Re: Why when Italy joined the eurozone, prices almost doubled in a very short time?

Seph — Tue, 25 Oct 2011 21:02:25 GMT

It wasnt just Italy, Austria experienced the exact same phenomena just after joining the eurozone. Exactly why this is, I am also very curious. My best guess would be that there were more regulations and taxation placed on businesses after joining, than there were previously, but I dont have any data to back this up.

I would also be interested to know how many other countries experienced this. (Doubled prices after joining)

Re: Why when Italy joined the eurozone, prices almost doubled in a very short time?

Kakugo — Tue, 25 Oct 2011 14:21:17 GMT

The official data puts inflation (CPI increase) in Italy during 2002 at 3,2%. According to a study by the Milan Chamber of Commerce it was actually over 6% because the official government agency tasked with monitoring consumer prices changed parameters just when the euro was coming into being, especially regarding food products.

I've read a lot about the topic and most of time I run into a concrete wall. Local analysts and economists seem at loss to explain the phenomenon. First they hint at "perceived inflation" but when analyzing the cold data they concede there has been an "unexplainable" increase in prices, especially in services and food products.

One of most sensible explanations is the fact with the Maastricht Treaty Italy also had to adopt a wide ranging series of "reforms" which added considerable burden upon manufacturers, producers and service providers. The price increases were then put off and implemented with the arrival of the euro.

Another possible explanation is the fact real wages in Italy more or less stagnated while prices have increased considerably, thus adding to the "perceived inflation". Continous tampering with CPI parameters has made extremely difficult to fully appreciate this situation but one thing is sure: most CPI "staples", like vegetables, fresh fruit, laundry services etc have been replaced with items less likely to experience the dramatic effects of monetary inflation: tanning sessions, iPads etc.

Finally another thing. After the coming in being of the euro Italian governments have adopted a policy of "hidden tax increases", meaning slapping very specific taxes on some products which must be paid by the seller and then passed on to the consumers. I can give you an example from my sector: mineral oils. This category includes engine and gear oil, hydraulic fluids etc. A couple of taxes were slapped on these products without much fanfare: us in the sectors knew what was going on but the end user just saw the price go up and was left wondering what was going on.

Why when Italy joined the eurozone, prices almost doubled in a very short time?

Hazel Brazell — Tue, 25 Oct 2011 11:21:05 GMT

I still don't understand the huge inflation hike Italy had when they passed from lira to euro.

Economics Questions

Re: Why when Italy joined the eurozone, prices almost doubled in a very short time?

Re: Why when Italy joined the eurozone, prices almost doubled in a very short time?

Why when Italy joined the eurozone, prices almost doubled in a very short time?