Inflation does not subside in Europe: France and Spain promote price agreements

Governments ask distributors for a price agreement

In Europe, inflation is not being controlled and the effects of the second round are evident. The food basket does not stop its increase and the concern extends to all governments, although mainly to consumers.

It is a price crisis that is mortifying the euro zone. The president of the European Central Bank (ECB), Christine Lagarde, has already announced that the organization will react again to the rising cost of living that persists in the countries of the euro zone and that the entity that presides has the obligation to fight in its statutes.

It is true that the inflation rate in the euro zone decreased in February (8.5%), but did so slightly. What is more worrying, the Underlying inflation, excluding volatile items such as energy and food, continues to rise, reaching 5.6 percent. And despite sharp falls in November, December and January, thanks to a pause in energy prices (electricity, gas, oil), the slowdown in inflation stopped last month.

With this panorama, social pressure increases. For this reason, the French government took the plunge to present a new response to the “strongest inflationary shock since the 1970s.”

Given the food inflation in France, which reached 14.5% annually in February according to the National Institute of Statistics (INSEE)the Ministry of Finance announced the establishment of a “anti-inflation basket” in supermarkets with “the lowest possible price level” on a selection of products.

The head of the Economy portfolio, Bruno Le Maire, was in charge of announcing the launch of an “anti-inflationary quarter”, the result of an agreement with distributors who agreed to offer a selection of products at lower cost.

prices locked
The prices “blocked” in the gondolas of Paris

The mechanism, financed thanks to the margins of the distributors, will mean reducing profits by “several hundred million euros”. In order to offer a complete aid package, “Bercy”, as the palace of the treasury is known, will also deploy in the coming months a “food bonus” for the most modest homes.

In order to preserve the government’s policy of non-intervention in price setting, and not produce future market distortions, this operation will be applied to products whose selection will remain in the hands of food distributors and producers.

For the consumer to have easy and clear access to this basket, the products included will be labeled with a tricolor logo that means “anti-inflation quarter”. Most of the commercial operations will be related to own-brand products, in which there is more capacity to set prices, said the executive president of Carrefour, Alexandre Bompard.

The products will be chosen by each of the distributors, and may be different from one region to another. Dominique Schelcher, CEO of the “U” chain, even posted the visual identity of the products on his Twitter account.

Another country that has made public the idea of ​​copying the French “model” is Spain. Nadia Calvinothe First Vice President of the Government and Minister of Economic Affairs believes that French supermarkets with a presence in the country could apply the same system of discounts.

“Regarding the announcements that we are hearing in other countries, and which refer to voluntary measures by multinational groups, we take it for granted that those multinational groups that have a presence in Spain will extend any commercial policy that may benefit French citizens to French citizens. Spanish citizens”, said the official at a press conference after the Minister council.

However, and as from the Executive that manages Emmanuel Macronthe socialist government Pedro Sanchez does not want direct state intervention in companies. A difference with the partners of the President of the Government with his partners of United We Can.

The second vice president of the Government, Yolanda Diaz, had already blamed supermarkets for price increases. For the partner and representative of the “podemistas”, the increases respond to the logic of the market. Díaz also charged against the companies’ margins.

Despite the differences, there are already chains that echo Calviño’s request. The distributor “Eroski” has been the first supermarket to announce a commercial campaign “basket that falls in love”, which is part of its commitment to “facilitate savings for consumers”.

Meanwhile, the French distribution giant has already presented its “cart” with 200 basic products at bargain prices for the customers of its 5,945 stores in France, similar proposals are being analyzed from the other side of the Rhine. In Germany, the year-on-year rise in food reached 22%, according to data from its statistical offices.

In Italy, for the moment, the star measure is the aid voucher for low-income families. The President of the Council of Ministers, Giorgia Meloni, has a fund of 500 million euros for families with an annual income of less than 15,000 euros. Another of the star measures, as Spain did, is the elimination of VAT on bread and milk, as well as the reduction from 10% to 5% of VAT on feminine hygiene products, diapers and baby products.

The measures will be replicated. Until further notice, the European horizon is with price remarking.

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