COLA in Germany to hold steady for May
May 1, 2007
RAMSTEIN AIR BASE, Germany — The cost-of-living allowance for servicemembers in Germany is going both up and down this month.
How is that possible?
Here’s the reason: It’s going up because of the nose-diving value of the dollar, and it’s going down because of a price survey conducted in Germany last December.
The end result? No allowance gain or loss.
“That two-point decrease is still in play and will happen 1 May, but there will also be a two-point increase due to the COLA currency fluctuation, which will be a net no change to the servicemember,” said Maj. Brian Kehl, chief of the Accounting and Finance Operations Branch for the U.S. Air Forces in Europe at Ramstein. “So, they will not see the decrease to their pay 1 May although behind the scenes it’s still there: It’s going down for prices compared to the U.S. and it’s going up for currency fluctuations.”
The Washington, D.C.-based Per Diem, Travel, Transportation and Allowance Committee, which sets the allowance rates, decided in March to drop the rate in Germany 12 percent to 14 percent due to higher inflation in the United States. The committee planned to spread the drop in the months of May and June to lessen the financial blow from the results of the price survey.
But the weakening dollar against the euro changed everything, at least for May. An exchange rate reset by the committee wiped out that planned 6 percent to 7 percent allowance decrease for May.
That probably won’t happen in June, unless the dollar drops even more. But if the currency rates stay steady this month, a planned 6 percent to 7 percent decrease will hit paychecks in June. That’s about $50 a month for the average servicemember.
Various factors contribute to the rise and fall of COLA. Those factors include the exchange rate and surveys that measure the cost of goods and services at a specific location compared to the United States and what percentage Americans stationed in the area shop on the economy.
For example, 56 percent of those stationed in the Kaiserslautern area shop on-base, according to Master Sgt. Keibu B. Kamarakafego, manager for the Command Military Pay Policies and Procedures. Since most people in Kaiserslautern shop at base facilities, the exchange rate has a weaker influence on the rate than a place such as Berlin, where Americans mostly shop on the economy.
Individual allowance rates are determined by rank, location, years of service and number of family members.
Changes in COLA will be reflected in May 15 paychecks, Kamarakafego said.