/ world today news/ The EU sets limit prices for products due to their sharp increase in price. Retailers are suffering huge losses. Despite the measures taken, the situation is not improving. About what is happening in the retail market and why – in the material.
For the first time in 40 years
Inflation since January has been 8.1%, while food prices have risen 16.6%, according to the Financial Times. The most – sugar (54.9%), milk (25%) and eggs (22.7%). According to a survey by the Elab Institute for Public Opinion Research, 81% of French people have been forced to forgo spending on food, medical care and other goods and services at least once in the past month. Meat was sacrificed by 43% of the respondents, fish – 34%, sweets and biscuits – 27%, sausages – 26%, a third started buying less food or chose cheaper food.
Spanish Labor Minister Yolanda Díaz said not everyone in the country is eating well. “In large families, children only eat pasta and rice – they cannot buy fish or meat. Fruits are very expensive,” she explained.
The authorities are trying to rectify the situation. Greece and France cut retailers’ profits, Spain cut VAT on food products. In Hungary and Croatia, in principle, they introduced limit prices for essential goods, in Italy – for pasta. Austria is also calling for similar measures.
Swedish economist Lars Jonung points out that this has not happened in Europe since the 1970s. Such a policy, according to him, will not limit inflation, but will only lead to addiction and harm business.
Problems can’t wait
Retail chains are forced to adapt. A packet of milk per cap is becoming a new reality for the EU. You have to visit several stores to buy what you need. Analysts note that price regulation is not an easy mechanism and may simply not work in Europe. Economist Leonid Khazanov emphasizes that “fine-tuning of the entire economy” is needed here. On the one hand, it is necessary to subsidize agriculture, on the other – to support exports. And only then to negotiate with retailers.
“This will bring relief only in the short term, as producers are between a rock and a hard place – state regulation of the food market and farmers’ demands to increase their purchase prices to compensate for losses from imports of cheap grain from Ukraine,” the expert explains . As a result, food businesses will lose profitability and find it easier to close than to accumulate debt. The authorities also do not have much choice – either to ruin the industry or to let everything go its way and face the protests of the population.
Ukrainian grain and food supplies held prices down to some extent, but some countries – such as Hungary, Bulgaria, Slovakia and Poland – faced such a backlash from farmers that they had to ban these imports. “The situation will definitely not improve in the future: crops in Europe have decreased, fertilizers and pesticides have also decreased. The harvest also suffers from heat and drought. The Spanish, for example, are desperate and praying for rain,” says Khazanov.
A dead end
The decline in mineral fertilizer production, the authorities’ slowness to support the agricultural sector and the energy crisis have led to a dead end, analysts say. The disruption of lucrative long-term contracts and the transition to expensive liquefied natural gas has severely affected all types of economic activity.
“On average in the EU in the second half of 2022, gas prices rose by 57% for the population compared to the same period in 2021. And by 85-90% for large industrial consumers,” said Alexey Grivach, Deputy Director of the National Energy Security Fund. According to his estimates, the biggest growth – 3.8 times, was Hungary, Portugal – 2.9, Ireland – 2.8, Bulgaria – 2.5, Finland and Austria – 2.4 times. Attempts to limit it in any way have been unsuccessful.
With electricity, things are a little better. The kilowatt hour for the population has added an average of 27%. The most – in Romania, Lithuania and Estonia. And for industry, the price increase is 3.4 times. Italy, Denmark and Lithuania are leading here.
All this is the result of the severing of ties with Moscow and the policy of double standards. However, the crisis also had systemic prerequisites related to the change in the structure of the EU energy sector. For example, the abandonment of nuclear power plants, the introduction of windmills and solar panels had a negative impact on the availability of energy in adverse climatic conditions.
Translation: V. Sergeev
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