Peter Jackson column

Jan 11 2007 By Peter Jackson, The Journal

I've had a soft spot for Slovenia ever since upon first arriving in the country three years ago, a tour guide told me it was shaped like a chicken.

I've never been able to see it, however I look at the map, but that claim was just the first aspect of this little country that I found so endearing.

I liked its countryside, its culture, its capital Ljubljana, its food and its people. I also liked its currency, the tolar, and the coins which bore no imprints of heraldry or presidents' heads, but rather unthreatening looking horses, fish and other fauna.

Alas, the tolar is no more. As from the beginning of the year, Slovenia has joined the euro.

But apparently the Slovenes are none too happy about it.

Since the introduction of the single European currency, according to reports, the price of a cup of coffee in one of Ljubljana's cafes has increased by 28%, reflecting a general hike in prices.

This will have particular resonance in Slovenia. When the little republic voted for independence from Yugoslavia in 1990, Serbia raided the Yugoslav monetary system and seized almost the entire monetary issue planned for Yugoslavia for the following year.

This meant that the young republic started life with an inflation rate of 200%, which it has since worked hard to reduce to general European levels.

The Slovenian experience of the euro seems to be fairly typical. Official EU polling some months ago found that 93% of euro-zone citizens thought the European currency had "added to the increase of prices".

It seems to be an iron law of economics that, if you alter a currency, prices rise.

This was certainly the experience - at least anecdotally - with decimalisation in 1971.

It's obvious why. If there's any rounding of prices to be done - and there always is - then it will inevitably be up rather than down.

Remarkably, in those days when many people recommended that the UK join the euro, it was argued that it would bring costs down by making prices transparent. This was maintained in the face of significant cost of living differences throughout the UK, despite having had our own single currency for a millennium. But, unlike the Slovenes - for us, the euro's no longer a threat.