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Last Updated: Friday, 2 April, 2004, 00:50 GMT 01:50 UK
Why diners foot the bill for euro changeover
By James Arnold
BBC News Online business reporter

Cafe scene
I wonder if they'll take deutschmarks?
We shouldn't worry our silly little heads about sneaky price hikes, policy makers assured us when Europe's single currency was rolled out two years ago.

The European Central Bank (ECB) found "no evidence of a significant impact on prices"; official eurozone inflation figures ambled along below 2%.

Consumers knew that was baloney at the time, and now the evidence is mounting that they were right.

In some sectors (notably catering) and some countries (notably France and Italy), euro-related price gouging seems to have been rampant.

See Venice and diet

The latest evidence of this comes in a paper* scheduled for release at next week's Royal Economic Society annual conference.

Giancarlo Marini, an economist at Rome University, was spurred to action when he was eye-poppingly overcharged in a Venetian restaurant.

Together with colleagues Fabrizio Adriani at Bristol University and Pasquale Scaramozzino from London, he has produced what may be the most thorough analysis of European restaurant prices before and after the euro changeover.

To do this, the three economists compared the 2002 and 2003 editions of the Michelin Red Guide - a useful source, since it can be assumed to filter out the more recklessly unscrupulous of restaurateurs.

Mind the gap

What they found can only be explained by concerted fiddling.

Restaurant price hikes
In the three eurozone economies they studied, restaurant prices jumped from one year to the next - by as much as 5.5% in Italy; outside the eurozone, meanwhile, the average bill remained more or less static.

When the analysis was narrowed down to tourist-oriented joints, the difference between eurozone and non-eurozone prices swelled to 6 percentage points.

Even inside the eurozone, prices at restaurants that catered mainly to an unvarying crowd of regulars - diners well qualified to spot an illicit rise - remained steady.

Consuming interest

The results look credible.

The authors took pains to allow for legitimate sources of restaurant inflation - high food costs due to seasonal bad weather, allowable rounding-up of euro prices, and the introduction of new menus in the new year.

Indeed, the authors reckon their figures underestimate real restaurant inflation.

And the study is only the latest in a long line.

According to Dominique Forest of BEUC, the European consumers' association, price-gouging has affected everything from Irish health services to the Austrian lottery.

"The Italians may have made the most noise about it, but this has been a problem throughout the eurozone," he says.

Could do better

With three EU states, including Britain, dawdling on the threshold of the eurozone, and 10 new members keen to get in, the issue is not just of historical interest.

Paying for a beer with euros
Don't expect much change from that
BEUC wants to see greater strictures in place for future changeovers - in particular, a long-standing obligation to print prices in both currencies.

Mr Forest points out that supermarkets, which in many countries have voluntarily continued to display dual prices, have won a greater slice of retail trade since 2002.

In Italy, long the preserve of the neighbourhood boutique, this shift has been most marked.

North and south

The only sure remedy for euro-inflation, economists say, is competition.

The more clunkily-regulated eurozone economies - France, Greece and Italy, for example - have tended to provoke more rip-off complaints than the liberalised north.

Fabrizio Adriani argues that the closely-packed restaurants of Italy's tourist hot-spots may be more prone to collusion than competition.

In Britain, notionally Europe's freest market, euro inflation may not prove so severe.

Unfortunately for europhiles, the more loudly eurozone shoppers complain, the less inclined Britain will be to take that risk.

* The Inflationary Consequences of a Currency Changeover: Evidence from the Michelin Red Guide; Fabrizio Adriani, Giancarlo Marini, Pasquale Scaramozzino; January 2004.

Return to story

Italy in a froth over euro cheats
18 Jan 04  |  Business
Berlusconi goes cool on the euro
21 Dec 03  |  Business
'Euroflation' sparks Greek boycott
03 Sep 02  |  Business

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