WRITTEN QUESTION E-1916/02

by Dorette Corbey (PSE) to the Commission

(2 July 2002)

Subject: Introduction of the euro

According to Eurobarometer 56, close to half the EU population thinks that the euro is pushing up consumer goods prices. According to a survey by the Netherlands' Consumers' Association, compact disc prices rose by 7,2 % between March 2001 and March 2002. In the same period, set-meal prices in restaurants increased by 6,2 %, on average, and by as much as 8,8 % in cafes. The euro was supposed to result in greater transparency and an end to exchange costs and thus lower prices. When the summer holidays came, people were supposed to discover the benefits of the euro abroad, since money no longer needs to be changed in the euro zone. Now that the introduction of the euro has resulted in large price rises, those benefits have vanished. At the same time, some old banknotes have not been returned, representing a profit for national banks and hence for national exchequers.

1. Can the Commission say to what extent inflation has risen in EU countries as a result of the introduction of the euro?

2. In what sectors and/or Member States have prices risen more than by the average rate of inflation?

3. Does the Commission acknowledge that it has a political responsibility to deliver on the pledge made to consumers and make sure that the euro finally benefits them?

4. What scope does the Commission see to flesh out that political responsibility? For instance, would the Commission support consumers' associations selectively campaigning against euro-related price rises and/or would it cooperate on naming and shaming strategies?

Answer given by Mr Solbes Mira on behalf of the Commission

(23 September 2002)

There is no statistical evidence that the euro changeover has caused a generalised price hike in any of the euro area countries.

Eurostat issued a recent press releases in July 2002 that analyses trends in prices over the last few months and addresses the euro changeover related issues. Results take into account a wide variety of sectors of the economy so as to cover the entire economy(1).

Inflation in the euro area peaked in May 2001 (3,3 % annual increase of the harmonised indices of consumer prices (HICP)) and has not since reached comparable levels. During the changeover period it is possible to observe an increase from an annual growth rate of 2 % in December 2001 to an annual rate of 2,7 % in January 2002. These increases can be traced to the hike in oil prices and prices of fresh fruit and vegetables. In fact inflation has followed a similar trend (from 1,9 % to 2,5 % annually) in the Union, thereby including the three countries not part of the euro area. In particular, from December 2001 to January 2002, yearly inflation increased from 2,1 % to 2,5 % in Denmark and from 1 % to 1,6 % in the United Kingdom. During this period, inflation decreased in Portugal and in the Netherlands. Italy saw only a minor increase in inflation from 2,2 % to 2,4 %(2).

Inflation, in the euro area, has since then been characterised by a descending trend. It reached 1,8 % in the euro area in June 2002.

The average rate of change in the euro-zone HICP between the first six months of 2002 and the last six months of 2001 was 1,4 %. This rate was the same as the six-month rate ending in June 2001 and close to the corresponding rates to June and December 2000.

The largest part of the price increases over this period can for most item groups -according to Eurostat's analysis be explained by a normal inflation pattern and by some special non-euro factors; in particular bad weather affecting fruit and vegetable prices, car and energy prices, and some significant tax increases on tobacco(3). These factors can explain as much as 1,2 rate points out of the total of 1,4 %. The contribution to the 1,4 % total of the changeover to euro banknotes and coins most likely falls within the range of 0,0 % to 0,2 %(4).

Nonetheless, it is clear that some sectors of the economy have seen a more pronounced increase in prices. Apart from food, some services, mainly hotels and restaurants, some health-related services and some repair services registered strong price increases. It is possible that due to the particularly sensitive nature of categories where prices have indeed risen, the effect on public opinion may be higher. This may explain why there is a general perception that prices have risen following the introduction of the euro banknotes and coins.

However, it should be remembered that the fundamental medium to long run anticipated effect of the physical introduction of euro banknote and coins is to improve the competitive environment across the euro area, and thus ultimately to raise economic efficiency as well as have a downward impact on consumer prices.

(1) The press release No 84/2002 issue on 17 July 2002 may be found at the following internet address: http://www.europa.eu.int/comm/eurostat/Public/datashop/print-product/EN?catalogue=Eurostat&product=2-17072002-EN-BP-EN&mode=download.

(2) Eurostat.

(3) The alcohol and tobacco goods registered a 2 % quarterly inflation q/q in 2002Q1.

(4) This range is slightly higher than the 0,0 % to 0,16 % range estimated for the month-on-month change between December 2001 and January 2002 and the quarter-on-quarter change between the last quarter of 2001 and the first quarter of 2002, as first published by Eurostat in February and May 2002.