Euro at 2-year high after COLA cut
FRANKFURT, Germany — Less than two weeks after U.S. troops in Germany learned they would be losing more than 14 percent of their cost-of-living allowance, the euro reached a two-year high against the dollar on Friday.
The euro climbed above $1.35 on foreign trading Friday, moving close to its all-time record amid expectations of a European interest rate hike in June and persistent uncertainty over the U.S. economy’s strength.
The military “accommodation” rate — the exchange rate used by military banking facilities in Europe — will be $1.3885 on Monday, meaning 1 euro is worth $1.38.
Conversely, $1 will be worth 0.7202 euros on Monday at those same military banks, the lowest rate since Dec. 29, 2004, when $1 was worth 0.7149 euros.
The weakening dollar is particularly bad news for U.S. servicemembers in Germany, who learned March 31 that their COLA — aimed at making sure troops’ purchasing power is equal to their stateside counterparts’ — would fall 14 percent by June 1. For many troops, that would mean about $100 a month.
The reason for the drop, according to Maj. Brian Kehl, chief of U.S. Air Forces in Europe’s Accounting and Finance Operations Branch, was because inflation had risen in the United States.
“On some goods, prices might be lower in the U.S. than Germany … but across the broad spectrum of those goods it was definitely a higher inflation in the U.S.,” Kehl said at the time.
A check of the Defense Department’s Per Diem, Travel and Transportation Committee Web site, shows that COLA rates for troops in Europe will not change on Monday despite Friday’s news. The Web site tracking the civilian equivalent to the COLA, known as post allowance, has not changed since April 1.