The dollar dropped to a 12-month low against the euro Monday, but it’s unclear just how, or if, that will affect the cost-of-living allowance for American military personnel stationed in Europe.

According to military banking rates, $1 bought .7768 euros on Monday, nearly a three-cent drop from the April 1 rate. It’s the highest the euro has climbed against the dollar since May of last year.

Americans living in Europe have noticed.

Larry Caldwell, 42, who separated from the Air Force nine years ago as a staff sergeant and lives in Germany, said the falling dollar is hitting Americans in Europe.

Caldwell, a satellite technician for the U.S. military in Landstuhl who has lived in Germany 18 years, said before the introduction of the euro, he and his family used to eat out on the economy three or four times a week. Now, they plan to stay home more often and buy on base more often.

“It’s becoming a little bit more sporadic that we’re going to go out and eat on the economy because we have to actually take this money and put it toward other things, like utilities, cell phones and this other type stuff we tend to use,” Caldwell said. “The only problem is that it’s only going to get worse. … Now, everything is going to get even more expensive due to the gas crunch.”

An official at the 266th Finance Command in Heidelberg, Germany, was unable to say if the euro’s recent surge would change COLA payments to U.S. troops and civilians.

COLA rates are calculated when the euro-dollar rate increases or decreases by more than 5 percent, said Sgt. 1st Class Dean Lowery, of the 266th Finance Command, which provides finance and accounting support throughout U.S. Army Europe and European Command. Lowery said that other factors also influence COLA amounts, from location in Europe to the cost of living in the United States.

A cost-of-living survey conducted throughout EUCOM last year also affected COLA rates, with personnel in some areas, such as Stuttgart, Germany, experiencing a drastic drop in COLA payments to the tune of 36 percent. Other areas saw their COLA increase slightly.

The new COLA rates that came from those surveys last year — designed to equalize the purchasing power of U.S. and overseas-based troops — were calculated using price surveys of troops’ spending patterns and how much they pay for goods and services.

Lowery referred all specific questions regarding COLA to the Per Diem, Travel and Transportation Allowance Committee in Washington, D.C., which prescribes COLA and overseas housing allowances for military personnel. Representatives there did not return requests for comment.

The surge of the euro against the dollar is a result of many global economic factors, said Nouriel Roubini, a professor of economics and international business at the Stern School of Business at New York University.

“We have a very large and growing deficit,” Roubini said of America’s financial situation, and the need to borrow that comes from carrying such a deficit.

U.S. interest rates are also expected to start rising, while interest rates remain more stable in European and Japanese markets, he said.

While it is difficult to say for certain how much a euro will cost in dollars in the future, Roubini said that the euro’s value against the dollar should continue to rise. Currently, one euro is worth about $1.26.

“The euro could go toward $1.30, but probably not much more,” he said.

Scott Schonauer contributed to this report.

Dropping dollar

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