Small shops and hair salons often round prices up
Labels must be in BGN and EUR
A blacklist of traders who deliberately violate the rules for converting prices from BGN to EUR or for rounding will be made after Bulgaria enters the Eurozone. This is foreseen in the National Plan for the introduction of the euro in Bulgaria. The black list will be published on the website of the Commission for Consumer Protection, and the aim is to ensure that traders do not mislead consumers with the prices of goods.
The goal of the government is the entry of our country into the Eurozone from January 1, 2025. One month after the EU Council decides to introduce the euro in Bulgaria and 12 months after the date of our entry into the Eurozone, the prices of goods and services must be announced in BGN and EUR. And the conversion of prices from BGN to EUR should be done at the current fixed rate of BGN 1.95583 for one euro. There will also be a rule for rounding off prices. If the third digit after the decimal point is from 5 up during conversion, the second digit after the decimal point is rounded up by one unit. And if the third character after the decimal point is less than 5, the second character is not changed. This means that if a patty costs BGN 3, upon entering the Eurozone, its price should be 1.53 euros.
People’s fears are that traders will round prices up, meaning the price of a pie will not remain at €1.53 when we enter the Eurozone, but at best it will be €1.60, and some may round it up to €1 .80 euros or even at 2 euros. If a merchant simply rounds up the Euro prices, they will not be blacklisted. Only a merchant who does not correctly write the prices in BGN and EUR will be included in this list. That is, if before our entry into the Eurozone he puts a label of BGN 3 and BGN 1.53, and from January 2025 the label says BGN 1.80 and BGN 3.52, the merchant will not be in violation. In order to understand whether a trader has not raised the price unreasonably, just because we entered the Eurozone, one has to remember all the prices of goods and services before the adoption of the Euro and compare them with those after January 1, 2025. But the rounding up of prices it may not be on the day we enter the Eurozone but over a longer period of time, for example a pie may become €1.80 or €2 a month or two after the introduction of the euro, and some prices may take time to round off and longer time. For example, in Bulgaria, the prices of many goods end in 99, that is, they are BGN 4.99, BGN 5.99, and so on. It is possible that the prices of these goods will again end at 99, but in Euros, which will represent a rounding up.
To learn about Croatia’s experience of the introduction of the euro, the Parliamentary Committee on European Union Affairs, Schengen Area and Eurozone heard from the Governor of the Croatian National Bank, Boris Vujicic. He explained that in Croatia they made a blacklist of dishonest traders, and civil organizations for consumer protection were very active in price monitoring. The Central Bank of Croatia has tried to monitor the changes in all prices. But it turned out that small shops and hairdressing salons, for whose prices the Central Bank had no data, most often raised the prices and rounded up. A number of analyzes show that when a country enters the Eurozone, prices are most often rounded up in restaurants and in the service sector.
In Croatia, they put a ceiling on some prices
The Governor of the Central Bank of Croatia, Boris Vujcic.
Penalties for unfair practices
In Croatia, from 2022 to the first quarter of 2023, inflation was high, which made it necessary to cap the prices of some basic foods, the Governor of the Central Bank of Croatia, Boris Vujicic, explained to the Parliamentary Committee on EU Affairs, Schengen Area and the Eurozone. The price cap has not affected the availability of food products in stores, he added. According to Boris Vujcic, Croatia’s entry into the eurozone led to an increase in inflation of only 0.2%, and the large price increase would have happened anyway, even without the adoption of the euro. But how the Central Bank of Croatia assesses whether a trader raises prices because of the euro or for some other reason was not clear.
Boris Vujcic explained that the State Inspectorate has imposed fines on merchants that reach up to 5,000 euros, which is a large amount for a small shop or hair salon. At the beginning of 2023, when Croatia entered the Eurozone, local media reported that the State Inspectorate in just two or three weeks imposed 151 fines totaling EUR 234,000 on economic operators who had resorted to unfair business practices. But at the hearing in the Bulgarian Parliament, Boris Vujcic did not explain exactly what unfair practices the fines were imposed for. In Bulgaria, there is currently no plan to impose fines for unjustified price increases, but only if the trader does not declare them correctly in BGN and EUR.
When asked how joining the Eurozone has affected foreign investment in Croatia, Boris Vujicic said that investments can be assessed in a short period of time, even though it has been more than a year since the country joined the Eurozone. But Vujicic stressed that investors from eurozone countries like to operate in their own currency.
Flour, sugar, milk and pork with fixed prices
Inflation in Croatia since June 2023 is higher than in Bulgaria.
The list was expanded
The government of Croatia introduced a ceiling on the prices of some basic foodstuffs – sunflower oil, milk, flour, sugar, chicken, pork and minced meat three to four months after adopting the euro. From mid-September last year, the number of products with state-regulated prices was increased to 30. Interestingly, in the last expansion of the scope, there were goods whose marginal price was almost twice lower than the current one, such as rice (from 4 .92 but 2.29 euros) and spaghetti (from 1.95 to 1.09 euros).
Placing a ceiling on prices has not led to the disappearance of goods from stores, it became clear from the words of the governor of the Central Bank of Croatia, Boris Vujicic. But despite putting a ceiling on some valuables, inflation in Croatia is higher than in Bulgaria. The annual inflation in our country, according to the consumer basket of the EU countries, was 4% at the end of January, Eurostat data show. And in Croatia, inflation is 4.8%. After joining the Eurozone, Croatia overtook us in terms of inflation. Before the record price rise in 2022, inflation in Croatia was low and close to the EU average. In 2022, inflation in Croatia increased, but remained lower than in our country. But a few months after joining the eurozone, since June 2023, inflation in Croatia has been consistently higher than in Bulgaria, according to Eurostat data.
Assoc. Prof. Grigor Sariyski, Institute for Economic Research of the Bulgarian Academy of Sciences, to “Trud news”:
Bulgaria will not get any positives from joining the Eurozone, but only an impulse to raise prices
I don’t think the governor of the Croatian National Bank presented the real measures they took there, because the blacklists are only one part of the truth. The one who is pleasing and good looking in front of the audience. In fact, what their government did was to introduce price limits, or in other words price ceilings. Just like in the years of socialism, when in our country there was a Price Committee and administratively determined what and how much it would cost. In other words, Croatia dealt with inflationary pressures by blocking market mechanisms. By abolishing the market economy.
Literally 3 or 4 days after the introduction of the euro, already in the first working days of 2023, the Minister of Economy Davor Filifović gathered the representatives of the large retail chains, to which journalists were not admitted, but in his comments to the media after that he mentioned about black lists and price controls. A little later, in the spring, price controls were introduced on 7 of the main commodities. In September, it turned out that this was not enough, and prices in Croatia continued to rise. Then the number of goods with regulated prices was increased to 30, and for some of them the ceilings were 30-40 percent below the price at which they were offered in the store.
In the second place, it must be said that there were blacklists for dishonest traders, but regulated prices in an economy that claims to be market-based implicitly defines everyone as dishonest. The introduction of price controls means that the government outlaws any trader who tries to sell at a price that covers the cost of delivery and the associated costs of selling a product. This is incompatible with free market understandings.
Third, the price problem is not at all something that can be created and solved within a few months. In the case of Bulgaria, there is something that is politely avoided in the comments on the subject, namely the large volume of liquidity buffers that will be released from the first day of entry into the Eurozone. Unlike Croatia, our minimum reserve ratio is 12%, and after Bulgaria enters, this percentage will drop to 1. This means that banks will suddenly find themselves with plenty of excess liquidity, which they will have to pour somewhere into the economy. In fact, this is one of the main factors that will lead to a strong inflationary pressure that will not disappear in a few months, but will affect price dynamics for a long time.
Fourth, when the Eurozone is commented on, Germany, Lithuania, Latvia, Estonia, Croatia are generally given as examples, but geographically and mentally Bulgaria is much closer to Greece. From this point of view, we are talking about a possible and probable scenario, personally I am not inclined to expect either an Estonian, Croatian or German scenario. To put it as mildly as possible, I would say that things will be much more negative with us.
It should also be noted that after Croatia was admitted to the Eurozone, it began to benefit from the benefits of the country’s admission to the Schengen area, which in turn brought a certain impetus to the economy. But with us, the effect will be far from the same. It is not yet clear whether the entry into the Eurozone and Schengen will happen simultaneously, and even if this happens, Bulgaria will have far less benefits than those enjoyed by Croatia. This will mean a much weaker foundation for economic development and, in the presence of a strong inflationary impulse, we will be faced with a situation in which the entry into the Eurozone will bring Bulgaria nothing but negatives.
A curious fact to note for all those who still believe that the Eurozone is some sort of panacea for dealing with the shadow economy etc. is that Minister Filipovic, who took up the fight against crooked traders and high prices, was fired very recently . Because of corruption.
2024-02-27 08:00:00
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