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COLA Falls as Dollar Gains on Euro
Stars and Stripes | Matt Millham | October 21, 2008

Cost-of-living allowances given to U.S. troops throughout Europe will fall Thursday to their lowest point in more than a year as the dollar continues to make gains against major European currencies.

Facing the steepest COLA cuts are troops stationed at some of the biggest bases in the United Kingdom and Italy, where allowances will drop as much as 12.5 percent. In Belgium, the Netherlands, Portugal and most parts of Germany, COLA drops between 4 percent and 10 percent.

Civilian post allowances across the continent, meanwhile, will stay stable at least until Oct. 26 after the State Departmentís Office of Allowances declined to change rates in Europe over the weekend.

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Both COLA and post allowances are pay supplements meant to offset the higher cost of living at some overseas locations, and typically rise when the dollar gets weaker and fall when the dollar strengthens against local currencies.

Troop COLA reductions in all European locations were based on exchange rate data, according to a Per Diem, Travel and Transportation Allowance Committee memo announcing the adjustments. COLA rates have a smaller threshold for change than has post allowance.

Exchange rate data from the Federal Reserve Bank of New York shows the euro traded at a mid-day average of $1.44 through the last half of September, but dropped to an average of $1.37 through the first two weeks of October. The British pound dropped from an average of $1.82 to $1.75 over the same period.

As a result, an E-6 with two dependents at most German locales will see about $45 less COLA in their end-of-month paycheck than they got in their mid-month pay. Troops of the same rank and family size stationed at either Vicenza or Aviano Air Base, Italy, will see a drop of roughly $90.

The same goes for a similar troop stationed at either RAF Lakenheath or RAF Mildenhall, England.

COLA in most European locations had held steady for a month after back-to-back cuts in September. But the improving exchange rate has, with the latest cuts, driven COLA to its lowest level since July 2007.

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