Rising prices and no handouts
Three interesting facts have come to light in recent days. One is from Eurostat: In August, Greek inflation was almost unchanged, easing slightly from 3.5% in July to 3.4% – the same was true throughout the eurozone.
The second fact came from Greek statistics agency ELSTAT. In June, the volume of retail sales was 7.6% lower on an annual basis and 3.8% lower than May. The decline in supermarket sales volume was even greater: 8.4% on an annual basis and 4% lower compared to last month.
The third fact is from a survey conducted by the Athens University of Economics and Business on behalf of the Athens Chamber of Commerce. One in two retail stores recorded lower turnover than last year during the summer sales, with only 18.3% of the stores increasing net sales. The situation was worse in Piraeus, where 62% of businesses reported lower turnover and only 5% reported a higher figure. The trend is clear: Inflation limits consumption to essentials – even in food.
When it comes to this year’s summer sales, the government’s amateurism is largely to blame for their failure. The sudden imposition of European practices has created utter confusion over “recurring,” “scaled” and “one-off” discounts, and has had the effect of hurting consumers and retailers. On another level, this will also affect the consumer price index, which will probably be higher in September.
However, beyond the blunder, there is the big issue of substance. With energy costs down and international commodity prices returning to their previous levels, why are commodity prices, and food in particular, soaring? Two answers have been put forward:
The first – if you ask someone in the know and they answer you honestly – is, “We don’t know.” We hear that the relevant agencies have not even been asked to investigate how prices are shaped in the food chain – from raw material imports to production and processing. Everyone does what they want and sets whatever percentage of profit they want. Only at the last stage, in retail, is there a specified percentage of gross profit – fixed from 2022.
The second concerns the causes of inflation. In this regard, the latest analysis of Alpha Bank’s Economic Research Department is enlightening: Profit growth accounted for more than half of the increase in the general price level, while the effect of nominal wages was limited, or even negative in the first quarter of 2023. Cumulatively, between the last quarter of 2019 and the first quarter of 2023, profits increased by 16%, while labor costs only increased by 7%.
In practice, this means: (a) that there is profit inflation and (b) that what was given as a wage increase was taken back through revaluations. Any action, therefore, to contain prices could not but contain some kind of intervention in the profit rates of specific industries/businesses, which are generally much higher than anywhere else in Europe. But these are the “holy grail” for the government, the incentive for speculative foreign capital to come in and buy Greek businesses and land – and they are not touched.
That leaves the several “passes” the government has created – which make it easier to pay the high prices, indirectly subsidizing the high profits. But, as Finance Minister Kostis Hatzidakis knows very well, the fiscal margins for the various passes are narrowing, and little by little, after the municipal and regional elections are held in October, they will begin to be withdrawn.
After three years of handing out (often horizontally and also often with clientelistic criteria and opacity) about 60 billion euros, this change is being felt at the level of economic activity and in public opinion, which, without the expectation of a variety of handouts, begins to view the government elected with 41% through different eyes. And public opinion is becoming less and less tolerant.
