Dublin is the third most expensive capital city in the European Union. Ireland's capital has climbed above Paris and Vienna, according to new igures, and now lags only London and Copenhagen in the cost of living. The cheapest EU capital in which to live is Lisbon.

The survey measures cost of living by comparing the cost of more than 200 items in each city, including housing, food, clothing and household goods together with transport and entertainment.

Using New York, with a score of 100 index points, as its base, the survey allocates index scores to all cities surveyed. Dublin's index score is 67.5, a reduction of 1.8 points from last year. London, the EU's most expensive capital, has an index score of 91 points, while Lisbon, the cheapest, has a score of 53.3. Milan also ranks above Dublin but Italy's capital, Rome, does not. Overall, in Europe, there has been a fall in the index score for every one of the 15 European capitals.

Contrary to expectations, the euro has not brought about an overall rise in retail prices. "Before the euro arrived, there was concern that prices would be rounded up when converted," said Ms Marie-Laurence Sépède, senior researcher at Mercer Human Resource Consulting, who carried out the survey. "We've seen little evidence of this in retailing."

In the global table, Dublin's ranking has fallen to 73 this year from 61 last year. The most expensive city in the world in which to live is Hong Kong, with an index score of 124.2, followed by Moscow with 120 points. Tokyo, which topped the list last year, falls to third.

London is the only EU city to get into the top 10 worldwide in the list , which is used by multinational companies to set allowances for their expatriate workers. The survey covers 144 cities, the cheapest of which is Johannesburg with an index score of 34.4.

New York is the most expensive city in America, followed by Los Angeles and Chicago. In South America, Caracas in Venezuela is the most expensive city. Buenos Aires, last year ranked 23rd most expensive city in the world, has fallen to 133rd this year amid catastrophic financial turmoil.

The results of the survey show that the gap between the world's most and least expensive cities is narrowing, according to Mercer.