WSJE(5/28) Germans Turn Sour On Euro Amid Higher Prices (Europe cheats on inflation as the US )
By G. Thomas Sims
FRANKFURT -- Nearly five months after Germans obediently traded in their
beloved marks for euros with hardly a peep, the citizens of Europe's most
populous country are souring on the new currency.
The reason: growing evidence that shops, restaurants and taxis jacked up
prices when converting to the new currency on Jan. 1. Many of these businesses
blame the price increases on other factors, such as rising food and energy
costs. Consumers blame the euro.
Data published Monday gave hope that inflation will continue to ease in the
future. Still, the outcry has become so loud that the German government, in the
middle of election year, can no longer ignore it. On Friday, Germany's consumer
minister, Renate Kuenast, will sit down with retailers, restaurateurs,
employers, unions and consumer-protection agencies.
Germans even invented a word for the phenomenon: "teuro." It is a play on
"euro" and the German for "expensive," teuer. The term has become so become so
widespread in the media that Matthias Wermke, chief editor of the Duden
dictionary, says that the nation's premier lexicon will consider adding the new
word in the next edition.
Officials say the euro-related price increases are the one hitch in an
otherwise smooth cash changeover, a huge logistical challenge involving 300
million people in 12 European countries. Germans are complaining more than
their neighbors, perhaps because the stable mark and its association with the
German Wirtschaftswunder, or "economic miracle," meant the euro was never
terribly popular to begin with. Germans swallowed it with surprisingly little
resistance earlier this year, but a recent survey by the respected Allensbach
institute shows that 54% of Germans would like to reinstate the mark. Germans
have lower tolerance for inflation than other euro-zone countries. During the
mid 1990s, inflation rates in Greece were typically above 8% and in Italy above
5%, compared with just above 1% in Germany.
The debate is coming at a bad time, when the euro-skeptical Sweden and U.K.
are considering whether they should also adopt the euro. Politicians and other
officials are having a hard time convincing the public that the euro, the
symbol of European integration, is not entirely to blame for the higher prices.
The chief economist of the European Central Bank, the manager of the new
currency, told an audience of lawyers and economists in Essen last week that
overall the euro has had little effect on prices.
"I can see from the look in your faces that you don't believe me. My wife
doesn't believe me either," the ECB economist Otmar Issing said.
Wim Duisenberg, the bank's president, admitted to a "problem of perception,"
noting that many prices have dropped. But he also said the "process" of using
the euro to increase prices "may still be going on" in some sectors. One larger
implication of the inflation fears is that they make Germans less willing to
spend, bad news for an economy just emerging from a recession even though
business confidence is on the rise again, according to new figures on Monday.
Hans-Joachim Koerber, the chairman of Metro AG, said last week that Germany's
largest retailer is getting hit by the belief that the euro caused prices to
rise, though he says the store didn't hike any prices when the cash was
introduced.
Some shops are once again showing prices in marks to reassure customers.
Schaffrath, a big furniture store in Duesseldorf, only printed euro prices
beginning Jan. 1. The shop found that customers were perplexed. The store has
since reverted to showing prices in both euros and marks. Frank Phlipsen,
manager of marketing, says the company has no plans to go back to pure euro
pricing.
No matter what company officials say, prices did go up initially. German
consumer prices were falling, or at least staying steady, from month to month
during the second half of last year before the cash introduction. But in
January, prices rose 0.9% from December. Since then, the month-on-month rate
has steadily declined to around 0.1% in May from April. Some sectors were
affected more greatly than others. Food prices rose 3% in January from
December, though they are now declining again. Service costs also rose 0.7% in
January and February, after falling for seven out of 12 months last year.
It is difficult to tell exactly what is behind the price increases. The
consumer-protection agencies of three German states -- Baden-Wuerttemberg,
Brandenburg and North Rhine Westphalia -- have registered some 1,700 complaints
so far, but companies tend to deny the euro played a role.
Consider, though, one of Germany's most popular fast foods: the Turkish
kebab. The price for an Iskender Kebab at the Antalya Grill in Bielefeld rose
overnight from 12 marks to seven euros, a price increase of 14%. The Turkish
restaurant admits to raising prices on Jan. 1, but says it has nothing to do
with the euro. The managers say rent has risen 20% since it last raised prices
in 1995, and some products such as lettuce are now twice as expensive.
Elsewhere, parking for nonguests at the Novotel Offenbach outside Frankfurt
rose from 12 marks to 10 euros, a 63% price increase. The hotel denies the euro
played a role. Instead it wanted to "motivate" nonguests "to park elsewhere
because they are blocking our urgently needed capacity for customers."
The early-bird price at the Therme Erding swimming complex in Erding rose
from 13 marks to 7.50 euros, a price increase of 16%. Therme Erding admitted
that "it is correct that not all of our prices at the turn of the year were
converted from marks to euros neutrally." The pool made "enormous" investments
since opening 2.5 years ago, and costs for energy have increased 30%, it said.
(END) Dow Jones Newswires 28-05-02
0430GMT |
