While food inflation continues to rise in France, approaching 16% in March, should the executive take inspiration from the initiatives put in place by our European neighbors to extinguish the outbreak?
This is what the oppositions in Parliament believe, which on the RN side demand 0% VAT on basic necessities or even price freezing in the ranks of the Nupes.
And the Minister of Economy for giving two examples in Europe: those of Spain and Hungary.
Spain has not stopped prices with its 0% VAT
Concernant d’abord le premier, notre voisin ibérique a mis en place au début de l’année un taux de TVA à 0% pour toutes les denrées de première nécessité comme le pain, le lait, le fromage, les fruits, les legumes ou the cereals. Other foods such as oil and pasta have been reduced from VAT from 10% to 5%.
“What are the results? Lower VAT in January, increase in food prices 14.6% in January, 15.7 in February, 16.3% in March, good result”, commented the French Minister of Economy .
What is it really? First of all, we highlight that the inflation rate fell sharply in March on the other side of the Pyrenees. With a global rate of 3.3%, Spain is today one of the countries that has best contained inflation so far.
But this figure is due exclusively to the fall in fuel and electricity prices for one year. Because in food, prices continued to rise. According to the INE institute (Spanish INSEE), the rise in food prices has even accelerated slightly since the introduction of reduced VAT rates.
December 2022: 15.7%
January 2023: 15.4%
February 2023: 16.6%
March 2023: 16.5%
We can hypothesize that the rise in prices would have been even higher if VAT had not been lowered. But the truth is that Spanish consumers have not gained purchasing power with this drop.
In France, the rise in food prices was higher in the period. According to INSEE, it went from 12.1% in December to 15.9% in March. A higher rate of acceleration than in our neighbor but in the end food inflation remains slightly below in France while Spain has given up 10,000 million euros in tax revenue at the same time with its reduced VAT rates. This blatant lack of result did not stop its Portuguese neighbor from adopting the same strategy in March.
Hungary between shortages and record high prices
What about Hungary and their attempt to block prices? As a reminder, in late 2021, in the midst of his re-election campaign, Hungarian Prime Minister Viktor Orban announced a price cap related to both fuel and food products. If since December the cap on fuel prices has been eliminated after a 30% drop in imports that caused many shortages in the country, the cap on basic food prices is still in force.
Since late 2021, prices for chicken breast, eggs, sunflower oil, potatoes, sugar, and even milk have been frozen at their October 2021 level. Lastly, only a handful of products ( among the most consumed by Hungarians) but which would have had perverse effects according to observers.
With the war in Ukraine and the explosion in their costs, Hungarian producers, forced to sell their products at a loss, compensated by raising the prices of neighboring products. Is the chicken breast blocked? Flambéed chicken thighs and turkey breast. Is the powdered sugar frozen? The price of granulated sugar has skyrocketed.
Consumers therefore massively stockpiled the few products at fixed prices which were therefore found to be in short supply, further fueling the rise in prices of non-fixed products.
In the end, Hungary is the European country that has suffered the most increase in food products in a year. According to World Bank data, from an increase of 11.3% in February 2022, food price inflation topped 30% last August and has since stagnated above… 44%. A level higher than that of Ukraine, which has been at war for more than a year (33% in January).
Source: BFM TV
