Penny dropped quickly for Irish people when euro was introduced
Republic’s population embraced currency, then saw anomalies compared to EU
The euro turns 20 in 2019, after two tumultuous decades that saw the single currency become a fixture on the financial markets and in Europeans’ wallets. Photograph: Philippe Huguen/AFP/Getty
Before the euro became a reality, the two primary concerns at the highest level in Ireland were that retailers would use the changeover to hike prices and older people would struggle to get their heads around another currency.
The latter notion was debunked almost immediately, as it turned out, with older people among the most adept at adopting the new currency having lived through the far more complicated switch from pounds, shillings and pence to the metric system in the early 1970s.
And while prices did increase in certain areas in the immediate aftermath of the currency becoming a physical reality, a huge volume of research conducted over the years following its introduction suggested that, while consumers remained convinced price hikes were significant, statistics showed they were minimal.
Concern that retailers and banks would exploit widespread confusion about exchange rates and the array of different notes and coins in circulation started well before the currency came into being as a non-physical monetary unit on January 1st 1999.
But those fears grew immeasurably as the dawn of the physical currency neared at the beginning of 2002.
It was feared that the potential chaos caused by the largest-ever currency changeover, one which saw the introduction of 14 billion new notes and 52 billion coins and the simultaneously withdrawal, over just six weeks, of 10 billion national notes and 107 billion national coins, would be mercilessly exploited by retailers with consumers ripped off across the board.
Policing the changeover and ensuring that did not happen in the Republic was the Office of the Director of Consumer Affairs (ODCA) which was headed by Carmel Foley.
In the months leading up to the changeover she repeatedly said no reputable company could use the changeover to justify price increases, and she repeatedly stressed the importance of companies knowing they could not blame the euro “or use it as a handy shorthand” to excuse price increases.
Her advice to consumers was the same; if they did not trust the claims of manufacturers or retailers then they would have to “hit them where it hurts, hit them in their pockets by walking away”.
As it happened, the ODCA did not find much evidence of price increases in the run-up to the euro although it did find misleading information was a problem with misinformed shop assistants or “people who are just looking for an easy answer are saying things like, ‘Oh, it’s all because of the euro’, when explaining price rises to customers,” Foley said.
Name and shame
One high profile euro-related incident saw Glanbia under the spotlight when it announced it was to charge the same for a half a litre of milk as it did for a pint – effectively a 13 per cent price hike.
In correspondence to its suppliers, it linked its move to the euro changeover. It made headlines and prompted the then minister for consumer affairs Tom Kitt to intervene and question the morality of the move after which the company reversed course.
That high-profile case served as a warning to other businesses and made it clear they risked being publicly named and shamed if they took advantage of the changeover to hike prices. and the name and shame stick was wielded effectively and repeatedly by Foley.
Even so, more than 80 per cent of Irish people believed prices climbed as a direct result of the euro changeover, according to a a Eurobarometer survey published at the end of 2002. But perception and reality are not the same thing and when statisticians were asked if the euro changeover had led to higher prices the general answer was “not significantly”.
A study by EU statistical agency Eurostat in 2003 reported that the changeover added up to 0.29 per cent to prices across the euro zone in the first year. Most of the rise came in the months directly before and after the changeover, with prices increasing by 0.09 per cent to 0.28 per cent between December 2001 and January 2002.
The most marked price increases came in the services sector, particularly in the so-called “small-shop” sector, Eurostat said.
The analysis found that services such as hairdressers, cleaners and restaurants could have added up to 0.09 per cent to inflation around the changeover period. Eurostat ultimately concluded that some price increases were temporary, while others, such as those for restaurants and hairdressers were small but enduring.
Ahead of the introduction of the physical euro there was a three-year, €5 million public information campaign which meant most Irish people knew what the euro was and what a punt was worth well ahead of its physical introduction.
Although given that the conversion rate for the punt was £0.787564 per €1, that knowledge was of little use.
To help people do the maths, 1.4 million yellow and blue calculators with outsized buttons were distributed to households across the State and while they became a talking point and something of a collectors’ item, within weeks they were completely redundant.
That was because Irish consumers took to the new currency almost immediately and dramatically outpaced other euro-zone countries in the changeover.
The number of Irish pounds in circulation fell almost twice as fast as other national currencies and within a week of the euro being introduced, there was a total of €2.8 billion in circulation in Ireland which prompted the then governor of the Central Bank governor, Maurice O’Connell to say: “The public has demonstrated such a great enthusiasm for the new banknotes and coins that the vast bulk of transactions are now taking place in euro. We can confidently say, only one week into the changeover, that the euro is now our money.”
Fast forward five years and Ireland was still best in class when it came to euro behaviour. A major eurobarometer report published in 2007 found that while across the eurozone many people were still using their own old currency as a mental benchmark to work out how much things cost, Ireland’s conversion was near total.
The report suggested 59 per cent of citizens across the euro zone said the currency was causing them no difficulty at all but Ireland recorded the highest percentage on 81 per cent.
Ireland also had the highest ratio of people using the euro to calculate even large purchases on 88 per cent compared with just 18 per cent in Belgium. And when it came to small purchases 91 per cent of Irish people were thinking exclusively in euro.
In 2007, another EU report asked consumers what they thought the main benefits of the euro were: easier and cheaper travel, easier price comparisons and the reinforced status of the EU on the global stage were in the medal positions.
These three advantages had long been cited by Irish authorities when selling the new currency but one of them ended up blindsiding it.
Because it became so much easier to compare prices across different euro zone states, Irish citizens who travelled in Europe started to see just how badly they were being ripped off while the multi-jurisdiction price tags in shops that traded across the eurozone meant Irish shoppers could see at a glance how much more they were being asked to pay for many goods and services.
Within a year, the mumblings about a rip-off Republic grew louder and less than five years after the currency was introduced, the phrase became one of the defining concepts of a generation