The French firmly believe the euro’s adoption significantly inflated prices, a notion stemming from the franc’s demise on January 1st, 2002. Is this accurate? The Dispatch investigates.
The iconic French baguette! Citizens used this staple to gauge price hikes. The public widely links the euro’s introduction to inflation, particularly for bread. Despite a baguette costing roughly one euro in 2021, prices haven’t skyrocketed. In 2002, upon the euro’s arrival, a baguette didn’t cost 1 franc as many assume, but 4.41 francs, equivalent to 67 euro cents.
Since 2002, baguette pricing has risen in line with general inflation, increasing by 30%; meanwhile, consumer costs climbed 26% between 2002 and 2020 according to INSEE data. The minimum wage, however, surged by 50%! Sébastien Faivre, INSEE’s consumer prices division head, stated, “We haven’t witnessed a widespread price surge after the euro transition.” The perceived increased cost of living in the early euro years can be attributed to merchants rounding prices upward.
Lingering Euro Skepticism
This practice fueled considerable distrust toward the euro, a sentiment that persists. “The rounding effect clearly boosted prices for frequently purchased goods (bread, pastries, coffee),” confirms INSEE, though this impact was far less pronounced for durable goods like major appliances, vehicles, and real estate. However, pronounced consumer anxieties about rapid price increases only extended to 2013, gradually waning since then.
In Toulouse, Airbus keenly monitors euro-dollar exchange rate shifts. In 2014, when the strong euro outperformed the dollar, Louis Gallois, then Airbus’s chief, declared: “A ten-cent euro rise against the dollar costs EADS* a billion euros in operating income.” Since then, export-oriented businesses have implemented currency hedging strategies to mitigate currency fluctuation risks.
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