In the age of the euro, consumers now have the power to compare prices in 12 different states
The introduction of Europe’s new currency, the euro, is another reminder of the value of things in hard currency, and that everything in the end revolves around money. The use of the same currency in 12 European states facilitates the comparison of prices and values over a broad geographical area, intensifying competition and offering consumers a broader choice. Increased competition means greater insecurity. It will be easier to compare the Greek economy’s performance with that of other countries, showing up whatever weaknesses had been concealed under the different parities. Of course, none of this will happen overnight; no one will suddenly be able to compare the advantages of shopping in Athens, Rome or Frankfurt. What is certain is that sectors of the Greek economy will become more and more globalized, revealing opportunities and risks that were not in evidence only a week previously. This is perhaps the most important effect of the euro. So the new currency is not only a new tool for daily transactions, but essentially symbolizes incorporation into a greater area in which we will be living. Different prices As of yesterday, about 300 million people from Cork to Crete and Kemijarvi to Cordoba are paying and being paid in the same notes and coins. The punt, the drachma, the mark and the peseta are going out of service. No more will holidaymakers traveling within the eurozone have to get used to a different currency, or work out how much more expensive a Big Mac costs in, for example, Belgium, or whether that lovely leather bag in Palma de Mallorca is a steal at 59,000 pesetas. Dilemmas such as these will be a thing of the past, but the effects are as yet unknown. Will prices level out across the eurozone, or will differences remain? Experts who have been studying questions such as these for some time have not been able to agree. Last October, Merrill Lynch published results of a survey which concluded that the increasing transparency of prices throughout the zone would raise inflation rates in Spain and Italy, while pushing prices down in Germany. A month earlier, Goldman Sachs announced that the new currency would not affect the cost of living either way. There are huge disparities in prices, wages, and VAT charges between the eurozone’s north and south. For example, there are considerable price differences between five basic consumer products – a jar of Nutella, a hamburger, a book, a personal computer and a car – in all eurozone states (see graph). It appears that no country has a monopoly on value for price. In Germany food is cheap, as are computers, while CDs are more expensive in Spain than anywhere else. This doesn’t mean, of course, we are going to start buying fresh bread rolls from Paris or read «Harry Potter» in Portuguese. However, it might mean more cross-border traffic in future, as people search for better prices. Buying VWs from Greece German automobile manufacturers should already start worrying about losing customers, as perhaps no other product is as inexpensive as cars outside Germany. The Volkswagen Golf, for example costs 4,200 euros less in Greece, although the price is increased here by 76 percent due to taxes and tariffs. Germans who know the market will buy the car at its pretax price, paying only 16 percent (German VAT) and then importing it into Germany. Therefore it will continue to be worth buying cars abroad and will continue to be for as long as there are taxation disparities from one country to another. According to one Volkswagen representative, pretax prices in some countries should be lowered if sales are to be satisfactory. «This is the only way to confront high taxes,» he said. The automobile industry is doing what it can to defend itself against profiteers, but their task is made harder by the wide discrepancies in specifications for vehicles and spare parts. Authorities in Brussels, however, say that the industry’s protection tactics are not exactly in the spirit of fair competition in a free economy. Volkswagen and Opel have already been severely sanctioned and Daimler Chrysler is now being threatened with a 72-million-euro fine. Some firms are already treating Europe as a single market and charging the same prices across the board. Since last October, all Apple computers have been sold at the same wholesale price throughout Europe, although this policy has not filtered down to the consumer, because of VAT disparities from one country to another and the fact that Apple’s suggested retail price is not binding. Local prices are up to the local distributor. In a country with relatively low wages, such as Greece, Apple computers are more expensive than in a country where competition is greater, such as Germany. Sources at the European consumer protection center believe prices of electronic and telecommunications goods will even out, meaning that the cost of household appliances, which has always been low in Germany, could rise. The Internet allows consumers to compare prices easily, but neither the Internet or the single currency can overcome the final obstacle. Tastes vary from one country to another, although they can be influenced. The results of the European Union’s Scoreboard study show that prices of certain brands vary by up to 40 percent. Retails prices of cosmetics also vary from country to country according to whether they are considered as a mass consumer product or a luxury item, a policy which is likely to become more and more evident to consumers.