The inflation surge can be largely attributed to the soaring budget deficit (and accompanying relaxed national pay agreements) 1977–1981, accommodated and reinforced by the sharp weakening of the Irish pound against sterling in the first years of the new system. This experience presaged the deep fiscal crisis of the 1980s.
That crisis, which was exacerbated by the UK recession, can hardly be blamed on the change in exchange rate regime. The growing reliance on foreign borrowing by the Government was already well under way in the final years of the sterling link and there is no suggestion that access to foreign borrowing was eased or necessarily hampered by entry into the ERM.