Oh, to be in Europe, now that euro is down

U.S. tourists finding great deals overseas

Currency

May 14, 2000|By Bill Glauber | Bill Glauber,SUN FOREIGN STAFF

PARIS - So, Jim Patrick, what made you decide to take a Paris spring break? Was it the food, culture and art? The chance to climb the Eiffel Tower?

"We were thinking of going to Hawaii," said Patrick, a 60-year-old photographer from Bellevue, Wash. "But it was cheaper to come to Paris."

This year, it's great to be an American in Paris and other parts of Euroland. From Brussels to Barcelona, Dublin to Dusseldorf, the dollar is riding high against Europe's single currency, the euro.

Introduced in 11 countries 16 months ago, the euro has declined by more than one-fifth against the American dollar. Not since the mid-1980s has the American dollar fetched so much local cash on the Continent.

From the prices they pay for hotels and restaurants to the entry fees at museums, American tourists are finding an up side to the euro's unexpected slide.

Others, though, worry about the currency's future.

The euro was adopted in January 1999 by 11 countries - Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.

Euro bills and coins won't be issued until January 2002. But national currencies such as the French franc and Dutch guilder are pegged to the euro.

Billed as solid as a rock at its inception, the euro has sunk like a stone against the dollar, from $1.17 to a low of around 89 cents, before a recent climb above 90 cents. In some ways, that's not so bad, with exports cheaper and growth stronger in parts of Euroland, especially France and Germany.

But, for the currency's architects, who regard the euro as the glue to hold together countries with different customs, cultures and languages, the currency's weakness has proved frustrating and an easy target for critics. "What has come is a currency with an external value that is melting like a wax in the sun," noted Germany's Die Tagespost newspaper.

The plunge has dented what little public support there was for the currency in Britain, the largest European country that has remained on the euro sidelines. Meanwhile, British manufacturers say they're being hurt because of the strength of the pound against the euro.

"We do not have a clear signal that it has bottomed out. We have not seen the end of the story," said Werner Becker of Deutsche Bank, a senior economist responsible for European monetary affairs.

Reasons for slide

Why is the euro declining? Analysts note America's booming economy and higher interest rates that draw capital. They also point to the unwillingness of Europe's leaders to make key reforms by cutting taxes, shedding public workers and deregulating the economy.

Since the euro's debut, the markets have regarded Europe's leadership as a financial Tower of Babel, in contrast with the clear notes sounded by U.S. Federal Reserve Board Chairman Alan Greenspan. But nobody anticipated the euro's sinking so low."I've been expecting the euro to recover," said Charles Bean of the London School of Economics. "What has happened has confounded the economic watchers."

The Americans in Paris don't seem to mind the euro's plight.

Take Jim and Susan Patrick, the couple from Washington State. The other day, they indulged their passion for photography while standing on a bridge overlooking the Seine River. They marveled at the sites and noted how relatively inexpensive everything was. He said the rate for the two-star hotel room they booked in February for $83 plunged to $69.

"The perception I had before I came here is that the prices would be high and Americans would be gouged," he said. "I was wrong."

Six years ago, Shannon Fawcett of Arkansas arrived in the City of Light and suffered sticker shock. She took one look at the cost of climbing the steps of the Arc de Triomphe and turned around. This time, she went on a spree, spent $5.50 and took in the magnificent view down the broad boulevard, the Champs-Elysees. "Your dollar goes much further," she said.

"We don't have to eat at McDonald's here," said one of Fawcett's traveling partners, Jean Pradel.

If they did, the Big Mac would cost $4.40.

Still, even with the rise of the dollar, Paris is hardly a bargain basement. A double room at the Ritz costs $577. This time last year, though, it went for $667.

Ask for a large beer at the cafe Le President, and the waiter plops down a 1-litre portion for $13.30.

"For us, there is no change," the waiter said of the euro. "For you, big change."

Time to stock up

Scott Morgan, an Air Force captain based in Germany, decided this spring that it was time to stock up on big-ticket items. Morgan and his wife, Jane, picked through flea markets in Belgium and purchased antique chairs and a desk. They've got their sights set on a grandfather clock.

"Working with the euro makes it much easier to comparison shop," said Morgan, who toured Paris with his wife, newborn, mother and two aunts.

J.C. Reeves, a Colby College junior, is spending the year abroad, enjoying bargains that can be found for such items as clothes in Spain and food in Paris. He noted that travel books published in 1999 showed an exchange rate of 5 francs to the U.S. dollar. Last week, the rate was up to 7.2.

"It's not like we're buying Versace suits," he said. "You can eat out more in Paris now. The dinner I would have paid $50 for in October now costs $43. You can probably go out to a bar one more time a month with what you save."

For those shopkeepers who cater to American tourists, the fall in the euro has led to a mini-boom.

"Americans are spending more," said Sobha Goorochurn, who sells $23 Paris sweatshirts and $45 Limoges vases in a shop by Notre-Dame Cathedral.

But, for all the sales they're racking up, Katrine Phan, who also works in the store, has been forced to change her summer travel plans.

"I want to go to America this year," she said. "But I can't afford it."

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