NEWS

Greeks learn quickly, but spend just as fast

It has now been a year since euros replaced drachmas in Greece. The 10,000-drachma note, formerly the largest denomination, seems very little in comparison to the 500-euro note, which is worth 17 times as much. Along with the other 11 countries in the eurozone, Greece was ready to welcome the new currency. So were a number of other countries, both in Europe and elsewhere. Throughout the whole of North Africa, Asia and South America, and Eastern Europe, Greek visitors can pay for goods and services with the money they had in their pockets when they left home. Prices are often displayed in euros as well as dollars and the local currency. Fifty-three percent of all Europeans and 57 percent of Greeks take only euros with them when leaving the eurozone; only 16 percent (and 24 percent of Greeks) choose to take dollars. Europeans’ greatest complaint about the abolition of their national currencies is the increase in prices after conversion to the euro, whether because prices were rounded off upward, or because we forgot how much a product or a service actually costs. Then there is the effect on inflation, which in Greece is 3.5 percent. All these factors contributed to Europeans’ negative impression of their new currency. Things got worse after the summer, when people were stung by prices at bars and restaurants. Germans, who have the most experience with stable prices and a strong mark, were the most dissatisfied. Over half said the euro did not help contain prices and 52 percent felt it had not benefited Germany. When we compare our own experience with that of the other member states, we get a more realistic idea of the situation. The majority of people in the Netherlands believe that price conversions have been at the expense of consumers. The European Commission made a special announcement admitting this was the greatest problem for the public, but that to a great extent, the impression was due to seasonal price increases or rises in the price of certain categories of goods. For example, cafes and restaurants throughout the eurozone increased prices by 4.3 percent, double the average inflation rate. In Greece, this increase was 8-10 percent, even worse considering the extent to which these services are used here. When one adds the knock-on effect of price hikes for fresh food, fuel and meat, then one is easily persuaded that the euro is to blame for higher spending. In Brussels, as in Athens, it is believed that this situation is a temporary one. This year the new currency will be fully assimilated, absorbing any inflationary effects. This is also the view in Frankfurt, at the European Central Bank, which is obliged to follow a rates policy on the euro, to keep inflation at around 2 percent. It is this policy which creates problems for Greeks. European bankers’ certainty that inflation will fall, combined with obstacles faced by the European economy in its effort to get going again, explains the ECB’s decision in early December to reduce the basic interest rate on the euro to 2.75 percent, thereby reducing bank interest rates to very low levels and wiping out interest on savings deposits. The only real, effective cure is to reduce our own inflation, because one of the characteristics of every single currency zone is that a currency can have only one interest rate, while every region, in this case every country, has its own characteristics and problems, and its own inflation rate. It is clear that the coming of the euro has nothing to do with the difference between inflation and interest rates, but it has made us more aware of the problem. Unfortunately, however, dealing with it will take many years and calls for a determined effort. As was to be expected, Greeks do not have any real practical problem. We are thinking in euros (44 percent say they calculate solely in euros, 35 percent do so some of the time and only 20.4 percent still think in drachmas). In comparison with other Europeans we have clearly adjusted more easily, as is evident from the speed with which drachmas were withdrawn from circulation, according to Thodoros Pantalakis, deputy governor of the National Bank. There were also few mistakes or problems, particularly considering the panic that gripped many people before the euro arrived. Of course, there are real difficulties in working out the value of very expensive items such as property and automobiles. It is easier to think about paying 150,000 (euros) for a home than 51 million (drachmas), or 10,000-20,000 (euros) for a car. Only the Irish say they usually think in euros, but only 7.8 percent of the Dutch, 9.9 of the Belgians and 10.9 percent of the Portuguese calculate large purchases in euros, compared to 23.4 percent of Greeks. All ages and educational groups appear to be adjusting at similar rates, although younger people generally appear to have adjusted more easily to the new currency. More men seem to prefer major calculations in euros (28 percent, compared to 19 percent), but 19 percent of men and 22 percent of women do so for daily purchases. The euro notes’ bright colors and other differences have aided easy recognition, although some coins – particularly the 1-cent coin – are considered awkward. People usually use 10-cent, 20-cent and 50-cent coins, the latter covering one-third of our needs. Apart from the Greeks and the Italians, 76.8 percent of eurozone residents do not feel it would be useful to have a 1-euro bank note. Hardly anyone in Europe has difficulty recognizing coins because of the differences in each country on the flip side. Greeks and Austrians are perhaps bothered the most. Meanwhile, many Europeans have shown an interest in the different «national» coins, collecting the initial series released. According to surveys, there are very few counterfeit notes (mostly 50-euro notes), amounting to just 7 percent of the forged notes circulating in the 12 eurozone countries before the euro was introduced. In other words, we have adjusted rather easily to what is an historic event both for Greece and for the history of Europe, which 65.4 percent of Greeks and 66.1 percent of other Europeans generally agree with.