EU newcomers’ inflation woes

RIGA/SOFIA (Reuters) – Miles apart, pensioners Alexander Ivanov in Latvia and Maria Vankova in Bulgaria are both grappling with the same silent thief – inflation. Until recently Eastern Europe had strong growth, but prices were fairly steady: Now, led by food and fuel prices, basic necessities are rapidly being priced beyond people’s reach. The elderly are feeling the sharpest punishment for their governments’ ambitions in taking the Eastern European states into the European Union. But prices surging at double-digit rates also pose a dilemma for officials, who are forced to choose between supporting growth and capping prices. With price rises galloping beyond target levels, the rampant erosion of purchasing power is also delaying some countries’ hopes of adopting the euro. For people in the east, much poorer on average than their western counterparts and spending more of their income on basics, price rises are a daily dilemma. The rate of price rises in Bulgaria at 13.2 percent is not far behind Latvia’s 16.7 percent, the highest in the EU. The 80-year-old Ivanov’s pension is 120 Latvian lats ($265) a month and his food needs are taking more than half of it. He has started to sell his belongings to find money to live. «A month ago this cost 2 lats, now it costs 3,» he said holding up a bag of curd cheese at the central market in Riga. «For us pensioners, it is impossible. I don’t know what the government is thinking.» In Sofia, 72-year-old Vankova is living off savings, unable to pay for power and medicines on her pension of 102 levs ($80.38) a month. «The situation has been getting worse since we joined the EU,» she said. The Baltic states and Bulgaria have had their hands tied by pegging their currencies to the euro, disabling them from adjusting interest rates to tackle inflation. Bulgaria’s average monthly wage of -250 is the EU’s lowest: Many Bulgarians travel to neighboring Greece or even Turkey for cheaper food. And official figures only tell part of the story. «I have the feeling that food prices have jumped 100 percent,» said Mariana Petrova in the Bulgarian capital, a mother of four who runs a small business. «If previously we needed 500 levs ($392) to cover monthly bills and buy food for our family, now we need over 1,000 levs… I often travel to Turkey on business and use the opportunity to buy cheaper vegetables, fish, meat,» she said.

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