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What are the states doing about high prices?

At the beginning of the year, the inflation rate in the euro area reached a high. Consumer prices in January were 5.1 percent higher than in January 2021, according to the statistics office Eurostat. This is the highest value since the euro was introduced in 1999. In December, the rate was still 5.0 percent. For 2021 as a whole, most EU countries had already recorded an unusually high rate of inflation.

How are people in European countries dealing with price increases – and what are governments doing about it? ARD correspondents report from seven countries inside and outside the euro zone.

Greece: Many people on the brink of despair

In Greece, inflation is breaking one record after the other: in December 2021 it was already 5.1 percent, in January it was even 6.2 percent – and thus clearly exceeded the previous record high of 5.7 percent in 2010.

For the population, the price increase first made itself felt in the energy sector. As early as September, the Greek government launched financial aid to relieve households with lower incomes in particular from the rising heating and electricity costs. The average price for natural gas alone rose by 154.8 percent in January compared to the previous year, despite government aid payments.

Because rents have also risen noticeably, Greeks had to spend an average of a good 22 percent more on housing in January. Inflation is also noticeable when shopping for groceries. Above all, the prices for vegetables, olive oil and fish have risen significantly. Greek households now spend an average of around 20 percent of their total income on food. In poorer households it is even almost a third.

Accordingly, dissatisfaction is growing among many Greeks, and in some cases despair. Because of the debt crisis and the resulting austerity measures, wages in Greece have not risen at all for a long time and have only risen moderately recently. Farmers are also complaining about the rising prices: production costs have risen by around 50 percent due to the significantly higher costs for fuel, electricity and fertilizers. At the beginning of February, hundreds of farmers blocked a highway in central Greece with their tractors to draw attention to their situation. The government has promised renewed aid.

Poland: The perceived inflation is even higher

In a European comparison, Poland is struggling with particularly high inflation. It was 9.2 percent in January. This is the highest value since November 2000. For the whole of 2021, the inflation rate was 5.1 percent. The main reason for this development is the high energy and raw material prices. But there are also other worries: because the costs of transport, heating and food prices have risen significantly.

The inflation rate is a political issue in Poland and, according to surveys, people's greatest concern – ahead of the risk of war in the East or the issue of migration. 83 percent of citizens then noticed that prices had "decidedly" increased in the past year. Many Poles also believe that inflation is actually much higher than the statistics indicate – they speak of 30 percent. More than 60 percent of those surveyed fear that everything will become even more expensive this year.

Across the country, large posters from a lobby group for conventional electricity producers claim that EU climate policy is responsible for most of the energy price hikes. There is a bit of truth in this insofar as in Poland electricity is still mainly generated from coal, for which a particularly large number of pollution certificates are due within the framework of the EU. Prime Minister Morawiecki also repeatedly blamed external forces for the sharp rise in prices, such as the delivery policy of the Russian Gazprom group.

To mitigate the impact of inflation on consumers, the Polish government has introduced a package of measures dubbed the Anti-Inflation Shield. These are tax cuts and financial support for the poorest households in Poland. Since February 1, VAT on basic foodstuffs, gas and fertilizers has been suspended and the tax rate for petrol and diesel fuel has been reduced from 23 to eight percent. This is the lowest possible rate that the EU allows. The price of petrol is around 5.55 zlotys, which is the equivalent of around 1.20 euros. Side effect: Since then, many Germans in the border region have been driving to the Polish side to fill up, and many Czechs have come to Poland to shop. In addition, a VAT rate of five percent on electricity and heat was introduced for a limited period of time. This regulation will apply for six months.

Experts, however, have doubts about how sustainable this will be and fear that prices will shoot up when the tax cuts expire. The obligation for supermarkets to point out price reductions due to tax policy in the shop windows was thwarted by a retailer with a notice that was eagerly passed on on the Internet: He pointed to higher energy bills of up to 360 percent for gas and ironically: "Looking for a creative accountant who can help me turns it into lower prices."

France: Inflation fuels election campaign

In France, consumer prices rose by 2.9 percent in January compared to the previous year. For the next few months, the French statistical office INSEE expects a further price increase, each with a three in front of the decimal point. People in France notice this when shopping, filling up gas and especially when they look at their electricity and gas bills. Suddenly 80 instead of 47 euros a month? It happens.

The government counteracts this. Almost six million households received a EUR 100 energy check and 38 million low-income earners also received EUR 100 to compensate for inflation. In addition, the increase in the electricity price was capped at four percent and the gas price was frozen until June. But now the government had to admit a "hole in the tennis racket," as it was called – or rather: one in the social network. Because the latter measure only applied to private heating connections. But five million households have collective connections, and these are particularly common in social housing.

The hole is now being plugged, and in the 8 p.m. news of a French TV station, a single mother of three turns up the heating again. This is followed by detailed tips on how to save money by buying together with the neighbors or how to finance a solar system.

Inflation and purchasing power have become the number one topic in the election campaign in France. Demonstrations and strikes are already taking place on the streets again for higher wages. The mood is tense – the presidential elections in April are not far off.

Czech Republic: Prices are rising even without the euro

Prices in the Czech Republic have risen across the board in recent months: those for petrol and heating oil by almost a third. Also the costs for gas and electricity, which were not so important at first due to the suspension of VAT. However, because raw materials and transport services have also become more expensive, consumer prices for food are also rising: oils and fats by a quarter, potatoes by around 18 percent, sugar by 17.5 percent and baked goods by 6.6 percent. Clothing, cars, housing: everything costs significantly more.

The government of Prime Minister Petr Fiala is reacting and is now doing exactly what it always criticized the previous government: Because of the inflation, it is preparing an out of line pension increase – the equivalent of a little more than 40 euros. It is the highest pension increase since 1997.

The Czech National Bank is trying to curb inflation with the textbook tool for these situations: raising interest rates, although this is controversial in the central bank's leadership. In the past year, it raised the key interest rate sharply five times and raised it again this month to 4.5 percent. However, experts from the business associations doubt whether this calculation will work. Conversely, the appreciation of the crown makes exports more expensive. And some firms could be crushed by higher borrowing costs post-pandemic.

Hungary: pithy sayings of the election campaigner

On April 3rd there will be elections in Hungary. It could be close. The rapidly rising prices and the high inflation rate of 7.9 percent in January 2022 compared to 2.7 percent in the same month last year are important campaign issues. The populist Prime Minister Viktor Orbán promises: "STOP inflation" – through state-imposed price freezes for additional costs, fuel, interest, food. For milk, sugar, flour, pork legs and chicken breasts, the rule has recently been that they may not be sold more expensively than they were last October. The price per liter for normal petrol and diesel was frozen at 480 forints – the equivalent of 1.35 euros – last autumn.

As a result, a lack of profit is the problem for dealers – the first gas stations are already asking their customers to fill up cheaply somewhere else, otherwise they would go bankrupt. When it comes to natural gas, Orbán is banking on Russia's President Vladimir Putin and on friendly prizes – and is hoping for the votes of families, pensioners and low earners who will feel it in their wallets. The opposition calculates against and demands: down with the standard rate of VAT, which is currently 27 percent. That would be better for everyone – but it would be at the expense of the state treasury.

Lithuania: Inflation tops Europe

Lithuania is one of the countries in Europe that is struggling with particularly high inflation rates: it was 12.4 percent in January this year, and the trend is rising. Above all, pensioners and low-income earners are badly affected, because the average pension is just 465 euros, the minimum net wage is 730 euros. On average, Lithuanians have a good 1,000 euros a month at their disposal. So what to do if petrol suddenly costs 1.55 euros instead of 1.15 euros and the heating costs are almost two and a half times as high as last year?

Those who can go to Poland to shop and fill up because the VAT on groceries and petrol is significantly lower there. It's worth it. For example, a kilo of pork in Lithuania costs twice what it costs in Poland. And petrol is also much cheaper.

It is more difficult with the heating. For a 70 square meter apartment, that cost an average of 63 euros a month in January 2021, a year later it is already 190 euros. Since January, however, it has been possible to apply to the social welfare office for a subsidy towards heating costs, which more than 100,000 households have already done.

In the end, however, the only thing that helps is doing without – even for those who have little to live on anyway: no vacations, no visits to restaurants, cheaper groceries. The car is sacred to the Lithuanians. Anyone who has been able to make this dream come true will hold on to the coveted status symbol to the bitter end.

Spain: The state waives a billion taxes

New year, old price increases: According to the National Statistics Institute, the inflation rate in Spain was 6.1 percent in January, only slightly lower than in December 2021. On average, it was around three percent in 2021. The main drivers of this development remain the costs for electricity, gas and fuel. They also lead to price increases in other areas, for example because producers pass on some of their increased costs to consumers.

The Spanish government significantly reduced the VAT on electricity and the electricity tax last year to counteract this. Both measures are valid until the end of April. The electricity generation tax of seven percent will also remain suspended until the end of March – of course it also influences the price of electricity. All in all, the Spanish state is giving up almost one billion euros in tax revenue with the aim of bringing prices back to the level of 2018 – so far a pious wish.

So it's not uncommon for Spaniards to check the time before turning on the dishwasher or washing machine, because electricity is cheapest at night and at weekends. In particular, the unpredictability of price developments annoys people because, unlike in Germany, the price per kilowatt hour is not fixed for twelve or even 24 months in most consumer contracts. Consumers therefore feel fluctuations on the electricity exchanges very directly.

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