Apart from Border residents, the only time most people think about foreign currencies is just before taking a holiday. They've become used to the magic roundabout of the pound-sterling-deutschmark-franc rate, and know it often has nothing to do with the state of the economy.

But the pound's recent slump against sterling has attracted more attention than usual. With five months to go before the euro currencies are fixed, we are in the endgame, and everyone is jostling for position. Everyone, that is, except the consumer.

In the past couple of weeks, shoppers have begun to report sudden jumps in the prices of certain goods, from books and magazines to groceries and even package holidays. Any increases are the result of two factors - shopkeepers greedily factoring the falling pound into old stock, or retailers simply passing on the hit they are taking on foreign currency purchases.

Earlier this week, the Minister for Finance, Mr McCreevy, chose the former view, and fired a warning shot across the bows of the retail sector.

"It would appear to me that some people in business are perhaps trying to use the opportunity of the volatility in the current exchange markets vis-a-vis the Irish pound, which would give them an opportunity to jack up prices," he said.

Mr McCreevy was doing far more than protecting the hapless shopper from gouging by retailers; he was watching his own back. What he could have added, but didn't, was that things look likely to get a whole lot worse for consumers.

In the first week of May, the European Union will decide how many euros each country will get for one unit of its own currency. Because the deutschmark is the most powerful currency, and the euro doesn't actually exist yet, economists measure the different rates against it.

Six months ago, a pound was worth 2.69 deutschmarks, and everyone agreed that this rate more or less reflected the strength of the Irish economy. It meant that travellers and shoppers buying German products were getting a good deal more than back in 1993, when the pound was officially valued by the EU at 2.41 deutschmarks, known as the "central rate".

But firms that export products to Germany, Britain and elsewhere were unhappy; they were selling in foreign currencies, and getting fewer pounds in exchange.

They, and the farmers whose subsidies are paid in foreign currencies, lobbied the Government hard, arguing that because the Irish economy is export-driven, Mr McCreevy should fight to get fewer, rather than more, euros - that the pound should merge with the single currency at the central rate of 2.41 deutschmarks.

Most economic reporting so far has tacitly accepted this argument. The nub of the idea is that we should all keep very quiet, and pull a fast one on our European colleagues by setting the pound at less then it is really worth, giving us a competitive advantage with our low-cost exports.

But while this is clearly good for exporters and farmers - from 2.69 to 2.41 deutschmarks is after all a drop of 10.5 per cent - and may benefit the economy as a whole, what does it mean for the rest of the population?

In crude terms, it means that the price of anything that has to be imported will cost at least 10 per cent more than it should. So the complaints of recent weeks about overpriced books, magazines, wine, holidays and groceries will only grow louder.

Irish people will discover that their salaries have been locked in at 10 per cent less than their European counterparts, and those wages will be worth 10 per cent less when they travel abroad.

Of course, our most important export market is still Britain, and the Prime Minister, Tony Blair, intends to keep sterling out of the single currency for the moment.

Given that the EU plan is to make the euro as hard and as strong as the deutschmark, this is probably good for the Irish shopper - in the long term. Since the war, sterling has been falling steadily against the deutschmark. In 1960, £1 sterling would buy almost 12 deutschmarks, by 1970 8.4 deutschmarks, by 1980 4.2 deutschmarks, and by 1996 2.35 deutschmarks.

In theory, then, our euro will continue this inexorable rise against a fundamentally weak British currency, gradually making British products less expensive.

Using a stark example, the problem is this: the drop of 5 per cent between 1988, when sterling was worth 3.13 deutschmarks, and this week, when sterling was at 2.97 deutschmarks, took a decade.

A similar pattern with the euro, downward as it is, would mean higher prices for Irish consumers until at least 2008.

But the reality is even worse than that. Sterling is not likely to stay out of the single currency for 10 years, and the most likely scenario is that Mr Blair will take the currency in around 2002, with sterling trading at higher than the equivalent of 2.41 deutschmarks.

In other words, Irish consumers are likely to find that all British and all continental imports are locked forever at artificially high prices.

Of course in time, with a single market and mobility of labour, prices and wages would converge across the European Union. But this could take many years - and after all, more than 120 years after currency union, such rates still differ significantly in the United States.

Irish taxpayers can also expect to pay a heavy price for going in at the central rate. At the moment, £2.93 billion of our national debt is in deutschmarks or other EU currencies.

Going in at the central rate instead of at 2.69 deutschmarks means paying an extra £340 million - the cost of quite a few hospitals and schools, with the odd sports stadium or tax cut thrown in. For the past six months, behind closed doors, the Central Bank has been trying to persuade the Government not to merge with the euro at the central rate. While Mr McCreevy has been careful to avoid all comment on the currency, the financial markets now believe he has ignored the pleas of the Central Bank economists. This is why the pound has been falling - the dealers expect to buy back the currency at a profit when the price drops to 2.41 deutschmarks.

The farmers' organisations and the business lobby groups may indeed have the overall well-being of the economy in mind when they insist on the central rate, but this approach happens to chime perfectly with their own special interests.

Ordinary consumers, with no powerful lobby groups, can expect to find their thoughts focusing on foreign exchange far more in the future, but by then it may be too late.