IRELAND will be among the founder members of monetary, union along with six other states, according to an analysis by National Irish Bank. And the latest weekly index from J P Morgan a continued high level of confidence that monetary union will go ahead on schedule on January 1st, 1999.

Mr Philip Halpin, chief operating officer of National Irish Bank, estimates that seven states will participate in the first wave, with Austria, France, Germany, Luxembourg, the Netherlands and Belgium joining Ireland in this group.

Finland will come close to qualifying, but will not, Mr Halpin forecasts in a paper published yesterday. Portugal, Sweden, Spain and Italy will be further than qualifying from Finland, he says, although their problems could be sorted out in two to three years time. Greece, meanwhile, is a long way from meeting the requirements.

Mr Halpin warns that qualifying for EMU will only be the first step and that "increased discipline and rigour will be required to operate successfully within the single currency area".

The competitiveness of the economy must be improved, he argues, and tax reductions will be vital to allow employees to improve living standards while getting low nominal wage increases.

Turning to the public finances, Mr Halpin argues that a deterioration in control of public spending has been masked by higher tax revenues. This means that significant cuts in spending are required before joining monetary union. The business environment in monetary union will also be highly competitive, he warns.

EMU will end exchange rate uncertainty and bring low interest rates, he says. However, he argues that there would be a strong case for a stabilisation fund to help states hit by particular economic shocks to adjust.

Meanwhile the J P Morgan index, published each Friday in The Irish Times, shows that a recovery in expectations about monetary union, evident in recent weeks, is holding.

The index is based on investors expectations as shown by trading prices in the interest rate swaps market. The probability of Ireland joining has held at 70 per cent, according to the latest calculations. It was 71 per cent the previous week having recovered from 63 per cent a month ago in a period when investors were questioning the future of the entire project. The probability of Spain, Portugal and Italy joining has also increased, according to the index.