Madam - Paul Gillespie (World View, June 14th), states that Gordon Brown has reopened the debate on Ireland's decision to participate in the euro without the UK.
If correct, this is partly due to a paper written by us that figures in the British Treasury's evaluation of whether or not the UK should join the euro.
To put the record straight, it was never our intention to reopen the issue of Irish participation. Our paper simply attempts to make an objective contribution to the on-going debate on whether or not currency unions promote trade between member countries.
Based on the Irish experience our results suggest that the link between using a common currency and increased trade is, at best, tenuous. Indeed Paul Gillespie admits that since the mid-1990s domestically owned Irish industry has not significantly diversified away from the British market.
The radical change in our exchange rate regime has not induced significant changes in trading patterns.
This evidence casts doubt on the contention that use of the common currency significantly increases trade and economic synchronisation between participating economies and suggests that countries such as Ireland will continue to have difficulties with the ECB's one-size-fits-all monetary policy.
This highlights the need to increase flexibility in the domestic economy as a substitute for autonomous domestic monetary and exchange rate policies. This is exactly what Mr Brown meant when he stressed the need to reform the UK's public sector wage-bargaining process prior to euro entry.
However, there is at least one issue on which we disagree with Mr Gillespie's defence of the Irish decision. Like many others he assumes that Ireland faced a choice between the euro and sterling - "a close British economic relationship", in his words.
The reality is not that simple. Between the break-up of the old ERM in 1993 and the introduction of the euro in 1999, the Irish pound was tied to neither sterling nor the DM. Rather, it floated and followed a middle course between these currencies.
The cost was increased bilateral volatility and slightly higher interest rates. The gain was a relatively stable average exchange rate. The fact that during this period we recorded unprecedented growth and rapidly falling unemployment may, of course, be a coincidence. Nevertheless, the key feature of currency independence was that we were able to offset inflationary pressures during periods of sterling strength and losses in competitiveness when sterling was weak.
Since 1999 this has been no longer possible and the Irish economy is now more exposed to sterling fluctuations than it was before euro participation. - Yours, etc.,
RODNEY THOM,
BRENDAN WALSH,
Department of Economics,
UCD,
Dublin 4.