IMF praise for booming Irish Republic provides ammunition for pro-euro lobby

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Groups campaigning for Britain's entry into the euro seized on a report yesterday from the International Monetary Fund praising the state of the Irish economy.

Groups campaigning for Britain's entry into the euro seized on a report yesterday from the International Monetary Fund praising the state of the Irish economy.

The IMF said the economy was "well-placed to continue to perform strongly". It said inflation, currently at a 15-year high, would peak in the second half of this year.

Britain in Europe, a pro-euro lobby group, said the report undermined a key eurosceptic argument that the Irish Republic's runaway inflation showed a booming economy like the UK's could not survive without the power to set interest rates. "The report explodes the anti-European myth that Ireland is a failing economy," said Kitty Ussher, chief economist at BiE. "Anti-Europeans in Britain should accept the truth about Ireland rather than attempting to misrepresent it for their own ideological purposes."

But Business for Sterling said the report clearly highlighted that monetary policy was too loose. "This should lead commentators to keep a very close eye on Ireland to continue to monitor the impact of giving up control of interest rates," said a spokesman, Andrew Haldenby. "I don't think anyone should crow about this report. We would support what Eddie George said, that if the UK had joined Emu on January 1 1999 would now be having an inflationary boom."

The IMF said the Irish economy would grow at 8 per cent this year. It said this reflected "fundamental improvements" in economic performance and a boost from its membership of economic and monetary union.

It warned overheating pressures had become more pronounced, with labour shortages driving up wages, infrastructure bottlenecks and a surging housing market.

"Medium term prospects remain favourable," it said. "However overheating in the short term poses a significant risk to this outlook."

It said higher inflation was to be expected because of Ireland's higher productivity and was sustainable as long as recent agreement on public sector were adhered to.

Austin Hughes, chief economist at IIB Bank, said: "Reading between the lines, they are saying 'well done, but handle with care'."

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