Soaring inflation, a global phenomenon, may be to a significant extent imported in Greece due to its great dependence on imports of energy and raw materials, but that is not the sole reason why prices of basic commodities in this country have skyrocketed, both in absolute terms and in comparison with consumers’ purchasing power.
A set of factors ranging from the energy costs of farming to the domination of special offers at supermarkets are behind this endemic phenomenon of price hikes in the country.
One of the reasons, among the most obvious ones, is the high indirect taxation: Levies like value-added tax and the special consumption tax such as that introduced just a few years ago on coffee, were increased or created during the decade-long financial crisis but have remained in place since.
Therefore, while in Spain basic food items such as milk, bread, eggs and cheese have a 4% VAT rate, in Greece it’s 13%.
Any talks of a VAT reduction in Greece, at least regarding basic food commodities, is stopped before it has even started, despite constant calls to the government by suppliers and retailers; the government claims it will not impose cuts due to fear of them not trickling down to consumer prices.
Instead it has opted to discuss a “gentlemen’s agreement” for price containment, a practice proven to be inefficient, with industry and retailing representatives.
Greece also has a number of peculiarities that drive prices higher than in the rest of the eurozone. As Stefanos Komninos, a market analyst and co-founder of consultancy company Netrino, explains, “even the fields with clover in Greece require energy consumption for their irrigation, while in Central and Northern Europe that is not necessary thanks to the weather conditions.”
Another structural problem in Greece is related to the allegations reiterated last week by dairy company Kri Kri, with its director speaking of artificial shortages and profiteering games regarding raw materials.