Mic

We just returned from a glorious two-week trip to northern Italy. This was probably my 10th time in the beloved country and my second since the Euro took effect (although the first was right at the beginning). I could not help but notice how much more expensive everything seemed. I'm not even talking about the weakened U.S. dollar (which certainly made matters worse!), but rather the actual prices of goods, services, restaurants, etc. We spoke to a number of locals who complained that when the Euro replaced the Lira, merchants took the approach of 1,000 lira = 1 Euro (as opposed to .50, as they should have). While something eventually has to give (given that this contradicts the laws of economics), Italians are rightfully complaining that they can no longer bear the cost of living as their salaries have not increased proportionately with the cost of living. Did anyone have similar observations? Is this just an issue in the more prosperous north? I'd be interested in hearing your impressions of the effect of the Euro on the less wealthy Mezzogiorno.

ira

Hi Mic,

The Italians we spoke with last Oct also complained that prices had increased significantly when the euro was introduced.

GAC

Mic: I don't think you'll find a solitary Italian who does not complain about the "carovita", especially since the introduction of the Euro. Indeed, I read on the Italian press that there has been a significant reduction of Italian tourists on Italian beaches because of the increased cost of renting chairs and umbrellas. Restaurants, hotels, and gasoline have seen a huge jump in price.

TexasAggie

We met and made friends with several Italians who were vactioning in our hotel in Monterosso. They ALL said without exception how much the cost of living has increased due to the introduction of the Euro. They also asserted that salaries have not increased enough to cover the increase in their cost of living.

bobthenavigator

No question--everything is up. I predict a correction in pricing in the tourist industry based on fewer tourists.

DRJ

There is concensus that the introduction of the euro caused Italian prices to rise. More importantly,IMO, is the almost total destruction of the US economy by "W" and friends.

ira

>...More importantly,IMO, is the almost total destruction of the US economy by "W" and friends.<

Gee, I must have been away when it happened.

montyw

Between my last trips to Italy (July 2001 - May 2004) I have certainly seen an increase in prices for everything from basic food items to hotel room - I think the only thing that seems to have stayed about the same is the wine. That is probably due to the international competitive nature of the wine industry...

Budman

<"I think the only thing that seems to have stayed about the same is the wine. ">

That's GREAT news!!!!!

Actually, I think the Italians got screwed when they switched from Lira to Euro because most of the prices were rounded upward.

Hosehead

Not too long after adoption of the Euro, i took a side trip to Dublin from the UK. I was surprised how much more expensive Dublin seemed to me than even London.

Talking with people i worked with in the UK and then later on in Holland, I think that prices have risen pretty much everywhere the euro was introduced.

Ingo

People are complaining all over the Euro - countries. Also here in Germany. The situation in Italy is particularly bad. Inflation has always been higher in Italy than in most other countries in the EU.

Now that Italy uses the Euro the tourists cannot take benefit from the usually weak Lira - so the effect for tourists is still worse.

I.

Eleni

same thing in Greece -- when the Euro went in, the merchants used it as an excuse to raise all the prices

Alec

Yes, there was a big hike in headline prices (restaurant meals, hotel rooms, cafe prices etc) when euro was introduced (2.5 years ago). Since then, the inflation rate in the Eurozone has been no more than 2-2.5% per year. Rise in gas prices is universal, not just in eurozone. Since 2002, US$ has declined by about 20%, so everything seems more expensive compared to two years ago, let alone 3-4 years ago. Coming from UK (where sterling has declined against euro only by about 5% since 2002), and with similar inflation, I find prices in eurozone pretty stable, and on the whole cheaper than what I normally pay at home (fuel, hotels, meals, groceries). I've found Southern Ireland to be around 20-30% more expensive for normal expenditure, except B&B (similar), fuel (15-20% less) and ice cream (1 euro for a huge cone!).

DAJ

Ingo, you stated, "Inflation has always been higher in Italy than in most other countries in the EU."

Why is that? Curious....

Thanks for your insights

mikemo

Hmm, seems something similar has occurred here in DFW: prop taxes, utilities, medical insurance, gasoline, up 20% - offset a bit by "W's" tax cuts - in the last 18 months.
M

whoknew

I think the combination of the "rounding up" of prices in Euro countries along with the weak US$ has made for a double whammy. The rising of prices in the US (housing, gas, etc.,)is also a contributing factor. (Fewer disposable dollars to spend).

I have a friend in The Netherlands and he has commented on the economy in that country as not being good. He states they are no fans of the Euro and has not seen any benefit of the switch.

molker

Several days ago, a newspaper here in Vienna reported that summer tourism is down by 15-205 in Italy this year.
Cause- very high prices there
Numerous other countries offer much better values
Examples- Croatia, Turkey, Tunisia

Most residents of countries ( including my wife)that now have the euro found that when the conversion from their old currency to the Euro a terrible rise in actual prices for most all goods occurred. Numerous comparisons of former and current prices find large increases especially to food items.
This was not due to inflation or political events.
Thus the observation of the original poster is certainly correct.

m_kingdom2

It's all a matter of perspective. If you were from Paris, Tokyo, London, etcetera, you would all have had my experience of Italy. In London, everything is priced highly when compared to other cities, only Tokyo is more expensive. When I visit Italy, everything there is cheaper, so I can't say it's expensive. Yes, it's more expensive than times when the Euro was just a dream (or nightmare). You must, however, remember that prices go up over the years, regardless of currency. Prada is around 20-30 per cent cheaper in Italy, as our other designers, so please appreciate that!

molker

I believe some posters miss the message of the original poster.
Yes, it is much more expensive. Much more than the rate of inflation or normal increases over time.
No attempt is being made to compare these costs to other foreign cities but rather to prices previously found in Italy in prior years.

Note: 15-205 in my prior post should be 15-20% ,thus saving Mk2 a correction memo.

Ingo

DAJ - difficult to say why. I have read and heard following:

First, the public debt is extremely high (more than 100% of the gross domestic product) and this caused a high interest rate.

Second, there is not really an active competition among the sellers. Also, many prices are fixed by public authorities.

Third: Manufacturers have problems to cut costs (read: releasing employees) due to strong unions and restrictive law while productivity is often low.

With the Euro the interest rate went down, but of course they cannot devaluate the Lira anymore ...