Price hikes defy observatory

Fruit and vegetables pushed inflation up again in May despite lower fuel prices and a strong euro. Can the new online trackers ease the burden on a household’s mounting shopping bill?

---

By Dimitris Yannopoulos, Athens News

Also on HCS Are Business Practices in Greece Corrupt? A Call for International Business Ethics Standards Are Greeks Culpable for High Prices? From Rich-Poor Relatives to Equal Partners: Towards a New Relationship between the Greeks of the Homeland and the Greeks of the Diaspora Will the Drop in US Dollar Affect Tourism in Greece?

SOMETHING is rotten in this country's fruit and vegetable markets. Few are willing to admit the problem is not one of "bad weather", and fewer can fathom a remedy for the never-ending price hikes, month-on-month and year-on-year, at least since early 2002.

Once again, professional forecasters and market analysts were caught off guard on June 9, when the announcement of the official inflation rate at the end of May defied their expectations of a slowdown with another skyward jump. A strong surge in fresh food prices outweighed the effects of lower energy costs and a strong euro last month, to push the consumer price index to 3.8 percent year-on-year – double the eurozone rate, from 3.4 percent in April.

"What's happening in the Greek fruit and vegetable market has no precedent in the rest of Europe," says Haralambos Kouris, president of the General Consumers Federation, INKA, the biggest and oldest independent consumer protection group.

"Not only have prices been rising at an accelerating pace for over a year now, but we often find price differentials of 150 percent or more in the same products, the same day and in different cities or different districts within the same city. In Europe, you can't find such price spreads exceeding 80 percent. And then only between different countries and for 'special' products such as skiing boots, but never in the same country," he told the Athens News in an interview.

Too expensive for tourists

This means that official inflation figures are unreliable as a measure of the underlying nationwide price trends, he said. INKA's European Consumer Centre, which deals with local complaints by tourists, warned on June 10 that Greece is fast becoming the "most expensive country in Europe" for millions of summer holiday visitors. Most tourists cite the "cost of living" as their main complaint at the end of their stay in Greece. The example that immediately comes to mind is the price of a bottle of drinking water – three or four times the price of a litre of unleaded petrol in many Greek resorts.

The National Statistical Service (NSS) said EU-harmonised Greek inflation rose to 3.5 percent from 3.3 percent in April, remaining among the highest in the eurozone. Early estimates show that inflation in the 12-nation bloc eased to 1.9 percent in May from 2.1 percent the previous month, falling for the first time since June 2002 below the European Central Bank's 2 percent ceiling. NSS said a huge increase in fruit and vegetable prices by 34 percent, caused the overall CPI rise in May, while fuel prices dropped by 3.8 percent.

Economy and Finance Minister Nikos Christodoulakis, who had forecast inflation to decline to 3.2 percent in May, put on a brave face over the latest blow to his projections by saying it had some silver lining – namely, lower "core inflation" and an incentive for consumers to become more selective by making use of the daily price lists issued by the government's "price observatories".

"I can see a positive development in these inflation numbers…that our core inflation, excluding fresh produce and oil, is moving on a very low level of 3.1-3.2 percent, the lowest level for the last two years," Christodoulakis told reporters on June 10.

He said bad weather that hit the country earlier this year still kept prices of a number of farm products high. But he called on consumers to "also do their part in reducing price pressures by becoming more discriminating in what they buy and how much they pay for it."

Transparency and price-spotting

Kouris disputed the claims that spells of bad weather were anything more than a pretext for widespread price fixing networks between producers, wholesalers and retailers. Nevertheless, he concurred that price observatories are the only alternative to severe price controls.

"Lack of transparency is one of the biggest problems in the Greek market, highlighted by the absence of valid invoices at the production and wholesale stages, which makes it impossible to calculate a realistic average 'starting price' for each product," he said. "Price observatories are therefore the only way to spur farmers and traders into more competitive transactions while simultaneously activating the consumer's price reflexes."

The price observatory, launched by the development ministry on May 28, is an online price tracker that can be accessed through the Internet from the home page of the General Secretariat for Commerce at www.gge.gr

Currently at its "pilot phase", it only monitors the daily prices of 25 fruit and vegetables sold in different open-air-markets, grocery stores and supermarkets in Athens, Piraeus and Thessaloniki. The ministry plans to add 120 more products to the observatory's list by the end of the year, when it hopes to be able to monitor markets throughout the country.

However, Kouris stressed that the hasty and superficial manner in which the price observatory has been introduced may prove to be counterproductive. "We need a much more flexible and diversified price monitoring mechanism involving daily surveys in different municipal districts within the same urban center, in the capitals of all the Greek prefectures and in areas where seasonal surges in consumption are observed, such as tourist resorts," he said.

"On the other hand, it is meaningless to monitor the price differentials of discrete products alone, as if the consumer can afford to buy his tomatoes in one place, his potatoes in another and his oranges in yet another."

A proper price monitor would have to include the weighted costs of "shopping baskets" for product categories such as fruit, vegetables, fresh and frozen meat, processed foodstuffs etc. Kouris said.

Early results?

The general director of the price monitoring department at the development ministry, Ioanna Hatzopoulou, rejected most of the criticism leveled against the online trackers. "Even though we are still at the start of the pilot stage, we can already see positive results both in terms of consumer interest in the new service and the traders' response to the observatory's market signals," she told the Athens News.

"Prices are already dropping in some of the products included in our daily tracking schedule, and this appears to come in response to the information that traders get regarding the pricing policy of their competitors, whether it be street markets, grocery stores or supermarkets," Hatzopoulou said.

She referred to the fact that in the first week of the observatory's online price listing, the minimum prices charged by supermarkets dropped faster than those at street markets in many fruits and vegetables. "Cherry prices have risen 40 percent compared to last year as local producers have suffered a catastrophe from the cold spells this spring," she said. "Otherwise, we shall see more price cuts in the coming months."