[TRANSCRIPT] If we are interested in growth, we mean to improve our standard of living. Every state calculates the GDP in its own currency. So, can they be compared to each other? The GDP in a national currency cannot simply be changed into Euro at the relevant exchange rate in an expedient way, because the exchange rates are subject to strong fluctuations and the purchasing power is different in each country. If you want to compare countries, the said aspects need to be corrected. The principle is simple: The data are calculated using the same prices for all countries. The PPP here are price relatives that show how many units of foreign currency are needed to purchase a product which is available for one unit of the domestic currency in a country. A PPP of 2 for a cup of coffee in the USA compared to Germany means that you can purchase the same quantity in the USA for two dollars, like in Germany for one euro. This way, the PPP does not only possible to convert into a single currency, but also to correct the effects of the exchange rates and adjust the differences in the price level of the countries. Due the particularity of a single currency in the euro zone, Eurostat has set an artificial currency as the standard, the so-called Purchasing Power Standard PPS. PPP can be used for comparisons of economic prosperity, which are relevant in different fields of policy. The allocation of funding from the Structural and Cohesion Funds of the EU would be impossible without these comparisons. Thus, the calculation of PPP and its use has a direct impact on the everyday life and work of every European - including you. Eurostat - Your key to European statistics!

• published: 30 Jan 2015
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