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BREAKING THE STERLING LINK: IRELAND’S DECISION TO ENTER THE EMS

Author: Patrick Honohan and Gavin Murphy Institute for International Integration Studies, Trinity College Dublin

Abstract

Ireland had been considering a break in the long-standing currency link with sterling for some time when the ideal opportunity of a new exchange rate regime – potentially retaining the sterling link while stabilizing other exchange rates – seemed to offer itself in the form of the “zone of monetary stability in Europe” proposed by France and Germany in April 1978. Based on newly released archives, this paper reviews the evolving attitude of Irish officials and the Irish Government over the following months as the decision gradually shifted to one of breaking the sterling link and rejoining what was little more than an expanded “Snake” arrangement; the UK having decided to stay out. While financial issues were to the fore in the discussions, the final decision to join was based on a strategic vision that Ireland’s economic and political future lay with Europe rather than with the former colonial power.

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The paper forms part of an IRCHSS-sponsored project – “Turning Globalisation to National
Advantage: Economic Policy Lessons from Ireland’s Experience”. Gavin Murphy also gratefully
acknowledges funding provided through the ESRI Phd scholarship scheme. This paper was prepared
for the session: “The Choice of Exchange Rate Regime in Historical Perspective” at the XVth World
Economic History Congress, Utrecht, August 2009.
We are grateful to Colm Gallagher, Pat Hickson and Owen Coyle of the Department of Finance for


Last updated 28 August 2014 by IIIS (Email).