ECONOMY

Greece is second most expensive country in EU

Greece is, relatively speaking, the second most expensive country among the European Union’s «old 15» members, that is, excluding the 10 newcomers, mostly from Eastern Europe, who joined in May 2004, according to a Eurostat survey. The survey considers prices relative to wages (not purchasing power parity) and finds that only Denmark is more expensive than Greece. In fact, many products and services are more expensive in Greece that elsewhere in absolute, not just relative, terms. The Benelux countries – Belgium, Luxembourg and the Netherlands – are less expensive in consumer goods, in absolute terms, while the price of services in Greece is higher than in, for example, Italy, Spain and the UK. Products sold by multinationals are also more expensive in Greece, even though the producing firms strive for a uniformity of prices across regions. According to company managers, higher taxation and logistics costs are to blame. Development Minister Dimitris Sioufas, not convinced by the argument, has asked the Competition Commission to look into the matter and determine whether there are irregularities. The commission is expected to announce its findings by the end of the year. The Development Ministry said prices will be lowered if more sectors open up to competition. However, there is much to be done to get there. And Greece, being an economy of relatively low competitiveness and a low level of services, faces further turbulence with economic liberalization. Inflation, double the eurozone average, is one good indicator of declining competitiveness. Another is the increasing current account deficit and the relatively low level of inter-EU trade. The latter represents only 57 percent of Greece’s total trade and is one of the lowest figures among the 25 EU members. The EU average is 66 percent. This translates to more taxes, more tariffs imposed on imports and exports alike, and more expensive imports. It also make Greece more vulnerable to currency fluctuations.