Backlash against euro could mean Slovenia is last entrant

Europe is bracing itself for a new backlash against the euro as the latest nation to join the single currency has been warned to guard against shops and restaurants that hike up prices under the cover of the changeover.

On 1 January, Slovenia will become the 13th country to scrap its national currency.But even before the new notes and coins have replaced Slovenia's currency, the tolar, there are fears that the changeover will fuel unwarranted price rises in the former Yugoslav republic - known as the "Switzerland of the Balkans".

Across the border in Italy, there were complaints of massive hikes in restaurant and bar bills following the adoption of euro notes and coins five years ago. Within a year, nine out of 10 Italians believed that prices had been converted to the detriment of consumers.

Scepticism has spread across the Continent. One recent opinion poll, by TNS-Sofres in France, showed that 52 per cent of people now believe the euro is a bad choice for their country. In Germany, which was reluctant to give up the mark, there is growing nostalgia for the old currency, with 58 per cent of people saying they would return to it if they had the choice.

The European Commission has urged Slovenian shoppers to "vote with their feet" and not buy goods in outlets that increase prices too much. Spokeswoman Amelia Torres said: "They cannot just put up with it and shut up. This would be the wrong way to approach the subject." She said that some prices will increase while others fell, and added: "It is quite clear that consumers will probably only notice the ones that increase, because that's part of the human way of noticing more what is negative."

Only 7 per cent of businesses admitted, when polled, that there would be price rises, but this was particularly the case among hotels and restaurants.

More than nine out of 10 people in the 12 existing euro nations believe that prices rose after notes and coins were introduced on 1 January 2002. In the 10 nations that joined the EU in 2004, three-quarters of people fear price increases when the euro is adopted.

In 2002, the European Commission insisted that the increase in inflation was negligible during the change-over. It said some prices, particularly in bars and cafés, increased, but these were offset by reductions in the cost of other items, such as electronic goods like fridges or cookers. That meant that consumers were more aware of the increases than the reductions, officials argued.

Slovenia, which has a population of two million, is the first of 10 mostly former-communist countries that joined the EU in 2004 to adopt the currency. After Slovenia switches currencies, the eurozone will have a population of 316.6 million.

The Slovenian Consumers' Association is monitoring the prices of specific goods and services and has begun to denounce increases it sees as excessive. Dual pricing has been in place to help shoppers to adjust to the new currency.

While Britain, Denmark and Sweden have stayed outside the eurozone, new member states are committed to joining the club. Lithuania was bitterly disappointed when the European Commission ruled that it has so far failed to meet the strict economic criteria for membership. Cyprus is likely to be the next new nation to match the requirements.

Despite inflation fears, Slovenia sees accession as a source of national pride. The country's Prime Minister, Janez Jansa, has invited his European counterparts, plus the president of the European Central Bank, Jean-Claude Trichet, and EU finance ministers to celebrate eurozone entry on 15 January in Ljubljana.