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Economy

ORIGINAL FRENCH ARTICLE: Flambée des prix : le "gouvernement brasse du vent"

by Benoit Pradier

As Prices Surge The “Government Is Blowing Hot Air” Say The Opposition

Translated Saturday 1 March 2008, by Claire Scammell

An increase of between 31% and 45% on spaghetti, 17% and 40% on yoghurt and between 10% and 44% on ham. The INC, France’s consumer research organisation has published a report in its publication 60 Millions de Consommateurs. On Monday 25th of February the Prime Minister François Fillon promised drastic measures aimed at seeing “where the abuse lies”. In the eyes of the opposition, the Government is blowing hot air.

The INC published a report on Tuesday in its publication 60 Millions de Consommateurs on the explosion in the food prices in France. Rises of between 31% and 45% on spaghetti, 17% and 40% on yoghurt and between 10% and 44% on ham; in some cases prices have risen by close to 50%.

Michel Edouard Leclerc, owner of the Leclerc supermarket brand announced on Monday there will be another rise of 4% by April. Leclerc is attributing responsibility to agribusinesses in the CAC 40 index who are hiking up prices. A study carried out by ILEC, (French institute for the study of consumer industries) has shown that between 1996 and 2006 retailer’s profit margins on well-known brands went up from 26% to 36%.

On Monday, amidst a general uproar in which everyone is passing the buck, Prime Minister François Fillon promised drastic measures aimed at seeing “where the abuse lies”, seeing what led to these rises. Without actually admitting it, the Prime Minister provided proof of the failure of the Galland law.

Drawn upon in December, this law, which intervenes in the relations between retailers and manufacturers, had as aim to relax the resale-below-cost threshold and to allow prices to be cut more easily. Jean-François Copé, President of the UMP group in France’s National Assembly, has insisted upon the fact that “the Government must organise itself to put in place a transparent plan of action”. Meanwhile, a BVA survey revealed last week that 58% of people in France judge economic policy to be poor; the Government is struggling to mask its incapability to maintain purchasing power.

In the eyes of the opposition the Government is blowing hot air. François Hollande has called for the French, faced with a president who “has not kept his promises concerning purchasing power” to “send a warning shot” by way of the municipal and local elections.

It is the opinion of the Communist Party that “rather than making a song and dance about these rises the Government could provide immediate and useful solutions to issues of French purchasing power, for instance, by an immediate reduction of sales taxes on products of necessity”. The party also recalls how “the main cause of the purchasing power crisis is weak salaries”. “The Government would do better to invest their energies in increasing salaries rather than pretending to tackle the high cost of living”.

This is certainly what is being demanded more and more by employees in the commercial and public sectors: wage increases. This can be seen today in the strike action of cashiers working in the mass retail sector, of employees of the Marseille city transport authority (RTM), at Air France, EADS, and at the company S3V which manages the ski area in Courchevel; the list is growing by the day.

But the Government is refusing to answer the wage question. Following the 5.2% rise obtained by workers in the German iron and steel industry the European Central Bank (ECB) quickly made a call to order, “the ECB does not tolerate the inflationary spiral of salaries” in the twenty countries of the Euro zone.

According to Nicolas Bouzou, an economist at Asterès, the economic consultancy, there is no sense to this attitude. Wages today depend on a share of the return on productivity while oil and food prices depend on an international price war taking place on the world market. Wage rises are not at all inflationary. Today the ,qin obstqcle is the monopolizing of revenue by shareholders.


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