Plugging prices
Finance Minister Tonio Fenech had his guard down when he gave a plug to Lidl. He said the German chain supermarket, renowned for competitive prices, could possibly put pressure on the market to stabilise prices and keep them from continuing to spiral.
Finance Minister Tonio Fenech had his guard down when he gave a plug to Lidl. He said the German chain supermarket, renowned for competitive prices, could possibly put pressure on the market to stabilise prices and keep them from continuing to spiral. Prices have been rising for some months, suggesting that the pressure was not coming only from abroad, where the prices of crude oil, cereals and their derivatives continue to soar.
The latest Eurostat figures, published last week, confirmed what was being said locally. They showed that Malta had registered the second highest increase in the prices of food ‒ described as products generally purchased for consumption in the home ‒ in the eurozone.
Eurostat data showed that our food prices rose by 9.7 per cent in the 12-month period to last April, compared to a 6.2 per cent increase in the eurozone. A sharp rise was registered between last June and November. Paradoxically, that coincided with the six-month price stability deal reached by the government with a number of major importers in the run-up to the adoption of the euro in January.
Minister Fenech expressed natural concern at what observers are describing as a dramatic increase in food prices over the past year, saying the government was looking into whether lack of competition in the local market could have contributed.
That was actually suggested in a recent European Commission report.
It pointed out that, due to Malta's small size, a few food importers dominate the market, hindering competition.
Is that happening? The Finance Minister said the authorities were delving into the matter. The Competition Authority was trying to see whether there was a lack of effective competition and whether this was impinging on the surge of food prices locally. Investigations were taking place.
The authority was looking at the cheese market where - the minister said ‒ abnormal prices had been observed. Other studies were under way, particularly with regard to animal feed and the price of cereals. "If it results that there is any wrongdoing, we will have no other option but to intervene," warned Mr Fenech.
The government is expected to be vigilant at all times, let alone in the current circumstances when costs and prices are mounting. Among other things that has led to a meeting of EU finance ministers to discuss the escalation in food and oil prices and their impact.
EU ministers agreed to work in the next few weeks on concrete ways of providing help to those hardest-hit by high fuel and food prices. The ministers also agreed that governments should not cut taxes or condone high pay awards in response to soaring prices because of the risk that this would turn a short-term problem into a long-term one.
Malta will be part of collective action decided upon by the EU. But it is the government that will have to decide on whatever basic remedial action it can attempt to take locally.
One of the available options is to try to "talk down" prices. That was what the Prime Minister and his team tried to do in the run-up to the decision on the adoption of the euro.
Among other things they used to point out that a new large supermarket was about to open, and it should have a positive impact on prices. Unlike the present intervention by the Finance Minister, to be ethical they did not mention the name of the supermarket.
Ethics aside, there is no guarantee that a single supermarket or even a chain of them will contain or influence by much the overall price level. Supermarkets and discount stores have their individual pricing policies. Not infrequently that is closely related to a well-honed purchasing policy, whereby big purchasers get bulk discounts as well as fine prices on items not that far from their formal sell-by date.
Also, supermarkets make selective special offers, while pricing to the full their much wider range of products. Rather interestingly, I know of companies that have carried out comparative exercises between the prices of their products and those of similar items supplied by Lidl. They were pleasantly surprised that in general their prices were quite competitive.
Such exercises may vary on a day-to-day basis, depending on special offers, new supplies and similar factors. But they go to show why the authorities should keep well away from implicitly making and talking about price comparisons.
What the authorities can do, in the context of a free market, is to see that there are no practices that curtail true competition, and to urge and educate the consuming public to exercise real choice by shopping around.
Admittedly, when the authorities talk in this way there will be those who subject them to criticism and ridicule, expecting them to exercise rigid price control.
But public awareness can best be created by the public authorities, with the extensive means at their disposal.
It is essential that more and more consumers move away from the notion that the government can keep prices down. Prices will be at their keenest to the extent that the mass of consumers shop around and speak out of the microphone that is their wallet.
That will not, in itself, keep prices down, especially at a time when there are fearsome import pressures.
Nevertheless consumers have to exercise their power as far as it takes them, while the public authorities have to carry out their possibilities to the fullest extent that they can do so.
The latest Eurostat figures, published last week, confirmed what was being said locally. They showed that Malta had registered the second highest increase in the prices of food ‒ described as products generally purchased for consumption in the home ‒ in the eurozone.
Eurostat data showed that our food prices rose by 9.7 per cent in the 12-month period to last April, compared to a 6.2 per cent increase in the eurozone. A sharp rise was registered between last June and November. Paradoxically, that coincided with the six-month price stability deal reached by the government with a number of major importers in the run-up to the adoption of the euro in January.
Minister Fenech expressed natural concern at what observers are describing as a dramatic increase in food prices over the past year, saying the government was looking into whether lack of competition in the local market could have contributed.
That was actually suggested in a recent European Commission report.
It pointed out that, due to Malta's small size, a few food importers dominate the market, hindering competition.
Is that happening? The Finance Minister said the authorities were delving into the matter. The Competition Authority was trying to see whether there was a lack of effective competition and whether this was impinging on the surge of food prices locally. Investigations were taking place.
The authority was looking at the cheese market where - the minister said ‒ abnormal prices had been observed. Other studies were under way, particularly with regard to animal feed and the price of cereals. "If it results that there is any wrongdoing, we will have no other option but to intervene," warned Mr Fenech.
The government is expected to be vigilant at all times, let alone in the current circumstances when costs and prices are mounting. Among other things that has led to a meeting of EU finance ministers to discuss the escalation in food and oil prices and their impact.
EU ministers agreed to work in the next few weeks on concrete ways of providing help to those hardest-hit by high fuel and food prices. The ministers also agreed that governments should not cut taxes or condone high pay awards in response to soaring prices because of the risk that this would turn a short-term problem into a long-term one.
Malta will be part of collective action decided upon by the EU. But it is the government that will have to decide on whatever basic remedial action it can attempt to take locally.
One of the available options is to try to "talk down" prices. That was what the Prime Minister and his team tried to do in the run-up to the decision on the adoption of the euro.
Among other things they used to point out that a new large supermarket was about to open, and it should have a positive impact on prices. Unlike the present intervention by the Finance Minister, to be ethical they did not mention the name of the supermarket.
Ethics aside, there is no guarantee that a single supermarket or even a chain of them will contain or influence by much the overall price level. Supermarkets and discount stores have their individual pricing policies. Not infrequently that is closely related to a well-honed purchasing policy, whereby big purchasers get bulk discounts as well as fine prices on items not that far from their formal sell-by date.
Also, supermarkets make selective special offers, while pricing to the full their much wider range of products. Rather interestingly, I know of companies that have carried out comparative exercises between the prices of their products and those of similar items supplied by Lidl. They were pleasantly surprised that in general their prices were quite competitive.
Such exercises may vary on a day-to-day basis, depending on special offers, new supplies and similar factors. But they go to show why the authorities should keep well away from implicitly making and talking about price comparisons.
What the authorities can do, in the context of a free market, is to see that there are no practices that curtail true competition, and to urge and educate the consuming public to exercise real choice by shopping around.
Admittedly, when the authorities talk in this way there will be those who subject them to criticism and ridicule, expecting them to exercise rigid price control.
But public awareness can best be created by the public authorities, with the extensive means at their disposal.
It is essential that more and more consumers move away from the notion that the government can keep prices down. Prices will be at their keenest to the extent that the mass of consumers shop around and speak out of the microphone that is their wallet.
That will not, in itself, keep prices down, especially at a time when there are fearsome import pressures.
Nevertheless consumers have to exercise their power as far as it takes them, while the public authorities have to carry out their possibilities to the fullest extent that they can do so.