economic trends and price movements," he said.