Within the euro zone, inflation is doing the splits. The rise in prices in Estonia reached 22% in June, according to figures published Friday, July 1 by Eurostat, three times more than the 6.5% recorded in France. Belgium, although bordering France, saw its prices increase by 10.5%, Spain by 10%, while Germany only posted an 8.5% increase, i.e. a level close to the monetary union average. How can such discrepancies, already observed during the 2008 financial crisis, be explained?
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The first reason is particularly valid for France and relates to the budgetary measures taken by the government to limit the impact of the waltz of labels on purchasing power. The energy shield and the 18-cent discount on fuels have thus made it possible to reduce the rise in prices in France by two points.
This dispersion of inflation rates in Europe also reflects the differences in household consumption patterns, as well as the weight of energy and food in their budget. INSEE has thus lent itself to a theoretical exercise: it has applied the structure of French consumption to each of the other member countries. The result is that if the Spaniards consumed a basket of goods and services identical to ours, for example, the inflation gap between our two countries would be lower by a third, because the weight of fuels is heavier in the budget the Spanish.
Tariff shield in France
With current inflation coming largely from energy prices, the way in which gas and electricity prices are set also explains the differences between countries. In France, this is how the contribution of electricity to soaring prices is the lowest, due to the implementation of the tariff shield in autumn 2021. In Spain, the local system of “dynamic pricing » makes consumer prices much more dependent on fluctuations in production prices. The situation is radically different in Germany, where energy distributors only revise tariffs once a year.
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In general, recalls Julien Marcilly, chief economist at Global Sovereign Advisory, “the way in which competition plays out in the various sectors of activity” and the weight of services – more or less confronted with international competition – in the economy explain that prices do not change at the same pace everywhere in Europe.
Finally, adds Mr. Marcilly, the labor market situation is not totally unrelated to the observed rate of inflation. In Belgium or the Netherlands, where the level of vacant jobs has reached a historic high, inflation is higher than in France or Italy, because the pressure for wage increases is stronger there. As for the Baltic countries, their particular situation, with a level of inflation which approaches or exceeds 20%, is partly explained by their stage of economic development. “Economic growth is stronger there than elsewhere: wages are therefore increasing more quickly, like inflation,” he underlines.
