27 January 2007

Lira, euro and dollars

When we made our first visit to Italy in 1998 they were using the lira and the standard was 1000 lira was about $.80 US. This made things pretty simple when you were buying something to compare prices, for example you could get a cafe' for 1000 lira. We were also amazed at how inexpensive many everyday things were compared to prices we were paying in the US. Fresh fruit and vegetables, coffee, vino, olive oil, pizza, etc were all less expensive in Italy. Of course there were things more expensive, like gasoline was a several dollars a gallon where it was about a dollar a gallon in the US.

On our later trips Italy had converted to the euro and we did notice a change. If you read the financial reports they confirm that prices for many things increased, what may have been 1000 lira was converted to 1.00 euro (instant inflation). The government officially reported that inflation since the euro conversion has been minor but many independent reports paint a different picture.

The euro and dollar have had a rather up and down track record over the past few years. With our decision to move to Italy this was one of the things I looked at: how far would our cash go once converted to euro. A few years ago the conversion was a pretty close 1 for 1, then spiked to above $1.30 for 1 euro, dropped back to under $1.18 for 1 euro and seemed to settle in the area around $1.20 for 1 euro when we were finalizing plans to move to Italia. Things have changed and the euro seems stuck closer to the $1.30 for 1 euro range and now that cafe' will cost about $1.30.

That said, our experience is that many of the everyday items we enjoy while living in Italy are less expensive than in the US - that $1.30 cafe' in Italy is still a bargain compared to $1.50 or more for the swill at Starbucks. But a stronger dollar sure would make our cash go farther.

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