Inflation staying put in June

Inflation in June is expected to stay at the same level it was in May, a yearly rise of 3.8 percent, according to sources in the National Statistics Service. This piece of news worries officials at the Economy and Finance Ministry, who had forecast that June and July would see a substantial decline in inflation. The fact that Greece’s inflation is consistently higher than the eurozone average is the biggest blow to the Greek economy’s competitiveness. Having lost the use of its own monetary instruments, including the ability to depreciate the national currency, when it joined the eurozone at the beginning of 2001, Greece is paying the price for the rigidities in its economy. In the long term, the market share of Greek products abroad will be even lower and this will cost dearly in jobs. Still, Economy Ministry officials think that there is a good chance of bringing the inflation rate below 3 percent by the end of the year. The reduction in international oil prices, combined with the strong euro, are contributing toward lowering inflation. The Bank of Greece is decidedly more pessimistic in its estimates; it says that end-year inflation will be around 3.5 percent. The central bank has often warned that there will be little progress in lowering inflation unless the government controls spending and keeps pay rises to levels below the rise of productivity. Its recommendations have drawn the ire of unions and at least a few ministers.

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