Eurogroup mulls inflation options

Greece is among the worst-affected members as oil price rises spill over into the cost of foodstuffs

Dealing with inflation at the European Union level should not involve cuts in fuel taxation or tampering with the price mechanism but should be based on boosting competition and targeted measures to offer relief to the lower income strata, Economy and Finance Minister Giorgos Alogoskoufis said yesterday.

“We have to speed up structural reforms for the strengthening of competition so as to achieve positive effects in those sectors where it does not fully function,” he told reporters after the EU finance ministers’ (Eurogroup) meeting in Frankfurt, which discussed the issue of galloping consumer prices.

Greece sided with the majority of members, which rejected French President Nicolas Sarkozy’s call for cuts in VAT and fuel taxes to deal with inflation.

Alogoskoufis said the international inflationary shock due to steep rises in prices of oil, food and commodities has affected all economies but not to the same degree.

“The impact is not the same in all countries, as they have different structural characteristics. But we agreed that the best way to face it is a common approach,” he said.

The Eurogroup president, Luxembourg’s Jean-Claude Juncker, said that the ministers pledged to present specific measures aimed at providing relief to the poor and combating profiteering by the end of the month.

According to data of the European Union’s statistics service (Eurostat), food prices in April rose much faster than inflation as a whole throughout Europe, and Greece was the fifth worst-hit member of the eurozone.

Inflation was 4.4 percent up year-on-year, with food prices rising 7 percent. In the eurozone as a whole, April inflation stood at 3.3 percent while food prices rose by 6.2 percent.

Differences were particularly apparent in vegetables. Due to the mild winter, prices in the eurozone were 2 percent lower in April, but in Greece there was a 6 percent rise. Fruit prices were up 8.2 percent in the eurozone and 11.4 percent in Greece. Bread and cereals rose 9.2 percent against 14.8 percent.