Specter of inflation reappears

The Greek economy seems to be threatened by a wave of strong inflationary pressures, as the consumer price index (CPI) records a steep rise. The National Statistics Service’s (NSS) head of retail prices and inflation department, Ioannis Moschakis, told Thompson Financial News that the inflation rate in November exceeded 3.5 percent, from 3.1 in October. The rise is primarily attributed to the rising international price of oil, but also to significant hikes in prices of food and consumer goods. «The trend in fuel prices is also upward and higher transport costs are factored into the prices of goods and services,» Moschakis said. National Bank of Greece analyst Nikos Magginas said he projects the Greek CPI to stand at between 3.5 percent and 3.8 percent for 2007 as a whole. He sees the rise in heating fuel and gasoline prices alone pushing inflation up by about half a percentage point in November, while a further 0.1 percent will be due to higher prices of food items, including fruit and vegetables, The recently approved electricity rate hikes, averaging 7 percent with effect from December 1, will no doubt add to upward pressures this month, especially in view of the fact that no substantial fall in fuel prices appears to be in sight. The government is concerned that if the trend continues it will cause an inflationary domino, pushing unions to press for higher wage rises. «We have to be careful not to enter into an inflationary spiral, as in the past,» Economy Minister Giorgos Alogoskoufis said after the European Union’s economy and finance ministers council (Ecofin) in Brussels on Tuesday, at which the uncertainties besetting the global markets of oil and commodities and their repercussions on European economies were discussed. The government has said its incomes policy in 2008 will be tight, including in the public sector.