Brussels, 29/08/2001 (Agence Europe) - "The introduction of the euro should not cause hidden inflationary pressures or VAT increases", the Chair of the European Parliament's Economic and Monetary Committee, Christa-Randzio-Plath (German PES), said on Monday in a debate organised with experts. According to Patrick Armand, the financial director of the French group Carrefour, who above all wants to avoid a slowdown in household consumption due to payment difficulties, three main reasons would explain an inflationary effect of the changeover to the euro: "abusive upward rounding off of prices, price policies of industrialists and the effect on companies of the technical costs of moving to the euro".
In France, Mr. Armand is counting on "quite a good level of price stability", and recalled that (1) French parliamentarians had agreed to ask traders to freeze prices between 15 November 2001 and 15 March 2002 and (2) that many French retailers have affixed on their products prices in euro and the national currency, without price increases. He stipulated that hikes in retail prices (due in part to the rounding off of prices) should only have an effect on "seasonal products, products of variable prices and promotional products". Jules Maaten MEP (Dutch, ELDR), author of a recent report on the issue of the introduction of the euro, said that in his country there was an error rate of 15% in the dual price labelling policy. Horst Kruger, representative in Brussels of the German traders' association, explained that the latter did not expect price rises. "three quarters of companies members of that association are considering keeping prices unchanged at the time of the introduction of the euro", he said.
"The transition to the euro will be better assured if the distribution of large banknotes of 200 and 500 euro is limited in the first months of 2002", said Mr. Armand, adding that small traders (especially like bakers and owners of newspaper kiosks who deal mostly in small currency) "will not be able to make the change directly" and would certainly have to hand back change in French francs for some time. Mr. Armand considers the repercussions on costs that companies will have to bear to ensure the changeover to the euro (costs that the ECB estimates at 30 to 50 billion euro in Europe, or 0.3 to 0.8% of the Community GDP) "will gradually be instilled in prices". Costs resulting from exports will allow for "a large economy of scale, counterbalancing the technical costs of the changeover borne by companies", he continued. Regarding the price policy of industrialists, he said that consumers would have to adapt to "new psychological products (a television at 1000 euro, a shirt at 10 euro) and thus a new scale of values".