WRITTEN QUESTION E-1713/02

by Raffaele Costa (PPE-DE) to the Commission

(13 June 2002)

Subject: Price increases following the introduction of the euro

As expected, the introduction of the euro has led to price rises in almost the whole euro zone. In Italy and Germany alarm has been caused by this phenomenon, which affects the weakest strata of society.

Official inflation figures do not reflect reality, nor does the price index used by the various governments.

The Commission claimed that the price increases (of 0,1 or 0,2 %) would be perceptible for no more than two months. On the contrary, they are continuing to rise, even though many national or international bodies do not recognise or try to hide the fact.

Many politicians say that we cannot go back (as many people would like). It is true, we cannot go back; however, nor can we accept all the increases without taking appropriate political and financial measures.

What steps has the Commission considered or is it about to introduce?

Answer given by Mr Solbes Mira on behalf of the Commission

(30 July 2002)

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

Eurostat has issued a press release in May 2002 that analyses trends in prices over the last few months. Results take into account a wide variety of sectors of the economy so as to cover the entire economic sector(1).

Eurostat's measurements of the harmonised index of consumer prices (HICP) take into account a widely comprehensive basket of goods. HICPs are harmonised inflation figures required under Article 121 of the Treaty of Amsterdam (109j of Treaty on European Union). They are designed for international comparison of consumer price inflation. The HICP covers those goods and services which are included in household final monetary consumption expenditure(2) Price changes as measured by the HICPs, the Monetary Union Index of Consumer Prices (MUICP), the European Index of Consumer Prices (EICP) and the European Economic Area Index of Consumer Prices (EEAICP) are used as measures of inflation in the Member States, in the euro-zone, in the Union, and in the European Economic Area(3).

HICPs provide the best statistical basis for international comparisons of consumer price inflation in the European perspective. HICPs cover virtually all areas of household final monetary consumption expenditure (HFMCE).

Inflation in the euro area has peaked in May 2001 (3,3 % annual increase of the MUICP) 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 Member States 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 %(4).

Inflation has since then been characterised by a descending trend. It reached 2 % in the euro area in May 2002 and is estimated at 1,7 % for the month of June 2002. These values are very low.

Nonetheless, it is clear that some sectors of the economy have been characterised by an increase in prices. Eurostat's study on euro changeover effects analyses HICP data on a quarterly basis. Results indicate that some of these increases relate to categories which are subject to a certain degree of public regulation and taxes. These are mainly the alcohol and tobacco categories that recorded a 5,9 % annual inflation rate in January 2002. If the Commission excludes the food category, it is possible to observe an increase in prices in some categories of services, mainly hotels and restaurants, some health-related services and some repair services. The total effect of these price rises on the HICP is very limited, with an estimation between 0 % and 0,16 %.

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 generalised unjustified perception that prices have risen following the introduction of the euro banknotes and coins.

(1) The press release No 58/2002 issue on 16 May 2002 may be found at the following internet address: http://europa.eu.int/comm/eurostat/Public/datashop/print-product/EN?catalogue=Eurostat&product=2-16052002-EN-AP-EN&type=pdf.

(2) . Further information on this index can be found in the Compendium of HICP reference documents available on the Eurostat website. http://europa.eu.int/comm/eurostat/.

(3) The MUICP is used, among others, by the European Central Bank (ECB) as a main indicator for monetary policy management for the euro-zone.

(4) Eurostat.