ECONOMY

Inflation over 4 pct in January, will fall later, says minister

Economy and Finance Minister Nikos Christodoulakis said yesterday that the Consumer Price Index’s annual rate of growth exceeded 4 percent in January, but argued that it would decelerate from then on. «In January, inflation increased sharply. It will decelerate in the coming months. It is above 4 percent,» Christodoulakis told reporters. The National Statistics Service (ESYE) will announce January’s headline inflation figure tomorrow. The inflation rate at the end of December was 3 percent, having risen sharply from 2.4 percent in November. According to ESYE sources, it will range between 4.2 and 4.3 percent. Christodoulakis attributed the sharp rise in prices to rises in fruits and vegetables due to extremely cold weather. He also said the big drop in fuel prices in 2001, because it was not repeated this year, also contributed to the rise, perhaps to an even greater extent than vegetables. Asked about the effects of the introduction of euro banknotes and coins, on January 1, Christodoulakis replied that these were «not significant,» although there were cases where producers and retailers took advantage of the currency switch to hike prices. Christodoulakis remarked that the rise in inflation was not confined to Greece, but was a phenomenon seen throughout the European Union. A recent study by Alpha Bank forecasts that, after a sharp rise in January, inflation will drop to 3.4 percent in February and 3 percent in April. If there are no unexpected rises in the price of oil, the study finds a 2-percent inflation rate by January 2003 quite likely. Average inflation for 2002 will be 3 percent, and will fall below 2.5 percent in 2003. Despite this forecast, it is widely expected that the announcement of January’s inflation rate will lead unions to voice demands for high pay rises. At a meeting Tuesday between representatives of unions and employers’ organizations, the General Confederation of Greek Labor (GSEE) asked for average pay rises of 6.7 percent in 2002. Employers appear willing to settle for around 5 percent in 2002 and a figure closer to average inflation for 2003. At Tuesday’s meeting, employers called for a two-year collective wages agreement. Christodoulakis did not mention pay rises; when asked about another hot issue confronting the government, social security reform, he said talks between the unions and the Labor Ministry would begin at the end of March. Christodoulakis appears more skeptical than his predecessor, Yiannos Papantoniou, about the likelihood of part-financing of social security through the state budget. Papantoniou had said, a few months before, that falling interest rates would free about 1 to 1.5 trillion drachmas (2.9 to 4.4 billion euros) annually that would otherwise go towards servicing Greece’s huge public debt. But the European Union has asked the government to accelerate repayment of the debt.