The Euro - one year on
Volume 40, Number 3, March 2003
This month I have invited my Consultant editor, John Andrew, to write the Comment. As a man whose full-time employment is in the banking Industry, not surprisingly he has turned to the Euro for his theme: It is now nearly a year since the financial face of Europe was altered. The euro was introduced on January 1, 2002 and within a matter of months replaced the familiar currencies of the continent such as the drachma, franc, mark and peseta. Although there were celebrations when the euro was launched, there were few a year later. As the euro’s first birthday approached, a survey revealed that barely half of the Europeans living in the eurozone wanted to keep the denomination. Although the German government was a keen supporter ofthe euro, the German population are not so keen. Indeed, 61 per cent of Germans want the mark reintroduced. No doubt as a publicity stunt, some shops are even still accepting marks. A recent poll reveals that only 27 per cent of Germans consider that the introduction of the euro was “good”, while 51 per cent claim that it was “bad”. Colloquial expressions can be very revealing. Now the German nickname for the euro is teuro, which a pun on the German for expensive. And how apt, as research by a German consumer group has revealed that 80 per cent of cafés and restaurants increased their menu prices when the euro was introduced and at the same time the prices of 10,000 retail products were also hiked up. The fact is that the euro has increased prices throughout the eurozone. In Greece the government admits to prices for fresh fruit and vegetables have risen by 95 per cent. In France some fresh foods have doubled in price, while the price of soap, shampoo and beauty products has increased by 40 per cent. Now this is strange, for when the euro was launched in January 2001 the French finance minister declared, “The euro must lead to lower prices”. When the euro was launched the two main advantages put to the public were: 1. within the eurozone it knows no frontiers and 2. prices of goods within the eurozone would be the same. There is no disputing that euros can be used in any country in the eurozone. However, there is clear evidence that its introduction was taken for a signal for businesses to increase prices. Research by he main Italian consumers’ association has revealed that prices have risen in 77 per cent of thenation’s shops and that as a result the average family is €770 (£500) a year worse off. In his New Year message, the UK Prime Minister Tony Blair said that “the political case for entry [to thesingle currency] is overwhelming”. He then referred to the economic tests devised in 1997 on convergence, flexibility, investment, financial services and growthand jobs. These tests are shrouded in mystery as far as the public is concerned. However, the UK government has promised a referendum on the subject, but when will this take place. Possibly not in 2003 as a recent internet poll has revealed that while 74 per cent of the respondents want a referendum, 54 per cent will vote no. So, the UK currency appears safe for a little while longer. John Andrew
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