Profits drive prices higher
Corporate earnings are to blame for inflation, not the growth of salaries, Brussels says
Corporate profits are fueling inflation to a large extent in Greece and will continue to do so in the coming years, according to the fall forecasts of the European Commission, which confirm previous relevant estimates of the OECD and calculations of other independent bodies, including the Bank of Greece.
In the special chapter of the Commission’s report on the factors that contribute to inflation, it is estimated that the countries in which profits (together with taxes) will have the biggest contribution to the rise in prices in the period 2022-2025 are Hungary, Poland, Romania, Slovakia, Greece and Slovenia. In contrast, the contribution of labor costs is clearly smaller.
In fact, Economy Commissioner Paolo Gentiloni, who was asked about it at Wednesday’s press conference presenting the forecasts, gave the green light to salary increases, saying that in many European countries “there is room to increase wages to strengthen the purchasing power of employees, taking advantage of leeway given by high profits in various sectors of the economy, without necessarily affecting public finances.”
For Greece especially, he said that the increases that have been made compensate for inflation and “we do not expect a salary-price spiral.” The relevant chapter of the report points out that while inflation was initially driven by energy prices and supply chain bottlenecks, the role of domestic factors such as wages and profits subsequently increased. Greece, however, is included among the countries in which external factors, such as energy prices, will continue to play an important role in inflation in the coming years.
The report also points to the strong upward trend in real estate prices, which was highlighted a day before by the report of the International Monetary Fund’s mission in Athens. In the third quarter of the year, only Greece, Portugal and Cyprus saw year-on-year property price increases, it said, while Greece is among the countries where property price growth is steadily continuing.
