Euro passes Italian menu test

Date: 17/02/05

Consumer perceptions that the change-over to the euro caused restaurant prices to double in 2002 was exaggerated according to a new report from the Centre for Economic Policy Research.

The study examined restaurant prices in Italy, where, during the switch to the euro notes and coins, some newspapers reported that prices were doubling in restaurants and cafés.

The report which examined price trends in 1998-2004 noted that prices rose by about 9% in 2002 (the year of the changeover to the European single currency). This was actually smaller than the 10% rise of the previous year and should, the report says, "induce caution in attributing a large inflationary effect exclusively to the introduction of the euro banknotes".

The report also noted that the average price of a meal rose by 40% in 1998-2003, suggesting that the shift to the euro focused people's attention on price rises that they might not otherwise have noticed. And it says that the shift also forced restaurants that might not have changed their prices to do so because they were changing their menus anyway. The change was higher in areas with fewer restaurants and therefore less competition.

In 2003 and 2004, prices remained relatively unchanged. The report says that the increase should now be reabsorbed, "although it is too early to have decisive evidence".

A spokesman for the EU consumer association BEUC said: "We conducted a survey of price changes in February 2002 and July 2002 and the outcome was quite clear. All over the eurozone there were price increases not just in restaurants but in cafés, newsagents, theatres and cinemas.

"It is fair enough to say that the increases were not as high as perceived but it doesn't really matter. "It happened and it had a huge impact on consumer confidence."

He added that the European Commission should try to ensure that the same situation did not occur when the new member states take on the euro.

Benjamin Angel, who works in the cabinet of Joaquín Almunia, the commssioner for economic and monetary affairs, agreed that the change-over had "disturbed customer perception". He said that since 2002 there had been a growing difference between real inflation and consumer perception.

"This fear was exported to the new member states," Angel said.

The EU executive will push for retailers to display their commitment to price stability via stickers to give consumers confidence in prices and also rapidly monitor price changes when the euro comes in.

"We need to nip any problems in the bud more quickly than we did in 2002," added Angel. After euro coins were introduced in 2002 member states only produced information on price changes in March, by which time it was "too late to reverse consumer perception".

According to a report published by the Centre for Economic Policy Research consumer perceptions that the change-over to the euro caused restaurant prices to double in 2002 had been exaggerated. The study examined restaurant prices in Italy, where, during the switch to the euro notes and coins, some newspapers had reported that prices were doubling in restaurants and cafés.