ECONOMY

Inflation leaps to 6-year high

Surging energy and food costs have pushed Greece’s national measure of consumer inflation to a six-year high of 4.4 percent in February from 3.9 percent in January, the National Statistics Service (NSS) said yesterday. This will not help ongoing wage talks as unions receive more evidence that workers’ purchasing power is falling. The EU-harmonized measure rose to 4.5 percen from 3.9 percent a month earlier, 1.3 percentage points above the eurozone average. Inflationary pressures are likely to make the European Central Bank (ECB) reluctant to lower the cost of money anytime soon, despite concerns of a slowdown, as it seeks to avoid a wage-price spiral. Economists surveyed by Reuters were expecting a slight pickup in the national measure to 4 percent. «It was a higher-than-expected reading driven by high food and energy prices as well as adverse base effects from the slowdown in consumer inflation during the first half of 2007,» said EFG Eurobank economist Platon Monokroussos. «Looking ahead, we expect headline inflation to remain at or above 4 percent throughout the first half of this year and to average out at 3.6 percent or higher in 2008.» The government projects consumer inflation will average out at 2.8 percent this year on GDP growth of 4 percent. Its 2.7 percent target last year was missed as 2007 inflation averaged out at 2.9 percent. Greek consumer prices remain stubbornly above the eurozone average, harming the economy’s competitiveness and possibly costing jobs in the long term, the central bank has repeatedly warned. The NSS said the cost of heating oil rose 38 percent year-on-year in February with car fuel prices up 19 percent. Pasta prices rose 21.3 percent, flour was up 19 percent and fresh produce 13.5 percent. «If oil, heating oil and gasoline prices had stayed at last year’s levels the CPI index would be at 3.0 percent,» said NSS chief Manolis Kontopyrakis. «March consumer inflation will depend on the price of oil on international markets.» Although one of Europe’s sunniest and windiest countries, Greece remains heavily dependent on oil imports. Labor unions claim workers are experiencing an unprecedented reduction in their purchasing power and are pressing for hefty wage increases as they fight the government on another front – pension reforms. The country’s largest private sector umbrella union, GSEE, which has started wage talks with employers, is asking for a 10 percent pay increase this year. The civil servants’ union, ADEDY, will demand a pay hike to at least cover inflation and is determined to hold more strikes if not satisfied. «If the wage rise offered by the government turns out to be below the current rate of inflation, we will immediately respond with labor action,» ADEDY head Spyros Papaspyros told Reuters yesterday. The government has yet to spell out its incomes policy for 2008 but has said pay increases will be around estimated inflation levels for this year.