February 2002 - Nr. 2
Two Sides of the Coin
Euro Brings New Benefits and Stirs Legal Controversies
TWIG - When the euro swept in as the new currency of 12 nations at the start of this year, it dispelled at a stroke festering concerns that the new money would be nothing but trouble. Much to everyone’s surprise, Germans have embraced the currency whole-heartedly, abandoning their once-beloved deutschemark and adopting the euro with remarkable alacrity. According to a survey conducted by the German Chamber of Industry and Trade, within two weeks of introduction the euro will have replaced the mark almost entirely - something most bankers and retailers had expected would take two months.
With minor exceptions, all of Europe has proven exceptionally well prepared for this conversion - unprecedented in scope and technical complexity. Frictions and benefits are, however, arising, sometimes in areas where no one could have anticipated them.
As the International Herald Tribune reports this week, amid the frenzy of the switch to a common currency at the start of the year, German retail chains unleashed a fierce price war. The barebones supermarket chain Aldi Einkauf trumpeted its "biggest price cuts ever" in giant newspaper advertisements around the country. Rival chains Lidl and Plus joined the fray with deep discounts of their own. The price cuts swiftly following the introduction of euro notes and coins at first heartened consumers who thought a new era of price competition had arrived with the new money, just as the promoters of the euro had been hoping.
But when the formidable C&A clothing chain tantalized shoppers with 20% discounts at its 184 stores in Germany, guardians of the old ways leapt into action. C&A was hauled into court for subverting decades-old rules that govern precisely when - and under what circumstances - shopkeepers legally can lower prices. The dispute highlights how the euro is already inciting fresh battles over economic reform in Germany and showing the potential to shatter conventions on the Continent. The power of the new currency to effect change was evident in C&A’s refusal to back down and in the support the retailer found among consumers, the media and some politicians.
Germans are watching the case closely to see if the standoff between C&A and a Düsseldorf district court yields any precedents that could weaken half-century-old laws that protect small business against competition from either other small businesses or powerful chains. If C&A loses, it could face a fine as large as €250,000 (US$224,000). Politicians at each end of the spectrum came out in favor of the retailer over the weekend and declared that the time was ripe for more competition. "If a judge can prevent discounts that benefit consumers, the law needs to be changed," said Guido Westerwelle, general secretary of the opposition Free Democratic Party. The consumer advocacy group Verbraucher Initiative heaped scorn on the court for a ruling that was "incomprehensible to consumers."
The German Retail Association, which sided with the court in the case, said short-term sales were unjustified because temporary changes in prices confuse consumers and are unfair because they force shoppers to interrupt their schedules and rush to stores to take advantage of price cuts. Some point out that the elimination of the Rabattgesetz (law governing sales) should have been followed by changes to the retailing laws as well. But unions are the biggest defenders of the existing retail laws, a force even euphoric consumers cannot lightly dismiss.
