That 'euro feeling' - not as advertised

Proponents of the euro, Europe's new single currency, sometimes portray the money as a mighty sword, wielded by the invisible hand of the market. At one blow, they predict, the euro will strike down barriers between nations, slash through the curtains of confusion that cloak marketing policies around Europe, and bring the now more easily comparable prices tumbling down in a frenzy of continental competition. A day of watching people shop on either bank of the Rhine, in the French city of Strasbourg and the neighboring German town of Kehl, suggests that it may not work out quite like that. Even here, where residents have crossed the river in both directions for generations in search of cheaper, better, or more varied goods, the signs are that shopping habits, government regulations, and a host of other factors will mitigate the euro's standardizing impact. Welcome though that standardization might be sometimes. Ordering a drink at McDonald's here on Wednesday, I was charged 2 marks. Accepting payment in French francs, the waitress changed the check to 6.70 francs but would take only bills, not coins. The change from my 50-franc bill turned out - fairly but nonetheless confusingly - to be 12.90 marks. Had I stayed for lunch, I could have eaten a Big Mac, medium fries, and drink for the equivalent of 4.08 euros (though the menu isn't priced in euros yet). Five minutes up the road, across the river in Strasbourg, exactly the same meal would cost me the equivalent of 4.57 euros, over 10 percent more. But French customers are not pouring over the border for cheaper hamburgers. Nor do they shop in large numbers for better deals even on big-ticket items, such as cars or furniture. Sometimes they do business in Germany despite the prices, not because of them. Michel Zimmer, for example, drove his car across the river to the Geiger garage in Kehl on Wednesday to have an oil leak fixed. "The labor is more expensive here, but the work is better quality," he explains. "I would rather pay more and not have the problems I've had with garages in France." Frank Hoffmann, a Geiger salesman, says he finds it hard to attract French customers to his Volkswagen showroom, even though he can offer lower prices on some models than dealers in France. That is because a French customer has to buy his car tax-free in Germany, and then pay value-added tax (VAT) in France before applying for French registration papers and license plates. The procedure adds several weeks and several hundred dollars to any car purchase, complains Mr. Hoffmann. "That is not what I call a common market," he sniffs. A Strasbourg resident, able to pop across the border as needed, might be ready to put up with such legal complications. But they clearly make it almost impossible for potential customers living in central France, for example, who might be tempted to buy a car in Spain, where car prices are notoriously lower than elsewhere in Europe. Those prices are "a matter of the market," explains Hoffmann. "Volkswagen has to compete in Spain with cheaper locally made cars, so it subsidizes its prices" to keep market share in a country where incomes are 25 percent lower than the European average. Hoffmann himself goes over to France to do some of his shopping, "but it's not a question of the prices," he says. "It's just that there is a much wider choice of food there, and there are special things that you can buy only in France." Just how wide the choice is becomes clear outside Strasbourg at Cora, a retail store so huge that sales staff travel on roller skates. "German customers come here because we are cheaper and they can find everything they want here," says Patrick Bapst, deputy manager. It is probably convenience rather than the prices that draws German shoppers across the river. A quick comparison of the prices of household goods at Cora and in smaller stores in Germany suggests that overall Cora is more expensive. But German VAT is lower than French VAT, Mr. Bapst points out. "Until taxes are harmonized around Europe, nothing can even out prices," he says. So far, the euro has had only two weeks to erode price differentials, and it hasn't really started. Cora has dual-priced all its 90,000 items in francs and euros, and the shop accepts payment in euros by check or credit card. (Euro bills and coins will be introduced only in January 2002.) But so far only an "insignificant" dozen or so clients a day are asking to pay in euros, says Bapst. In Strasbourg itself, customers at big stores such as Marks and Spencer and Les Nouvelles Galeries can pay in euros, but only at one central cash register. And, since no goods are priced in euros, it is perhaps unsurprising that neither store has yet served a single euro-client. Here in Kehl, just one shop - a branch of a chain of drugstores - has begun to price goods in both marks and euros, and to put up posters saying, "Ich hab' das Euro Feeling." But the "feeling" goes only so far: The cash register is not yet set up to accept payments in euros.