Myths and Facts
MYTH: Experience shows that joining the euro area causes prices to rise
FACT: Many people believe that the introduction of the euro brought about major price increases.
It is true that when people started using euro cash on 1 January 2002, the prices did go up for some frequently bought, low-cost items, such as a cup of coffee, a loaf of bread, or a haircut – where prices are highly visible.
Studies by the European Central Bank, the European Commission and research institutes show that these price rises were concentrated in local, neighbourhood services that had little competition. However, they represent only a very small part of a consumer’s budget. In fact, the average consumer price increase due to the euro changeover was estimated to be only 0.1% to 0.3% of the 2.3% average inflation in the euro area in 2002.
In contrast, many other prices remained steady. Prices of hi-tech goods and clothing even continued to fall as technology and production processes became cheaper. But surveys have shown that it is everyday cash purchases which most influence consumer perceptions.
The Commission’s monthly surveys of 20 000 EU consumers show that when euro cash first appears, a ‘perception gap’ between actual and perceived price changes is created, with consumers in the euro area systematically overestimating actual inflation. Now, several years after the euro's introduction, perceptions are gradually coming back into line with reality.
Inform and prevent
The European Commission works closely with national authorities and central banks, consumer organisations and the retail industry to prevent abusive price rises when the euro changeover is implemented in a country that joins the euro area. Effective measures include extensive consumer-awareness campaigns and industry- or nationwide fair-pricing initiatives to discourage the abusive rounding up of prices.