- The Washington Times - Thursday, February 5, 2004

PARIS — From back-packing tourists to high-flying diplomats, Americans in Paris are feeling the pinch as the single European currency hovers near record highs against the sagging dollar.

“I had always thought a euro was about equal to a dollar. But when I arrived at the airport and went to the exchange counter with $60, I got back only 39 euros,” complained 42-year-old American tourist Daniel Enterline.

“I couldn’t believe it. I felt the U.S. dollar had been relegated to a Third World currency.”

The dollar was little changed yesterday, closing at $1.254 against the euro. Earlier in the day, the dollar had dropped to a one-week low on speculation finance ministers at a meeting of the Group of Seven nations in Florida today and tomorrow will fail to agree on a plan that would curb the currency’s two-year drop.

The dollar’s drop has brought a dip in the number of American tourists and their spending, a drop in European exports to the United States and a new frugality among dollar income earners living and working in the euro-zone countries.

While most American expatriates, particularly those who work for major U.S. companies, are paid in euros, those who get paid in dollars say they are feeling the pinch.

John Giannini, a Paris-based independent filmmaker whose clients are mainly American, said the high euro is forcing a dramatic change in his lifestyle.

“The average dinner here costs about 25 euros a person. But now, when I look at 25 euros, I don’t see 25 euros anymore, I see 30 bucks,” he said. “It makes me less likely to go out, less quick to accept the suggestion that we go for a meal.”

If the exchange rate doesn’t improve, he added, he will consider leaving Paris.

The dollar has tumbled 31 percent against the euro in the past two years as international investors were attracted to higher yields in other countries.

“The Bush administration prefers an orderly decline in the dollar, which they see as stimulating exports and boosting job growth,” said Paresh Upadhyaya, who helps manage $70 billion as a currency strategist at Putnam Investments in Boston. “They don’t want to see a turnaround in the dollar’s current trend.”

U.S. Treasury Secretary John W. Snow has suggested he would resist European calls to counter the dollar’s slide when he meets with other representatives of the G-7 in Boca Raton, Fla.

Tuesday, he said the value of currencies is “best set in open, competitive markets,” reinforcing speculation the United States wants a weaker dollar to foster global growth.

The pain is being felt among staffers at the U.S. Embassy in Paris, where diplomat Ben Chang said he and his colleagues are cutting back on spending or choosing to spend elsewhere.

“While we don’t have a choice with day-to-day items, with bigger purchases we are looking at what we can buy online from the States,” he said. “Even when you factor in the shipping, it often still costs less.”

On two occasions, Mr. Chang said, sympathetic Parisian acquaintances “offered to pay for my drinks at a bar when they discovered I was paid in dollars.”

Yet, in the long run, it is the Europeans who are suffering most from the weak dollar as countries like France and Germany register a significant drop in foreign demand for their goods.

French exports to the United States fell by more than 17 percent in the first 11 months of 2003, a figure that partially takes into account an American campaign to boycott French products.

Much of the dollar drop is attributed to the virtual crash in demand for aircraft parts normally representing a quarter of total French exports to the United States in the wake of the airline crisis. But the surging euro was a significant factor, including in the area of tourism, which recorded a 12 percent decline last year in the number of visitors from America.

“The euro is the last problem we had in a long list of problems by the end of 2003,” said Paul Roll, director of the Paris Tourism Office.

“We don’t have specific figures to confirm this yet, but we hear that while Americans are still coming over, they are underspending. And it’s reflected in the hotel and restaurant business,” he added.

The unfavorable exchange rate has prompted French Prime Minister Jean-Pierre Raffarin to call for action to counter what he suggested is a deliberate attempt by President Bush to maintain a weak dollar to boost exports.

Germany is also worried that a persistently high euro could hamper economic recovery. The European Central Bank, the only body with the power to stem the rise of the euro, condemned the currency fluctuations, but has stopped short of taking any action.

One reason could be that not every country in the European Union is suffering. The weak dollar has helped Ireland for example, to keep inflation low — and keeping a check on inflation is, after all, the objective of the European Central Bank. Still, analysts are forecasting slower economic recovery in the European Union should the dollar remain weak over the long term.

Although the euro is indeed hovering at one of its highest levels since it was introduced in 1999, the current exchange rates are no worse than what has been seen in the pre-euro days.

“It is wrong to think of the euro as a new currency,” said a spokesman at the Department of Foreign Trade. “It is just a basket of old currencies. In the past, one U.S. dollar usually bought between five and six French francs. If you look at the equivalent in euros today, a dollar is worth about 5.1 francs. So historically, it’s not that high, although the currency’s volatility is hurting our exports.”

The Paris Tourism Office’s Paul Roll is also urging for a more tempered view of the exchange rate. “First of all, Americans coming to Paris are not spending all their money in euros; they are still paying their airfare in U.S. dollars,” he said. “Secondly, when you want to visit Paris, you will come whether you come today, tomorrow or the day after tomorrow. You might just spend differently. All our experience indicates that when prices reach a certain level, there is a shock, but afterwards, people get used to it.”

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