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To: TobagoJack who wrote (8279)	9/6/2001 5:31:30 AM
From: elmatador	Respond to of 74559

If the low spending during he seasons' was not enough to dump the economy. We have the Europe effect: Launching the Euro will cause the spending to be depressed in January as customers wait to 'get' the prices. The price is right Published: September 5 2001 19:11GMT \| Last Updated: September 5 2001 19:13GMT European consumers are worried. Two-thirds of the public think that companies will exploit the introduction of euro notes and coins to raise prices. Officials at the European Central Bank disagree. One side must be wrong. Anecdotes abound. Unilever has admitted to accelerating some price increases before January 1. A German investigation by the broadcaster ARD suggested that retailers were rounding prices up to convenient euro- denominated price points. And Laurent Fabius, the French finance minister, has accused some companies of using the euro as a pretext for raising prices. But hard evidence of abuse is scant. Mr Fabius also acknow-ledged that there is no link between French inflation and the euro cash changeover. On Wednesday the German statistical office published a study of 18,000 recent price changes, which found "no impact worth mentioning". Nevertheless, the demise of national currency denominations presents companies with difficult pricing decisions. Simple price points, for example E9.99 or E10, benefit everyone. They speed transactions, reduce the need for small change and are easy to remember. Rounding down might win consumers' favour at the cost of lower margins. Rounding up could damage a company's reputation. All of this is complicated by dual pricing, which will continue for the first two months of 2002 - long after national currencies have become rare. Little can be learnt about pricing decisions from national currency exchange rates to the euro. Take Germany as an example. One euro buys exactly DM1.95583. The closest euro price point for a DM199 product is E100, a price reduction of 1.7 per cent. But the most obvious euro price for a DM250 product is E129, an increase of 0.9 per cent. History provides few answers. The replacement of the Ostmark was followed by inflation in eastern Germany but that was caused by previous price restrictions, not the switch to D-Marks. Inflation rose after decimalisation in the UK but it also coincided with wage increases and loose fiscal policy. The most likely impact of euro notes and coins is a small spike in inflation, particularly if confusion is widespread. In the longer term, though, greater competition and price transparency should lead to lower prices and more efficient markets. Governments' role is to provide clear and objective information on the transition. Political point-scoring will simply undermine confidence. Competition must be encouraged. And to set an example, the average price of government services and fines should not rise.