ECONOMY

SEV: No cause for alarm over inflation issue

Inflation? All the hullabaloo over rising prices has blown the whole issue out of proportion, the Federation of Greek Industries (SEV) said yesterday in its first response to warnings this week from the government and the Bank of Greece that inflation constitutes a major problem. «We don’t think there is cause for alarm or panic,» chairman Odysseas Kyriakopoulos stressed. «All the talk and speculation over the issue probably intensifies inflation rather than weakens it.» Rising prices came to the forefront this week after the government and the Bank of Greece warned of the catastrophic effects of above-average inflation. Left unchecked, high inflation could derail economic growth, erode Greek competitiveness and lead to job losses, they cautioned. The Bank of Greece in its interim monetary policy report due to be tabled in Parliament today is expected to focus on the country’s stubbornly high inflation as well as suggest measures to combat the problem. Fueled by an unusually cold spell, the euro changeover, a series of floods and rapid economic expansion, Greece’s inflation has persistently overshot the European Central Bank’s 2 percent ceiling in recent years and soared above the eurozone average. Harmonized annual inflation in October edged up to 3.9 percent from 3.8 percent in the previous month, surpassing the eurozone average of 2.3 percent. It was the fourth highest in the region after Ireland, Portugal, Spain and the Netherlands. Analysts said inflation this month is estimated to remain unchanged from the October level, but could ease slightly in the final month of the year on the back of favorable base effects. The deceleration is projected to carry over to the early months of 2003. Greece’s high growth rate and structural rigidities, however, mean that inflation should continue to overshoot the ECB’s target next year. The industrial sector is definitely not responsible for high inflation, Kyriakopoulos said. «Prices for industrial products have remained stable,» he said, comparing the drop in the wholesale price index in September with the hike in the consumer price index. He said evidence suggested that consumer prices similarly could be stabilizing soon. Informed consumers and competition are key to bringing inflation down.