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EDITIONS
 Tuesday, 14 January, 2003, 16:42 GMT
Why Italy is turning back to the lira
Marco Pizzi
Marco Pizzi says people prefer paying in lire

At Top Store on the outskirts of Milan, shoppers queue three-deep for the till.

A young woman pulls a stack of notes from her wallet to pay for a pair of shoes.

The only thing that isn't going up is our wages - so, at the end of the month we have less and less

Shopper
But they are not the official currency, the euro. They are lire.

"Everyone prefers to pay in lire because they know exactly how much they're worth," says Top Store's owner, Marco Pizzi.

"They're also suspicious that euro prices are higher than the old lira prices."

'Amazing response'

Italy's central bank will continue to exchange lire for euros until 2011.

Just before Christmas, Mr Pizzi read that many people had never got round to changing their old notes and coins.

Shopper
Are the Italians turning their backs on the euro?

So he decided to start accepting them as payment.

He was amazed by the response.

"It has been incredibly successful. There are still lots of lire around.

"We have already cashed 50 or 60 million old lira notes, and a few hundred kilos of coins."

Price inflation

In the centre of Milan, there's another queue - this time outside Gucci. It's the first day of the January sales.

The first time in months that the well-dressed people waiting patiently in line have felt able to afford things.

"I work in the fashion business so I know first-hand what's been going on," said a woman in a fur-trimmed suede jacket.

"Prices have gone up by between 20% and 30%."

Another shopper said: "The only thing that isn't going up is our wages. So, at the end of the month we have less and less."

According to a middle-aged man: "People have a big problem with the 1 and 2 euro coins.

"The lira coins were worth much, much less.

"So we are spending the euro coins without thinking, as if they were worth nothing."

National obsession

The normally dull subject of inflation has become the focus of an animated national debate.

Liras
The lira is making a comeback in some shops

In bars and cafes across Italy it's one of the main topics of conversation.

Television talk shows and newspapers are obsessed by it.

At the centre of the debate is the question of how fast prices really are going up.

The Institute for National Statistics, Istat, says the inflation rate is 2.5% for the year, and 2.8% for December.

'Vicious circle'

But an independent research group, Eurispes, says it is more like 29%.

Consumer organisations agree.

"It's mainly the basics, like milk, foodstuff, public transport, bars and restaurants, that have gone up," according to Maria Agnino, a lawyer for Codacons, Italy's largest consumers' association.

"It's because the shopkeepers and the producers took advantage of people's confusion during the changeover.

"Now it's become a vicious circle.

"Some shops are raising prices because the producers are raising prices.

"Other shops are raising prices because they see everyone else doing it."

Penalty call

Consumer groups are calling for the introduction of heavy fines for shopkeepers who raise prices without a good reason.

Italiian shoes
Inflation is hitting every sector

They point out that many of the other countries in the eurozone, such as France and the Netherlands, have much heavier penalties.

Istat admits there have been some sharp price rises over the past year - particularly for vegetables, cappuccinos and restaurants.

But it maintains that the methodology used by the independent researchers is unscientific.

"For a start, their figures are based on what consumers are telling them," said Gianpaolo Oneto, one of the main statisticians at Istat.

"It's hard for people to remember exactly how much something was a year ago."

"People also feel like prices are going up by more than they are because it's the everyday essentials that are affected.

"They're just not noticing the fact that the price of durables - things like computers, mobile phones and cars - are not rising at all.

"And the fact that wages are going up by less than inflation makes them feel poorer at the end of the month."

Irrevocably tarnished?

The government is considering tough new measures to try to keep inflation down.

One proposal is to reintroduce dual-pricing, so that consumers have a better understanding of what they are spending.

Another is the replacement of euro coins with notes, so that people do not spend so freely.

But critics say it is too little, too late.

They lament the fact that the euro, which was probably more popular in Italy than any of the other 11 countries in the single currency, has now become irrevocably tarnished.

See also:

09 Jan 03 | Business
08 Jan 03 | Business
02 Jan 03 | Europe
01 Jan 03 | Business
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