Nobody claims that inflation here must be at precisely the same level as in the euro area generally. It is reasonable to expect some differential at this time in view of our economic conditions but there are obvious limits. The point I want to emphasise is that, if present trends persist, we may have a sharp loss of competitiveness on our hands.
One of the inevitable consequences of an integrated European economy and a single currency is the strong tendency to centralise financial activities in the larger centres and an increase in cross-border competition. This is a threat to the Irish financial services industry, which has been expanding vigorously in recent years.