Wednesday, October 13, 2004

The "bacon buttie" test

More woes for the euro, according to the The Times business section today.

Despite the extravagant claims for "price transparency" and the theory that this would push prices down, the actual prices of consumer goods in the different eurozone countries are nearly as far apart as they were at the time of the introduction of euro banknotes and coins three years ago

Advocates of the single currency had confidently predicted that the euro would overcome the difficulties consumers had in comparing prices when they were expressed in different currencies, but the Dresdner Kleinwort Wasserstein investment bank has blown that comfortable little fantasy apart.

Prices, it found, are still as divergent as they were when the single currency was introduced physically. Furthermore, DKW said it might take 20 years before prices in euroland had come as much into line as those in the states of America. The difference in prices across six eurozone cities was an average 14.5 per cent this year, according to DKW. The gap had narrowed only slightly from 14.9 per cent last year.

This allowed Oliver Letwin, the shadow chancellor, to crow triumphantly – with some justification: “So much for claims that the single currency would make the market far more effective. This is one more piece of evidence that it’s free trade and not the currency that matters.”

Actually, the only surprising thing is that anybody actually thought it would be any different. I could not tell you offhand how long the UK has been a single currency area - no doubt someone will tell me – but prices in Yorkshire are still very different from those in London and then, even in Yorkshire, there are substantial variations.

Employing the famous "bacon buttie" standard, a three-rasher teacake in the outskirts of Bradford will cost you £1.20 compared with £1.80 for two rashers on toast in York. In a hundred years time, no doubt, bacon butties will still be cheaper in Bradford – just supposing the Moslems haven't taken over completely, in which case they will be banned. That is the way things work.

Only a moron selling a slightly dodgy euro would ever think it could be any different.

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