EU politicians impose price caps on food to tackle cost of living crisis
Europe’s retailers and governments are locked in their fiercest tussle over food costs for 50 years, with policymakers resorting to price controls to tackle the worst cost of living crisis for a generation.
Despite lower energy prices easing overall price pressures, growth in the cost of food has continued to soar, prompting increasingly unconventional market interventions from politicians trying to assuage public anger.
Food prices in the EU rose 16.6 per cent in the year to April, according to Eurostat, far in excess of a headline inflation rate of 8.1 per cent. Some of the biggest surges have been in the cost of staples, with the cost of eggs rising 22.7 per cent over the period, whole milk up 25 per cent, and sugar by 54.9 per cent.
“We haven’t had price controls in a general pattern in the western world since the 1970s,” said Lars Jonung, a Swedish economist and expert on the controversial caps.
Central and eastern European states hardest hit by rising prices, such as Hungary and Croatia, have moved to cap the cost of essentials to shield the most vulnerable, who tend to spend more of their income on food.
Nora, a 32-year-old mother of three in Budapest, said it was “nice” that price controls had made products such as whole milk cheaper. But she noted that supermarkets had started limiting purchases, meaning she had to visit multiple stores or go shopping every day to take advantage.
Greece has taken an alternative approach to limit prices by capping retailers’ profit margins on food and other essentials.
In richer economies, France has negotiated a looser agreement with supermarkets to offer a selection of items at the lowest possible price. Spain is one of several countries to have cut value added tax on food. Others, such as Italy, are coming under pressure to cap the cost of beloved foodstuffs such as pasta.
Source: Financial Times