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ECONOMY

What dollar-euro parity means for American visitors and residents in Europe

The euro and the dollar have reached near parity for the first time in 20 years. Here is what that means for Americans in Europe.

What dollar-euro parity means for American visitors and residents in Europe
Photo by Ibrahim Boran on Unsplash

The euro is almost at parity with the dollar for the first time in two decades, and American news outlets are deeming it a “good time to be an American in Europe.”

For Americans on holiday in Europe this summer, they can rejoice over wine, taxi rides, and even luxury items being “cheaper than they have been in decades” all thanks to a strong dollar. 

According to American news outlet, CNBC, the near parity between the euro and the dollar mean that Americans “travelling to one of the 19 European Union countries that accept the euro” will get a “15 percent discount on purchases today relative to a year ago due to the exchange rate.”

But the benefits are not just for American tourists – Americans residing in Europe, as well as European tourism sectors, stand to gain from the nearly equal exchange rate too. For the tourism industry in Europe, which was hit hard by the Covid-19 pandemic, the weak euro might actually be beneficial, as it might entice more American tourists to spend their holidays here.

For tourists

Americans had become accustomed to budgeting extra for European vacations when taking the exchange rate into consideration. In 2008, the New York Times reports that a €5 glass of wine might have cost Americans the equivalent of $8, compared to the $5.20 it might cost today. Here is what Americans wanting to get a good bang for their buck in Europe this summer should know: 

First, it might not be advisable to go book your trip right now simply because the exchange rate is advantageous for American travellers. Willis Orlando, a travel specialist at Scott’s Cheap Flights told CBS news that “other factors like large crowds still mean higher prices at hotels.”

Unfortunately airfare and lodging are more expensive this summer than they were last year (up 20 to 60 percent in some markets) due to high demand and inflation. On top of that, the airline industry is in crisis, attempting to handle staff shortages and high volumes of tourists, which has led to strikes, cancellations, and long-wait times in airports across Europe.

READ MORE Airport chaos in Europe: Airlines cancel 15,000 flights in August

However, if you do have a trip planned already, you can look forward to your dollar going a longer way at restaurants, stores, and when shopping.

If you want to maximise your benefits from the currently favourable exchange rate, you can take a few money-saving steps:

Use an ATM to withdraw local currency – Instead of converting dollars to euro at the airport or at a conversion teller, who will charge a commission in addition to the exchange rate, simply use an ATM once in Europe. 

Pay with your credit cardForbes recommends this for American tourists, but when paying with your credit or debit card beware of foreign transaction fees. Also be aware that many businesses in Europe do not accept American Express. Another tip is to pay in ‘local currency’ when using your credit card, as if you pay with dollars you could wind up with a conversion fee. 

Consider pre-booking – If you want to lock in the current exchange rate, then consider prepaying for your trip. However, you might not need to do this, as the dollar is expected to “remains strong for months to come,” according to CBS News.

Take advantage of tax-free – The Value Added Tax (VAT) is the sales tax in Europe. If you spend over a certain threshold of money at a single store, you can request a tax-free form to receive a refund on the VAT. You can file this form at the airport or train station when departing.

For Americans living in Europe

The close exchange rate is beneficial for Americans who are residents in Europe as well. The principle is the same – for example, if you have a rent payment coming up, and you have been wondering about the best time to transfer money from your American account to your European bank account, consider doing so now. Your American dollars gaining value means they will go a longer way than they did even just six months ago. If you want to transfer a large sum, check with your American bank account to see what the maximum transfer amount is prior to doing so. 

The euro-dollar near parity also benefits Americans residing in Europe who might be looking to buy property in France, as well as those who have any income dollars, whether that be in salary, pensions, or investments. 

Of course, for Americans living in Europe and making their income in euro, the opposite is true that travelling back to the United States will be more expensive now than last year. In this case, it would be worth considering locking in your rates by prepaying for bookings.

The dollar will likely remain strong for the next few quarters, as its value-increase is due to the Fed raising interest levels in the US, making it more attractive for investments than Europe, who is currently suffering from a shortage in gas supplies due to the ongoing war in Ukraine. 

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POLITICS

Could 1 and 2 cent euro coins soon be scrapped?

If you hate carrying pocketfuls of the tiny one and two cent euro coins then you'll be in favour of what the European Commission is planning to do.

Could 1 and 2 cent euro coins soon be scrapped?
AFP/ECDC

Brussels is considering a new rule to round off all prices to the nearest 5 cents, which would mean phasing out the small, brown one and two cent coins.

On Monday, the Commission opened a 15-week public consultation on the use of the small coins.

After consultation, the Commission will consider the possibility of putting forward a new law at the end of next year which would introduce uniform EU-wide rules for rounding off cash payments to the nearest 5 cents

“EU rules on euro coins state that the EU institutions should periodically examine the use of different denominations of euro coins in terms of costs and public acceptability,” the consultation said.

The commission “will carefully study the economic, environmental and social consequences of introducing uniform rounding rules,” it said on Monday.

Ordinary citizens and institutions are invited to share their opinions and suggestions on the issue of whether prices should be rounded off and the small coins ditched.

Citizens are invited to leave feedback on the Commission's website. A quick look at the comments suggests opinions were divided.

One commenter from France wrote: “I am in favour of removing the 1 and 2 cent coins. They are expensive to produce, to transport, and clutter up purses without providing any real service. In addition, these “small” coins seem to me all the less necessary as card and contactless payments have increased significantly (especially since the Covid epidemic).”

However another respondent summed up the views of many who though a rounding off of prices would simply mean a rounding up of prices at the expense of consumers.

“Abolishing 1 and 2 cent coins will most likely result in another rounding up of prices concerning mostly consumer goods, which will make day-to-day life even more expensive, whilst wages have not risen and are in the future unlikely to increase at the same rate,” wrote the anonymous commenter.

“Hence, the standard of living is progressively decreasing. Now that cannot possibly be, nor should it be, the aim of the European Union.”

 

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