Inflation on the rise in eurozone

Inflation is on the rise in eurozone - one month after the launch of the single currency.

Inflation is on the rise in eurozone - one month after the launch of the single currency.

New figures out today estimate January inflation in the 12 countries which have switched to the euro at 2.5 per cent, compared with 2.1 per cent in December.

But today EU officials were quick to dismiss any link between the euro and the unwelcome inflationary signal.

"The fact that the estimate for January is higher than the actual figure for December cannot necessarily be taken as evidence of a significant euro changeover effect, when all the other possible influences are taken into account."

READ MORE

The Commission said these influences include price increases which may have been caused by incorrect conversion rates, and a rounding-up of some prices.

Two months ago the head of the European Central Bank Mr Wim Duisenberg predicted that the advent of the euro would not hit inflation. He also hinted that inflation in eurozone would not rise above 2% this year.

Today nobody was really sure if the increase reflects the start of a serious underlying problem, or is just a temporary blip caused by the currency changeover.

But Tories were in no doubt, with MEP Ms Theresa Villiers blaming the rise directly on the euro: "It is simply scandalous that price hikes on this scale have been imposed on consumers across the eurozone as part of the cost of the new notes and coins.

"Claims that the euro would mean cheaper prices have been comprehensively debunked."

The inflation figure was published by the European Commission's statistics office, Eurostat, exactly one month since the launch of the euro.

The Commission, concentrating on the technical success of the launch, said in a statement: "On one month the euro has firmly taken its place as the daily currency in the life of more than 300 million Europeans.

"Indeed it took only a few days for people to replace much of their national currencies with the new euro banknotes and coins." Latest figures show that 95% of all cash transactions are in euro in all 12 single currency countries.

In Holland, the national currency is already obsolete, with other national currencies disappearing from the end of February.

By the end of business yesterday, more than 60% of national banknotes in circulation in eurozone at the end of last year, had been returned to national central banks.

And, so far, levels of counterfeiting have been low, with "only a few" false banknotes and coins detected. Occasionally, they have been accepted as payment, but, says the Commission, in general the quality of forgery is low, thanks to the effectiveness of the security features of the new notes.

- PA