The mystery of runaway prices
Outrageous discounts are the first “mystery” in the Greek market, with supermarket chains successively advertising 50% off specific products. Are they selling below cost to drum up new custom? Probably, but then we see those same products going for half-price at every other supermarket.
Low uptake of own-brand products is another paradox, with Greece seeing generics represent just 16.3% of fast-moving consumer goods (FMCG), against 51% in Spain, 49% in much wealthier Switzerland, 47% in the also wealthier UK, 44% in Belgium etc.
The government claims that the high cost of products stems from “imported” inflation, which is partially true, when coupled with domestic greed. According to a study by the Research Institute of Retail Consumer Goods (IELKA), the so-called household basket is more expensive (before VAT) only in five other European Union countries, compared with Greece: France (23% dearer), the UK (17%), Italy (13%), Spain (6%) and Portugal (4%). Yet Greece is second to last on the purchasing power chart, just above Bulgaria.
The phenomenon can be explained: The state subsidizes market distortions by throwing money at consumers. This was blatantly obvious with all the different “pass” programs initiated by the government. So what if we had among the highest electricity rates? The government stepped in to lighten the load.
This policy, however, has two major side-effects: It does not fix the distortions and it cultivates an “anti-consumer” mentality. When everyone knows that a protest march on the Finance Ministry is the solution to the problem of rising prices, consumers have no motivation to look for cheaper products – and sellers have no reason to reduce their prices.
