Inflation surges as shopkeepers use euro to raise prices

A surge in inflation in the 12-nation eurozone last month was partly due to shopkeepers using the euro as an excuse to raise prices, the European Commission said yesterday.

Eurozone inflation jumped to 2.5 per cent last month from 2.1 per cent in December, its first rise in eight months. The target is 2 per cent.

The commission said the increase should not be blamed wholly on the launch of notes and coins on 1 January. The rise "cannot necessarily be taken as evidence of a significant euro changeover effect", it said. It pointed to a range of factors, including a weather-related increase in food prices, changes in fuel costs and the introduction of new tax rates.

But it admitted the switch could have led to some increases in prices. These included retailers rounding up euro prices to a "psychological or convenient" level and possible mistakes in calculating conversions. The commission said some shopkeepers might have tried to make "windfall profits in the knowledge that consumers are not yet fully familiar with prices expressed in euro". There is anecdotal evidence that some prices have risen sharply, from coffees in Paris to taxis in Milan.

The European Central Bank has dismissed fears of a prolonged surge in inflation. Pedro Solbes, the European Union's commissioner of monetary affairs, said yesterday that the January figure was a "peak".

Fears of "rip-off" retailers have long been used as an argument against the single currency. Theresa Villiers, a Conservative MEP, said the increases were "simply scandalous". But an independent economist, Ken Wattrett of the London office of the French bank BNP Paribas, said: "In the long term the euro changeover is disinflationary because it increases price transparency and price competition."