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Two decades later, the euro cannot shake its reputation as a price engine

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PARIS: Europeans have been living with euro banknotes and coins for 20 years now, but many still point to the single currency for secretly pushing consumer prices up, despite much evidence to the contrary.

“The euro is a disaster, it’s catastrophic,” said Maria Napolitano, a 65-year-old Italian living in Frankfurt.

“With 100 deutschmarks, you could fill your shopping cart. Now, 100 euros is not enough to fill two bags.

This is an impression shared by many across the eurozone, from Paris to Rome, from Madrid to Athens.

Victor Irun, a 53-year-old teacher from Madrid, said that for Spaniards the changeover was “like stepping into a club for the rich without wearing the right clothes.

“You felt like we weren’t ready yet,” he said. AFP. “It was as if we were living in Spain, but paying with French or Dutch money.”

Some Germans even invented a new nickname for the single currency, “teuro”, a play on the German word for dear, “teuer”.

Perception and data

In a 2006 study, university professor Hans Wolfgang Brachinger compiled an index of “perceived” inflation among Germans, which measured a “felt” increase in consumer prices of seven percent between 2001 and 2002, against about two percent normally.

In reality, however, official statistics have shown no recovery in inflation in Europe’s largest economy.

“There was a very strong feeling in several countries that prices had gone up, and yet official statistics told us the opposite,” said Giovanni Mastrobuoni, professor of economics at the University of Turin.

In a detailed study on the matter, he tracked the prices of different everyday commodities in the euro area, from fruits, vegetables and bread to drinks and restaurant meals, and found that the prices of some inexpensive commodities had increased. actually increased due to the change to the euro.

And as retailers tended to round up rather than down when converting the price into the single currency, it was hardly surprising that people took notice and felt cheated.

“The things that you consume very often, the food, the coffee, things that don’t cost that much. Over time, they would shape your perceptions as these are the most frequent transactions, ”Mastrobuoni said.

In France, the average price of a simple coffee in a bar fell from 1.19 euros to 1.22 euros between late 2001 and early 2002, according to the National Statistical Office, INSEE.

Headline inflation is not affected

According to Mastrobuoni, the phenomenon is even more marked in countries where the distribution sectors are less concentrated, as small retailers are more free to increase their prices.

The European Commission calculates that the real increase linked to the introduction of the euro is between 0.1 and 0.3 percent.

However, headline inflation was hardly affected as the prices of high-end products did not rise and in some cases even fell due to improved productivity.

For the 12 countries that adopted the euro from the very beginning, the average annual inflation rate was 2.3 percent in 2001 and 2002, according to the EU’s statistical agency Eurostat.

However, the picture varied from country to country.

In Spain, inflation was 2.8 percent in 2001 and 3.6 percent in 2002, while most other countries recorded constant inflation or, in the case of Belgium, Germany , Luxembourg and the Netherlands, slower inflation.

Pierre Jaillet, researcher at the Jacques Delors and Iris institutes in France, said that consumer profiles played an important role in making them feel a gap between the evolution of real and perceived prices.

“The average basket of consumer price inflation matches the average budget of an average urban worker,” Jaillet said.

The less well-off tend to spend more of their income on food, so they will be in a greater rush, he argued, noting that consumers generally remembered the price increases, but not the cuts. of price.