NEWS

Oligopolies, high profit margins account for inflated prices

A pricing paradox is afflicting Greece: Consumers earn less than other Europeans yet pay more for goods and services. This is a question that is open to many interpretations, although a string of studies now being conducted by the Ministry of Development and the Competition Commission may shed some light on the matter. On one level, one could argue that the Greek market is a small one with room for only a few businesses in certain sectors; in such a situation, these firms can directly influence the levels of prices. These oligopolies all but dominate several product sectors. Olive oil, for example, is produced and packaged by just two major companies, while a single company controls 60 percent of the soft drinks market. Inflated prices did not appear overnight. For years up to 1997, consumer inflation raged in double digits; only from that point were serious efforts made to bring it under control. This means that over the years prices froze at high levels, according to one experienced business executive. «You can forget the high profit margins of the past if you expect high employment rates,» Deputy Development Minister Yiannis Papathanassiou has repeatedly said, shedding light on another aspect of the high cost of living in Greece. Other factors play a role as well, such as distribution costs, the abundance of special deals and promotional packages launched by companies, and a variety of government decisions that nudge costs upward. For example, the previous, PASOK government passed a regulation saying that bottled water had to display an indicative price. A small bottle of water at the time used to cost 50 drachmas, or 15 cents, while after the regulation was put into practice, the price skyrocketed to 50 cents, or approximately 170 drachmas. The freezing of prizes and a string of gentlemen’s agreements did little to control price hikes. Last but not least came the euro, and along with it a preposterous rounding-up of prices, especially in the services sector.