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EU: Swedish Study Suggests Euro Not Bringing Uniform Prices To Eurozone

  • Mark Baker

Despite the introduction of the euro more than two years ago, prices do not appear to be converging in the European Union's eurozone. That's the conclusion of a recent Swedish study comparing prices of furniture in eight eurozone countries. RFE/RL spoke to the author of the study, who says he sees tendencies toward convergence but that Europeans are still reluctant to shop across borders. An anti-euro group in the U.K. says the study supports its belief that early claims that the euro would bring lower, more uniform prices across Europe was a fallacy.

Prague, 4 November 2003 (RFE/RL) -- Consumer prices in the European Union's eurozone do not appear to be converging, despite the introduction of a common currency more than two years ago. That's the conclusion of a recent Swedish study comparing the prices of furniture and household products in eight eurozone countries.

The study, by Gabriel Thulin of the Swedish consulting firm Halvarsson and Halvarsson, examined prices of 27 goods sold through the Swedish furniture retailer IKEA. It compared prices in eight euro-zone countries with prices in three EU countries that do not use the euro -- Britain, Sweden, and Denmark -- as well as the U.S. and Canada.

Not surprisingly, Thulin found big disparities in prices between Europe and North America. But -- more shockingly -- the study also found wide differences in prices among the eurozone states themselves, often between neighbors.

In Belgium, for example, the price of a popular bookshelf ("Billy") was more than 30 percent higher than in stores just across the border in Germany. Overall, the Netherlands came out as the cheapest eurozone country. In Finland, the most expensive, the same basket of goods cost almost 20 percent more.

To be sure, the methodology was far from scientific, relying on furniture products sold through one retail chain. Nevertheless, the findings call into question the early assumptions of euro supporters that a common currency would quickly make markets more transparent and lead to price convergence.

Thulin, speaking this week to RFE/RL by telephone, said he was surprised by the findings. "I had expected that [the prices in the eurozone] would be more coordinated," he said. "Now I can say [that the prices are] coordinated in some way -- by chance or by transparency -- for larger goods. But not at all for smaller goods."

He said some of the reasons for the price differences are peculiar to IKEA, which allows local managers to set many prices on their own, depending on local conditions.

But he said the results also highlight lingering marketing differences in the eurozone -- difference that apply to a range of consumer goods, not only furniture. For example, he said in some markets -- in the Netherlands and Germany -- IKEA is viewed as a broad seller of general furniture, whereas in other markets it's seen as an exclusive Scandinavian design brand. Naturally, prices will be higher in the latter.

"The same for the Netherlands and for Germany, [where] IKEA has a rather broad market position. In some other countries, it has [the profile] more of a Scandinavian design look and [therefore the stores can] take more [money for the furniture]," Thulin said.

And, he said, cultural factors play a role. Europeans are still reluctant to shop across borders. "With a common currency, the transparency [within the eurozone] is much greater, but still there are mental blockages [among the population], so to speak. I think it's a process," he said.

Early supporters of the euro argued the common currency would highlight pricing inconsistencies throughout the eurozone. Enlightened consumers would be better informed. The result would be lower and more consistent prices throughout the EU.

That's a fallacy, according to Britain's No-Euro campaign, an advocacy group that supports EU membership but not Britain's adoption of the common currency. Thulin's study has now found its way onto the group's website.

Matthew McGregor is No-Euro's campaign manager. He said that, despite the common currency, local conditions will always mean different countries will have different prices. "The argument that prices will fall because prices will converge for British consumers -- we've always thought it was ludicrous," he said. "And this report goes quite a long way toward highlighting that fact."

Thulin said he did see some tendencies toward price convergence -- particularly with larger, more expensive items. But he said it will take a long time. "There's a pressure for [prices] to even out. But it will not happen in one minute or one hour or one year. It will not be a total evening out of prices. But the tendencies are stronger," he said.

In the meantime, Belgians are well advised to buy their bookshelves in Germany.
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