Prime Minister Nicolae Chuke says there has been no discussion about the possibility of reducing VAT on food products: “When there is a price increase, the VAT reduction is very quickly absorbed by the price, and the effect does not reach the original intention”.

• Wage inflation in January coincided with food inflation / Who received the highest and lowest salaries

Asked at a press conference on Wednesday evening about the possibility of lowering the VAT on food, which is currently 9%, Chuke said there had been no discussions on the matter.

• “However, in crisis situations, it has been demonstrated that when there are these price flows and price increases, the reduction in VAT was absorbed by the price very quickly, and the effect was not as originally intended.
• Thus, every time we analyze financial measures, we must analyze the consequences and make decisions based on this,” the prime minister said.

More and more aggressive prices in Romania

The annual inflation rate in February 2023 compared to February 2022 was 15.5%, after a 22% increase in food prices, according to data from the National Institute of Statistics. In January, inflation was 15.1%.

Sugar, butter, gas, margarine, potatoes, eggs, cheese and milk rose in price the most last month, INS also showed.

Annual inflation is expected to fall to single digits as early as the third quarter of 2023 – almost three quarters ahead of the November 2022 forecast – and then to 7.0 percent in December 2023, well below the 11.2 percent expected earlier, because in the second half of next year it will noticeably slow down its decline, remaining slightly above the target range at the end of the forecast horizon, respectively at 4.2 percent, similar to the previous forecast, according to the minutes of the CA BNR discussions.

How other European countries are trying to contain the explosion of prices

Faced with rising food prices, European governments are looking for solutions to limit the consequences, especially since some countries are in the pre-election period (as, incidentally, in the case of Romania) and rising food prices threaten the social balance. Greece introduced an anti-inflationary food basket, Hungary introduced disastrous price controls, Spain and Italy reduced VAT.

In Hungary, inflation exceeded 25% in February. In Latvia, 20%. In Lithuania, prices rose by more than 17%, in Slovakia – by more than 15%, just like here. Here we are talking about the general price index, because food prices have risen even more. For Hungarians, products have become more expensive by almost 50%, even though Orbán’s government has tried to introduce price controls. In Germany, food prices have risen by more than 20%. (source: Eurostat)

UNITED KINGDOM: Almost a quarter of families with children say they have experienced food insecurity

The problem is even more difficult for the people of the United Kingdom (elections are ahead in January 2025), where hundreds of thousands of people had nowhere to go and turned to the food bank in the Trussell Trust network. In January 2023, almost a quarter of families with children said they had faced a lack of food during the previous month, according to Food Foundation data cited by the daily newspaper Les Echos.

About 3.7 million children currently suffer from this phenomenon, which consists of limited, insufficient or uncertain access to healthy and nutritious foods. The number of families forced to skip meals has quadrupled across the country. The association is campaigning to help the 800,000 children in England who are not entitled to free school meals despite their poverty.

Sadiq Khan, the Labor mayor of London, has just responded by launching a £130m scheme to provide every primary school pupil with free meals for the next school year. During 2023-2024, more than 270,000 children in the capital should use it.

Portugal: subsidies for poor families and an increase in the minimum wage

INPortugal’s competition authority has published recommendations to limit future price increases by increasing competition between companies.

Last fall, the Portuguese government announced a package of 8 measures worth 2.4 billion euros (10% of GDP) to help households cope with rising inflation. The authorities also plan to provide direct support to families – those who earned less than 2,700 euros gross per month will receive 125 euros, plus 50 euros per child.

Finance Minister Fernando Medina announced on Wednesday that he has no intention of reducing the VAT rate on staple foods, which is currently 6%, but will continue to provide direct subsidies to help the most vulnerable families cope with rising prices, Reuters reported. .

At a press conference organized in Brussels after a meeting of European finance ministers, Medina said the Lisbon government had subsidized the poorest families, who spend most of their budgets on basic food, and raised the country’s minimum wage and social benefits. 2023 year.

• “This has always been our priority and will remain so in 2023: strengthening the incomes of the most vulnerable families and focusing our efforts in this direction.
• We do not consider lowering the VAT rate on basic foodstuffs a priority,” Fernando Medina said in a statement broadcast by public broadcaster RTP.

Opposition politicians and activists criticized the Lisbon executive for focusing on deficit reduction instead of redistributing higher tax revenues as prices rose and hit the most vulnerable families and businesses.

Portugal’s annual inflation rate was 8.2% in February, slowing from 8.4% in January.

Greece. Anti-inflation basket: EUR 5.58 per package of 400 g. butter, EUR 2.89 a liter of semi-skimmed milk, EUR 5.42 a pack of 200 gr. coffee

Greece, where elections will be held in July 2023, also introduced an anti-inflation basket: 5.58 euros for a 400-gram package of unsalted butter, 2.89 euros for a liter of semi-skimmed milk, 5.42 euros for a 200-gram package of coffee. Despite the introduction of an anti-inflation basket almost five months ago, Greece cannot contain the rise in food prices.

Marked on the shelves with the blue label well known to Greeks, the “kalathi tou nikokiriou”, “home basket”, has been operating for 19 weeks under a law passed last autumn, according to which the state obliges distributors to offer at least one product at a special price in a certain number of categories – 31 at the beginning, 60 today – at risk of a fine of 5,000 euros per day.

These are butter, eggs, toothpaste, baby diapers, and with the beginning of fasting, frozen seafood and the traditional dessert – halva were added. Next: After 19 weeks since the law took effect, of the 1,134 commodities, 101 (8.91%) increased, 106 (9.35%) decreased, and 927 (81.75%) remained stable. The issue is even more sensitive in Greece, as the country suffers from structural weaknesses that affect shelf prices, despite having one of the lowest wage levels in the EU.

Hungary is a textbook on economics. So, NO

Freezing the prices of basic food products not only did not stop inflation, but even accelerated it in Hungary.

• “The country has become a laboratory, confirming what all experts have been saying for decades: price freezes are ineffective and ultimately fuel inflation,” said Mateusz Urban, Hungary specialist at Oxford Economics.

In the midst of the election campaign, the nationalist-populist government of Viktor Orbán froze the prices of basic food products: powdered sugar, chicken breast, sunflower oil, milk…

Selling prices for seven products were frozen at October 2021 levels. The list was expanded to include potatoes and eggs. This policy has no analogues in Europe. This strategy may have contributed to the re-election of Viktor Orbán, but it has not protected Hungarians from rampant inflation.

At the beginning of the year, it exceeded 25%, which is a record for the EU. If we talk only about food prices, the country is among the five countries in the world where inflation was the highest. Worse “indicators” are shown only by Zimbabwe, Rwanda, Egypt and Lebanon.