Shattering the Euro Myth | Business| Economy and finance news from a German perspective | DW | 31.05.2004
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Shattering the Euro Myth

Ever since Germany replaced the Deutsch Mark with the Euro in January 2002, consumers have been griping about a hike in prices. A new study proves that it's all in their heads.


Germans think the new currency has hit their wallets hard.

Academics at the Technical University in Dresden gave 1,500 people two menus. One with dishes listed in Deutsch Marks, the beloved currency that accompanied Germany out of the ashes of WWII. One with the euro, the symbol of monetary unity in Europe that has, at times, been anything but since going into circulation in 12 countries on Jan. 1, 2002.

The result was to supposed to be the last word on a debate raging in Germany since the euro's introduction: Have prices really risen since the Deutsche Mark left?

Consumers certainly think so. Anti-euro campaigners warned of cataclysmic prices increases following the introduction of the euro. Almost immediately after the euro came into regular circulation, Germans complained that everything from cars to the beloved Turkish sandwich, the Doener, had seen markups.

Can I pay with Chiemgauer?

"Long before the euro was introduced, we were being told that the cost of living would get more expensive after January 2002," Stefan Schulz-Hardt, who helped organize the study told Die Welt newspaper.

Some chanelled their aggression by calling for boycotts of the "Teuro," from the German word "teuer," meaning expensive. Department stores offered customers the chance to pay in Deutsche Marks. The special deals were designed both to let customers get rid of their remaining Marks and to encourage spending in a currency Germans felt more comfortable with.

A high school in the small town of Prien even made up a new currency, the "chiemgauer," that soon became a popular alternative in town stores.

A psychological price increase

All the while Germany's Bundesbank as well as economists remained adamant that prices had not rocketed. The Bundesbank did record a 2.1 percent hike in prices upon the euro's introduction, but the national bank attributed the increase to energy, insurance and tobacco taxes introduced at the same time.

The bank also saw found something else in its most recent report: By assuming 100 euros was automatically 200DM and not the bank-mandated rate of 195,58DM, the consumer "increased" prices by 2.3 percent.

The Dresden study proved much the same thing.

Experiment participants were asked to guess how big a price difference existed between the two currencies. The study showed that participants thought a price increase of 15 percent to be closer to 20 percent. When the academics gave the participants menus with no price increase at all, they thought the "euro menu" was 10 percent more expensive. Whether that's the final word remains to be seen. But among the many reasons Germans have had for keeping their wallets closed, the "Teuro" argument, at least, seems to be losing currency.

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