The high inflation figures published yesterday in Israel are not surprising. Many countries in the West, including the countries of the European Union – Israel’s largest trading partner – are facing sharp jumps in price indices. In the past year, European governments have taken a series of steps to try and deal with inflation also with the help of non-monetary tools. Interest rate hikes by the central banks were the order of the day, of course, but most governments in Europe decided that they should be accompanied by fiscal measures.
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Some of the governments on the continent tried to adhere to a balanced budget, so that the measures would not be inflationary, but in any case they aimed to deal with the disproportionate effects of inflation on the weaker sections, with the possible damage to demand and consumption, and even with its consequences on health. Beyond the field of energy – which does not affect the Israeli economy in a significant way due to the country’s gas reserves – Globes presents several European policy measures taken in recent months, which may be able to inspire the Israeli government’s fight against inflation, and help its residents deal with the rise in the cost of living.
France: The government “turned to the heart” of the large marketing chains
At the beginning of last March, the French Minister of Finance Bruno Le Mer appeared in front of the cameras. This was only days after the consumer price index in the country for the month of February surprised for the worse, jumping to 6.3% on an annual basis. Le Mer told the nation that following prolonged talks and pressure exerted by the government, the large French marketing chains agreed to “shave several hundred million euros” from their annual profits, to help fight rising food prices. The marathon talks took place after the French President, Emmanuel Macron, gave a public speech in which he “addressed the hearts” of the supermarket chains, asking them to “make a national effort” to help the residents.
The agreement reached by the parties was to launch a basket of basic products, from food such as pasta and rice to hygiene products, which will be marked with a special sticker that will read “anti-inflation basket”, against the background of the French flag. The Intermarche chain announced that it will offer 500 products as part of the basket, the “Carrefour” chain announced that it will offer about 200 products at prices of up to two euros. The Systeme U chain offered 150 products at “cost prices” and the cheap chain Casino announced that it would offer about 500 products at prices of less than one euro. Finance Minister Le Mer announced that his office will monitor that the chains do not raise the prices of other products in order to maintain their profit line. Two months after the launch of the initiative, the French Ministry of Trade and Industry reported this week that the prices of the basic products included in it have fallen in the last two months by 13%, contrary to the European trend. Inflation in France fell in March to 5.7%, and rose in April to 5.9%.
Spain: Significant discounting of public transport
About two weeks ago, a public transport card was launched in Germany, valid throughout the country and costing only 49 euros per month. The card is clearly designed to ease the expenses of German residents, who have been dealing with higher inflation than in Israel for more than a year (7.2% in April). The card is a follow-up project to a much more drastic step taken last summer by the German government, which distributed free monthly cards for only nine euros for three months. That step “shaved” entire percentages off the inflation at that time in Germany, but the current step is also expected to benefit – in a more minor way – the price index.
Buses in Spain / Photo: Shutterstock
But Germany is not alone. The social democratic government of Spain (inflation of 4.1% in April) has taken a clear line of measures to help the residents, including a significant discount on public transportation. Already last year, Prime Minister Pedro Sánchez announced free travel for Spanish residents who travel regularly on local and regional trains, and the government decided to extend the measure until the end of 2023. The governments of Spain’s autonomous communities have also been offering more than a 50% discount on travel in recent months Solitude. At the beginning of the month, Sánchez announced a 90% discount on tickets for young people up to the age of 30, for travel throughout Spain, only for the summer months.
UK: One-time grants, tax breaks for the weaker sections
Food inflation is particularly rampant in the UK. In recent weeks, the media in the United Kingdom praised the sweet potato as the only vegetable that met the Bank of England’s inflation target, and became more expensive by only 2% in the past year. The rest of the food products became more expensive by 19% in March (on an annual basis), and estimates are that prices may continue to rise, while inflation (10.1% in April on an annual basis) should decrease.
As a result, the conservative British government actually increased the aid it extends to the weak, and announced the distribution of a grant of 900 pounds per year to poor households. This, in addition to subsidizing energy prices for households and heating grants. Finance Minister Jeremy Hunt even said during a presentation Last year’s budget that the company must “take care of the weakest” in it. Prime Minister Rishi Sonak, perhaps inspired by his counterpart Macron across the channel, announced that he would meet this week with the heads of the food marketing chains to arrange for price reductions. The British Competition Authority announced that it would launch a comprehensive investigation into the price increases of products food and justification for it.
In France, too, the government intends to distribute “food coupons” to the weaker sections in the coming months, and in Italy (inflation of 8.2% in April, on an annual basis) the government considered imposing a ceiling price on pasta, which has become more expensive by tens of percent in the past two years. In the end, the government decided to avoid the measure, but established a special team within the Ministry of Industry to supervise and monitor food prices.
Denmark: Regulation of the rental market and restriction on rent increases
Only when the water recedes, says the well-known proverb, do you see who swims without a swimsuit. Similarly, only when there is an inflationary crisis, do you suddenly see the importance of government regulation of the rental housing market. In many European countries there are laws for the protection of tenants, regarding early eviction, regarding the duration of the contract and even the legally permitted increases in the rent. In general and in contrast to the situation in Israel, in some European countries, such as in Germany, it is not possible to raise the rent freely after each year. The fact that this is a booming market in Israel contributes a lot to the spike in inflation in the country.
Nyhavn district in Copenhagen, Denmark / Photo: Reuters
In Denmark, for example, the government decided last February to impose a limit on the rent increase – which is linked in the country to the price index. Instead of a 10% increase that was allowed to the apartment owners (according to the index of the past year), it was decided that they would be allowed to increase the rent by only 4%. The Danish concern, which is the situation that is close to being realized in Israel, is from a rent-index spiral, where rent increases “fuel” the spike in inflation, and so on. The measure will be valid until the end of 2024 at least.