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Tel Aviv has dropped to 39th on the list of the most expensive cities, according to the 2005 worldwide cost of living survey published by Mercer Human Resource Consulting in London.

Tel Aviv was No. 33 in the 2004 survey, and No. 40 in 2003. Mercer, an international human resources company, conducts the surveys as a service for clients who have employees working outside of their home countries.

The information is meant to help the clients determine how to compensate their overseas employees.

The survey covered the price of more than 200 items in 144 cities, including rent, transportation, education, clothing, culture and food.

Doron Niv, CEO of CRG, Mercer's representative in Israel, says that one reason for the drop in Tel Aviv's ranking was the rise of the euro against the shekel from the beginning of 2004 through the beginning of 2005.

According to the survey, Tokyo is the most expensive city in the world, as it was in 2004. Osaka came in second place, followed by London, Moscow and Seoul.

Asuncion, Paraguay was the cheapest city on the list, with Manila and Buenos Aires second and third from the bottom respectively.

Mercer said that most of the movement in the list was a result of changes in exchange rates, principally for the dollar and euro. These changes explain why U.S. cities became cheaper relative to those in the euro zone and Canada during the past year.

New York's position was relatively stable, dropping one spot to No. 13 in the world, and Miami moved from No. 55 to No. 57. But Los Angeles sank from No. 27 to No. 44, San Francisco went from No. 38 to No. 50, and Chicago moved from No. 35 to No. 52.

Mercer said the rise in the ranking of cities in Central and Eastern Europe had occured because they have become more attractive to foreign investors. Warsaw shot up from No. 76 to No. 26 on the new list, while Prague rose from No. 49 to No. 28.

The survey compared the prices of identical products in the 144 cities surveyed. The average cost of a cup of coffee, including service, was 2.6 euros in London, 4.14 euros in Athens, 3.04 euros in Tokyo and 0.52 euros in Buenos Aires. A fast food hamburger meal in Prague averaged 4.39 euros as opposed to 2.56 euros in Buenos Aires, 6.38 euros in London and 6.5 euros in Amsterdam.

Monthly rent for an unfurnished three-room luxury apartment averaged 3,469 euros in Tokyo, 2,472 euros in London and 1,900 euros in Paris, but only 1,100 euros in Prague, 1,050 euros in Berlin and 556 euros in Buenos Aires.