Wednesday, 28 January 2009

Things I noticed giving up the Crown for the Euro

This infographic seems nicked from and I am hotlinking to village Opoj website
On January 1, 2009 the Euro became the official currency here in Slovakia replacing the Slovak crown.

1. Before the switch
There was nervousness long before the D date about price increases. The government and media kept telling people how worried they are about businesses "abusing" the switch to enact "unwarranted" price increases.

One of the key economic news topics in December was what was not going to work after the switch. The banks had arrangements in place to shut down some services (internet banking for a few days) and ATM machines for a few hours.

Oh, and Google screwed Slovak Adwords advertisers (while Moneybookers didn't (in Slovak).

2. The giddy Day One
I shopped at my local Tesco on January 2 (January 1 is a holiday). I paid in crowns but received my change in euros. In this way within two days all the crowns in my wallet were gone and I was 'switched'.

The cashiers asked everyone whether they would be paying crowns or euros. Some people said Euros with a proud smirk. It was a funny feeling, yet another important marker on our way to become 'first class' Europeans.

ATM machines here supposedly usually have slots for four notes. The banks reportedly fed the euros in two slots a few days before the New Year, minimising the downtime required to switch. For a few days you were only able to get EUR 50s and 10s in some machines or 20s and 10s.

3. Nominal schnominal?
I am trained as an economist and I know there is no money illusion and nominal does not matter to a rational person. Nominal of course does matter (and there are loads of evidence in behavioural economics literature).

We tipped by rounding up in crowns before. E.g. you'd leave 100 on an 82-95 crown bill. Traditionally people would simply round up to the nearest 10 and in recent years in classier establishments to nearest 20, 50 or even 100.

With euros, even rounding up to the nearest euro sounds cheap to our ear yet a euro is 30.126 crowns. So people first did not tip at all, I believe out of fear of under or overtipping. I tipped a taxi driver who delivered sushi a little over a euro towards the end of the first euro-week. He told me this was his first tip in the New Year and other taxi drivers confirmed people had ceased up tipping.

With the government sponsored price abuse hysteria, many businesses are keeping weird an uneven euro prices to avoid any semblance of the derided 'machinations during switch from crown to euro'. This is inefficient and annoying but sooner or later I am sure this will stop.

There are some data probably interesting for economists on what portion of currency in circulation was withdrawn within the first fifteen days through retail shops. There is other data on people bringing in cash to the bank days before the switch to have it converted seamlessly and legends of dodgy cash buyers of expensive apartments helping fuel our real estate bubble.

Flipside Wallet will ship to Slovakia but won't fit our euro billsWe have made the switch now complaint of the day seems to be that we have to now carry too many coins and they don't fit in a normal wallet (I would add the bills don't fit in the beautiful and RFID-fraud safe Flipside Wallet (TM)).