Living in Greece

Athens, Greece: Real inflation in 6 months

January 17, 2008 at 07:21 ·

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fruit is cheap in Greece compared to here, that’s for sure.

these price increases don’t seem as drastic overall as the last ones you posted.

^no confusion here i just figured the general increase in prices wasn’t as drastic as i remember it being when i last heard about price hikes

I think you’re confused or not paying attention. This is a comparison of Athens vs. Athens, 6 months ago vs. today’s prices to measure inflation.

The last comparison was an Athens, Greece vs. New York/CA, USA country-to-country comparison. Totally different things. I won’t do another Greece vs. USA comparison until June, which is the anniversary of the first.

Katalaves?

—
OK, but I never published any previous price increases, so I’m not sure what “last ones” in your first comment refers to. The only price list I ever published was the Greece vs. USA price comparison, which had nothing to do with inflation or price increases, only to show the gap in prices between two countries (as you know).

You don’t think 5-20 percent increases in 6 months are drastic, with another 18 percent on the horizon? Within 12 months, it’ll be 5-20 percent + 18 percent = 23-38 percent. I think that’s quite steep and unreasonable, especially since most employers (including mine) aren’t raising salaries by 23-38 percent.

“You don’t think 5-20 percent increases in 6 months are drastic, with another 18 percent on the horizon? Within 12 months, it’ll be 5-20 percent + 18 percent = 23-38 percent. I think that’s quite steep and unreasonable, especially since most employers (including mine) aren’t raising salaries by 23-38 percent.”

i agree it’s unreasonable; you’ll get no argument from me there. it’s a shame, but the same thing is starting to happen here too, albeit to a lesser degree. i wonder how the states is going in this regard.

Excellent post once again Kat. I have noticed the price increase in milk since summer. It’s really insane.
I don’t understand how spinach has gone up since it’s in season.
Thanks for your hard work!

This is excellent work, Kat! One or two caveats: seasonal produce is best avoided in these calculations of retail price indices; and hi-tech things usually go down in price, so they distort the figures too.

One point strikes me quite clearly: the major price increases are in Greek-produced goods, whereas imported goods (I think I can tell which are) have low inflation. Why is this important? Because it suggests that the problem is not in the retail sector, but in the production mechanism of the Greek economy itself. The implication of this, is that refusing to buy such goods will just put the companies out of business, rather than pressuring them to reduce prices.

The average increases, excluding the “difficult sectors” I mentioned, seem to imply an annual rate of at least 20%. I suspect that for the last 10 years, the RPI has been over 10% p.a. and cumulatively this has been a disaster for the wage/price ratio.

Why has this happened? Well, the obvious explanation, in line with standard economic theory, is that Greece should not be in the Eurozone. This was clear to me in the late 1990s, and should have been obvious to all economists and politicians responsible for macroeconomic policy. The evidence is that they put politics before reality, and (as usual) ****ed Greece with that. A contributing factor to the problem in the last 8 years or so, is that in the 1990s Albanians and others were cheap labour, badly exploited and keeping the businesses afloat. This occurred even to the extent of making the Greek owners rich, but not putting the profits back to modernise and make more efficient their businesses. In recent years, Albanian workers in particular have been able to secure higher wages, almost to Greek levels, so their cheap labour has mostly gone.

One interesting point: in every other EU country, the economists in universities, research centres, banks etc, conduct serious research [along the lines of yours, but in more detail] in order to check the validity of government figures. Isn’t it strange how Greek universities do nothing to challenge the state? Or how the private banks have nothing useful to say? The politicians just carry on with their false data and manipulations, and nobody says anything. Great.

fms, interesting post, as usual.

“One point strikes me quite clearly: the major price increases are in Greek-produced goods, whereas imported goods (I think I can tell which are) have low inflation.”

interestingly enough, the Greek government claims that inflation is ‘imported’ from overseas.

“Why is this important? Because it suggests that the problem is not in the retail sector, but in the production mechanism of the Greek economy itself. The implication of this, is that refusing to buy such goods will just put the companies out of business, rather than pressuring them to reduce prices.”

But the two are connected right? And how valid is that implication? i always assumed the relentless price gouging had little to do with anything else other than plain old fashioned greed. Or maybe that’s what you are saying and i’ve just misunderstood

what is interesting though, is that private consumption in Greece, as a percentage of GDP, has been declining for the last 2-3 years in a manner which suggests it’s the beginning of a general trend. considering that private consumption is one of the few engines of ‘growth’ in the Greek economy, it’s obviously a worry.

my prediction is that Greece will either be forced to open itself eventually to ‘competition’, and become truly globalised in the proper, meaningful sense, or they will just have to increase income tax heavily in the future. Because once those EU funds dry up, i’m not sure how they are going to keep things going in a country whre tax cheating is a national sport.

I find your suggestion that Greece should not be in the EUROZONE very interesting.
In the past Greece was able to periodically devalue the Drachma to make its exports more competitive.With the advent of the EURO this is no longer possible.

The people need to understand this but first it must be embraced by the intellectual elite.

The real culprit of troubles in the Greek economy remains the inability of the system to modernize. Rampant bureaucracy and corruption, a failing educational system and a worldwide slowdown in economic growth (oil prices play their part) are the reasons why the greek consumer will feel increasingly under pressure.

It’s sad to think that only 10 years ago, with 250-300K Dramchae you were set.

Y – I thought about doing a USA vs. USA inflation comparison, but I honestly didn’t have time and think the window for that has passed. We’ll just see in June.

C – This keeps swirling in my head so I’ll post it. I noticed the price of cheese and milk has gone up again since I did this survey on Dec. 22, but we’ll leave it for June. To give you an answer about spinach and other items that fluctuate despite being in season, it not only depends on season, but also availability, “market price” and where it came from. So the week I surveyed, it was 1.79 perhaps because it was imported or AB had to pay extra to an enterprising farmer, etc. It’s back down to 1.29 this week. Too many variables, which shows Greece’s vulnerability and dependence.

M – As usual, you make very interesting points. I want to highlight something you said, namely that the government is blaming imports for higher prices when in fact that’s a lie. If you look at the imported items, nearly all of them stayed stable or went down in price. The exception is pasta from Italy, but they were very transparent in announcing that durum wheat was affected by climate change and price hikes would indeed reflect that.

To a point, I also believe Greece should exit the eurozone and perhaps the EU. The country initially believed it would benefit from EU subsidies, grants and funding, however all they’ve done is abuse this assistance and pay it all back with penalty, thus sending this economy into further turmoil, lining the pockets of the rich and corrupted, and passing the consequences to the everyday man, which these funds were originally supposed to benefit.

T – Nice to see you here again! Please comment more if you wish. Don’t you think that Greece would spiral downward much faster if it had the chance to devalue its own currency instead of being held accountable to the EU?

And yes, I remember those days. I arrived here when that was possible and the U.S. dollar was quite strong, as well. That’s but a memory now.

Yiannos (and others): to be honest, I am horrified by the thought that the price increases are probably NOT caused by greed. I say this, because we can more or less try to control greed and either boycott the perpetrators or legislate. My fear is that the inflation in domestic prices is fundamentally self-propagating, and necessary, and nothing can be done about it in the short/medium run.

Concerning Greek membership of the eurozone: the idea was, I suppose, that price competition from imported EU goods would stop domestic price inflation. The Italian experience of the 1990s was that they ended up with a 2-sector economy, consisting of domestic low-productivity goods and traded [although domestically produced] goods. This seems to have happened in Greece now. The logical outcome is that shops should sell mainly foreign [cheaper] produce and Greek production should cease: if that happened, Greek unemployment would go through the roof (and the government would fall through the floor).

Really, there should have been a phased transition to the Euro, and Eurostat should have put monitors on the Greek inflation indices. Ha! The EU is as useless as the Greek state: what am I thinking of, here?

I was wondering if anyone was aware if the prices in Athens are the cheapest in Greece. The reason for my asking is that I would like to move to Greece but to Ioannina. I would figure the distance would make it more expensive. Any comment would be appreciated

Price levels are only partially determined by cost levels in any country: what is equally important is the nature of demand. In Greece, historically, demand has driven up prices much more than costs have. Now, we have the great benefit of both! To try to answer your question: some things are likely to be more expensive outside Athens (because of transport fuel costs), other things will be cheaper than in Athens. I am guessing here, but possibly local imports from Albania and Bulgaria will help keep down prices in the North. Here in Athens, the supermarkets refuse (for example) to sell Bulgarian wine which is excellent and a fraction of the cost of Greek wine.

By the way, did anyone else pick up on Alogoskoufis’s lie that Greek inflation is caused by imported goods?

A – It should be clear from many articles and comments on this site that Greece is a ‘results may vary’ country where anything (good or bad) is possible. I repeat this phrase many times, and commentators echo what I say. Therefore, logic doesn’t apply. It’s completely subjective.

M – Yes, I did, and I believe I agreed with you in an earlier comment. Besides that, the table I put together illustrates that quite well. What would be news is if a Greek politician DIDN’T blame someone else/another country and actually told the truth. Cheers!

Kat said : “To a point, I also believe Greece should exit the eurozone and perhaps the EU”

I think that would have more negative effects than positive and is quite an exaggerated response.

Kat Reply:
April 15th, 2008 at 19:25

Not really sure why you’re singling me out, since it was FMS’s suggestion to begin with and many others (also men) agreed with him and found it an interesting idea. Or do you only pick on women who happen to be American? I agree that would have a negative effect in some ways, which is the reason I said I agree “to a point”; but perhaps drastic shock is what it needs since “reform” hasn’t worked (Yiannos has said the same thing in other comments).

Also you’re in Cyprus.

*2009: Better to leave voluntarily than be kicked out since Greece entered under false pretenses and falsified stats to begin with.

I am not sure that Greece would benefit from leaving the Eurozone: I am pretty sure it would have benefited from a delayed entry. There are some things that cannot be undone, and Greece has a habit of engaging in these mistakes.

Hello.

Thank you so much for such a wonderful site. You receive a lot of heartfelt thanks from many which is a blessing

I have a question: What happens to my money in the bank in EUR currency if Greece goes out of euro zone? What may the conversion rate be? Do you suggest any precautionary measures like moving it to another country? (I currently live in USA).

Much appreciate your help!