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Sarkozy to tackle rising prices

Latest update : 2008-02-27

Soaring food prices are worrying French consumers, as producers and distributors blame the accelerating inflation on rising raw material costs. President Sarkozy has promised to clamp down on the price hike.

Feb. 26 - French President Nicolas Sarkozy promised on Tuesday to “strike the iron where it hurts,” in order to clamp down on rising prices. Between November 2007 and January 2008, prices have risen by 5- 8% for a large number of commodities, according to a report published in Tuesday's edition of  French consumer magazine "60 millions de consommateurs". Prices of grain and milk-based food products have surged in recent months. Yoplait brand yoghurt prices have risen by 40%, while there has been a 32% rise in the cost of Camembert cheese. The price rise has hit more than 200 staple products, according to the French magazine.


 “I’ve asked (French Finance Minister) Christine Lagarde to open a formal investigation. We’re going to hit where it hurts, as there is no reason why the French should cut corners in their purchasing power because of a hike in commodity prices that does not correspond to the real cost of production and is unfair considering current competition in France”, Sarkozy told food industry workers in a small village in central France.


Meanwhile, Prime Minister François Fillon also asked the finance ministry to investigate the real cause of soaring prices and explain why prices were higher in France than in other European countries.


Reforming “La Loi Galland”

The spokesperson for the French Federation of Trading and Distribution Companies contests the methods used by the magazine to calculate the rise in prices. “The magazine has based its report on the figures provided by the French survey organisation, INSEE. Rising costs of primary products is one of the main reasons for the accelerated inflation,” she says.  “The Galland law (legislation voted in 1997 to prevent giant retailers from exerting too much pressure on their suppliers by cutting prices) needs to be reformed. We want to negotiate directly with suppliers and industries to help lower prices.” As for the reason why prices are lower in other European countries, she points out that, unlike France, “they have flexible regulations that don’t weigh on the distribution system”. In any case, she adds, “our margin doesn’t go over 2%”.



Excessive margins?


According to Gilles Psalmon, deputy director of the National Federation of Milk Producers, milk prices have always been transparent. (26 centimes per liter in 2006, 34 cents in early 2008 and sold for close to a euro per liter in supermarkets.) “I don’t want to blame other members in the supply chain (distributors and industries), but their cost margins are, at times, excessive and unjustified,” he told FRANCE 24 in a telephone interview. “We’re worried about the fall in milk consumption, which could drive us into losses. The milk industry needs more price stability than variation.”


Accelerating inflation has already hit Italy and Spain, where angry consumers protested against the rise in commodity prices. In Spain, prices for bread sold by Bondi brand rose from 2.50 euros to 4 euros a loaf in one month. The local Consumers’ Union has called for a boycott of certain brands that lead to a rise in prices of petrol and other primary products used to produce basic goods. Italian consumer organizations asked people to refrain from buying or eating pasta for a day in September 2007, to protest against a 25% hike in prices. In Germany, the Federation for German Consumer Organisations said the rise in costs is justified, save that for milk and bread.

Date created : 2008-02-26