WRITTEN QUESTION E-1192/02

by Erik Meijer (GUE/NGL) to the Commission

(26 April 2002)

Subject: Consequences of introduction of the euro: prices rises experienced by consumers and their nostalgia for the old currencies

1. Is the Commission aware that a survey carried out between 26 March and 2 April by the Catholic broadcasting association KRO and financial research institute Nibud among 2 500 Netherlands citizens revealed that, of those questioned, 80 % have seen their spending go up since the euro became legal tender, above all on daily shopping, clothes and leisure (going out, restaurants), whilst 17 % feel they have spent about the same and 3 % think they have spent less, as they are now hesitating to buy luxury goods that have risen sharply in price? And is it aware that these figures are very different than anticipated in January 2002 when, of those questioned in a similar survey, only 24 % felt they had spent more and 68 % thought they had spent the same amount as before?

2. Is the Commission also aware that 66 % of those questioned by KRO/Nibud think that prices have risen sharply compared with last year, 31 % that they have gone up slightly, 1 % that they have remained about the same and 1 % that they have fallen sharply, whilst in January only 26 % believed there had been a sharp increase and 59 % thought that prices had risen slightly and 14 % that they were unchanged?

3. Is it surprising, in these circumstances, that in January some 87 % of people were still converting prices into the old amount in Dutch guilders and that, by the end of the first quarter, that figure had only fallen to 86 %? And is it surprising that 57 % of people do not expect to be thinking in euros in 2002 (of which 12 % do not believe they will ever think in euros), 77 % say they miss the guilder and only 9 % say that the introduction of the euro has made them feel more European?

4. How does the Commission explain the fact that this verdict on the euro in practice is so unfavourable, even though 36 % of those questioned visited another country in the euro zone during the first quarter of 2002 and have therefore already experienced the advantage of no longer having to change their money?

Answer given by Mr Solbes Mira on behalf of the Commission

(12 June 2002)

1. The results of this survey are not surprising. The feeling that prices have strongly increased recently in the Netherlands is confirmed by the evolution of the Dutch harmonised index of consumer prices (HICP) which increased by 4,6 % between the first quarter of 2001 and the corresponding period of 2002. Consumers faced significant price increases since the euro changeover in January 2002 for some types of goods and services. Consumers form their own views of inflation by comparing the prices they pay over time for the same goods. They usually focus in the short term on their most frequent and most important purchases. With the euro changeover experience still fresh, consumers' opinions on euro-changeover inflation can therefore be expected to depend heavily on their experience of the prices for the small goods and services they buy repeatedly. Furthermore, it must be stressed that this acceleration in inflation started in 2001 continuing throughout the year, well before the introduction of notes and coins in euro. Indeed, according to the Dutch national consumer price index, computed by the Centraal Bureau voor de Statistiek, consumer price inflation in 2001 was the strongest since 1982 but the main factors of price increases were the rise in indirect taxation, particularly in the standard VAT rate, entered into force on 1 January 2001, and probably for another part accelerating wage increases.

2. However, it must also be acknowledged that the rise in consumer prices between the 4th quarter of 2001 (Q4/01) and the 1st quarter of 2002 (Q1/02) was faster than expected by most observers, including the Commission services as well as probably the Dutch authorities. This acceleration in inflation in the 1st quarter of 2002 is for a large part attributable to accidental factors, more precisely such as the bad weather in southern Europe, and increased energy prices, which according to the Dutch HICP led in January 2002 to a 15,1 % month-on-month increase in the price of fresh vegetables and a 5,3 % rise in the price of fruit. These factors and some significant tax increases (mainly on tobacco) can also explain most of the observed price change of 0,8 % as measured by the euro-zone HICP in Q1/02 to Q4/01. However, it may not be excluded that some upward rounding of prices in euro also played a role. Indeed, the euro changeover effects are likely to fall within a range of 0,0 % to 0,16 % estimated for the month-on-month change in the euro-zone between December 2001 and January 2002, and confirmed for the first quarter of 2002 compared to the fourth quarter of 2001, as published by Eurostat on 16 May 2002.

3. The Commission is not of the opinion that there is a causal link between the extent of consumer price inflation in Member States and the respective percentages of people already thinking in euro or still in legacy currencies. These percentages seem to have much more to do with the relative complexity of the conversion, which is itself related to the proximity of the conversion rate with a round figure.

4. The Commission has never expected that the adaptation process to the euro would be instantaneous. It is unfortunate that the introduction of the euro coins and notes has coincided in the Netherlands with a strong acceleration in inflation, of which it is not (and by far) the main reason. However, the Commission still firmly believes that the advantages of a single currency in the largest part of the Union will be experienced gradually by European citizens in the course of time, for instance as an increasing proportion of them, when travelling in other Member States, will experience the advantage not to have to change their national currency against the local one and to face the associated costs.