A Painful Exchange
Saturday, December 9, 2006
PARIS, Dec. 8 -- It didn't take long for sticker shock to hit Allan and Christine Britton.
Twenty minutes after arriving in Paris for a brief layover between the United States and South Africa, they were standing at the foot of the Eiffel Tower, checking out the menu at the Jules Verne Restaurant: sea bass, $78; filet of beef, $77; lobster, $106; dessert, $25.
"Everything I see here is expensive -- even the train in from the airport was expensive," said Allan Britton, who runs a textile company in Meriden, N.H. With a shrug, the couple padded off in search of something more reasonable.
The tanking dollar, which recently hit a 20-month low against the euro and a 14-year low against the British pound, has Americans who live or travel in Europe gulping harder, digging deeper and shelling out painful amounts of money.
The $9 soda, the $5 espresso and the $30 taxi ride are commonplace. Dinner for four at a pizza joint for $100 is starting to leave a bad taste in Yankee mouths.
"The poor dollar," moaned George Bernauer, a retired school teacher from the Boston area and regular visitor to Europe, as he headed into the Louvre museum. "Five euros" -- that would be $6.65 -- "for a can of Coke; it's outrageous."
The greenback is taking one of its worst beatings ever in Europe, with high U.S. trade and budget deficits, low personal savings, the burst of the U.S. housing bubble and threats of a recession driving down the value of the dollar overseas, particularly in Europe, where economic growth is picking up.
On Friday, it took $1.32 to buy one euro, a fall in value of about 13 percent on the year and approaching the record of $1.36 in December 2004.
Many analysts think the drubbing is going to get worse.
"Our bank is bearish about the currency. In our latest report, we expect the dollar will be at $1.40 against the euro at the end of the first quarter next year," said Philippe d'Arvisenet, chief economist at BNP Paribas in Paris.
Others are much more pessimistic, d'Arvisenet said, with some warning that the dollar's value against the euro could fall as far as $1.90 if Asian governments and developing countries get spooked by continuing declines and decide to sell off their huge dollar reserves.
"If they abandon the dollar, it could cause a global recession, and the dollar could go through the floor," d'Arvisenet said. "It would be counterproductive for everyone. So we rule this out. But maybe we're wrong."