EPA

That can't be right

SO MUCH for the benefits of a single currency: over the past year, at a time of negligible inflation in Europe, daily newspapers in Italy have raised their cover prices by around 18%. At a restaurant in Rome, a plate of spaghetti carbonara costs almost 20% more these days. Ditto the foie gras and vegetables bought in a street market in Paris. These increases have mostly come since January 1st, when euro notes and coins were introduced. Despite the reassurances of politicians of all hues, has the euro provided an excuse for unwarranted price hikes?

In Germany, central bankers have staunchly defended the line that the euro has, if anything, reduced prices. But price increases in some areas have been so blatant that the government has finally come clean. Hans Eichel, the finance minister, has admitted that consumers are indeed paying higher prices “in some sectors”, notably in food and service industries. Sceptical consumers have dubbed the new currency the “teuro”, a play on the German word for expensive. Bild, a German tabloid, has appointed a euro “sheriff” to hunt down price-gougers.

Down with the euro then? Unfortunately for eurosceptics, the picture is murkier than at first appears. General price inflation in Europe is hardly at shocking levels, despite big increases in the prices of basic commodities such as energy, which have nothing to do with the euro. In France, for example, the consumer-price index has barely moved since January, and is only a little up on a year ago. In the Netherlands, France and Italy, leading retailers were co-opted into freezing prices during the first few months of the new currency.

Moreover, even acknowledged price increases are not always what they seem. From Valencia to Vienna, it is still too early to separate the effects of the euro from price changes that, year after year, follow the cycles of food and goods production. Statisticians say it will take them a while yet to sort out what is genuinely due to opportunistic price hikes by retailers.

One thing is worth noting, however. Central bankers and politicians who devised the euro have no right to complain if prices are rising. They planned the introduction so that the big costs fell not on financial institutions, but on retail businesses with tills full of cash. It would be small wonder if the result were higher prices at many of those tills.

Copyright © 2002 The Economist Newspaper and The Economist Group. All rights reserved.