The summit was announced by Social Affairs Minister Johannes Rauch (Greens). Vice Chancellor Werner Kogler (Greens) and Minister of Agriculture Norbert Totschnig (ÖVP) are also there. Together with representatives of the food trade and other experts, they want to discuss the causes of the price increases and find possible solutions. In the past few weeks, Rauch had repeatedly criticized the fact that food prices were above average.
On Saturday, Kogler and Rauch also advertised their cause on social networks. “Inflation is becoming an ever greater problem in people’s everyday lives,” says the Vice Chancellor in a video in which his party colleague also has his say: “When shopping, at the supermarket checkout, people realize that it’s no longer possible. Both praised the measures taken by the government so far. Now you have to look at the food industry. It is no longer acceptable that “in Austria 10 to 20 percent more is paid for exactly the same product than in Germany,” said Kogler.
Debate on VAT reduction
On Sunday, the head of the Institute for Higher Studies (IHS), Klaus Neusser, emphasized in the ORF “Press Hour” that the level of inflation in the food sector is high compared to Germany, but the price increase is below the EU average and is also lower than in Germany. Inflation in this country is mainly driven by the energy sector as well as the leisure and gastronomy sector. The current narrative is wrong, according to Neusser.
grocery store
In the last 30 years there has been a strong concentration among supermarket chains in Austria. According to the market researcher RegioData, the three largest food retailers – Spar, Rewe and Hofer – accounted for around 84 percent of the entire market.
The debate about persistently high inflation in the food sector (most recently at more than 14 percent) has been going on for months. In contrast to other countries, the domestic government did not actively intervene in the market, for example by reducing VAT on groceries. Finance Minister Magnus Brunner (ÖVP) ruled this out again on Saturday. In other European countries it has been seen that this measure is not or only partially passed on to the end consumer, he said.
In addition, it is a “watering can method” from which people with higher incomes in particular would benefit particularly strongly. “So the question is whether that’s smart.” In the past few months, the opposition had sharply criticized the government for its “watering can policy” and one-off payments. Most recently, Greens club boss Sigrid Maurer emphasized that Vice Chancellor Kogler had already suggested thinking about a reduction a year ago. SPÖ and the FPÖ support such a measure.
“You can’t have anything against transparency”
While the director of the Economic Research Institute (WIFO), Gabriel Felbermayr, recently advocated an open-ended discussion about the VAT reduction, Neusser held back. The economist rejects price interventions, as he said in the ORF “Press Hour”. A VAT reduction for certain foods would fuel demand and thus inflation. He thinks the decision to strengthen purchasing power is right, “however, the problem is that we have worked too much with the watering can”.
It is true that inflation is significantly lower in Spain, for example, but real purchasing power has fallen there. “I’d rather live in Austria, where purchasing power isn’t declining.” Neusser will take part in the “Food Summit”. There should also be a discussion about how to ensure more transparency in food prices and more competition. “Of course, you can’t have anything against transparency, and I’m certainly in favor of that,” said Neusser, even if that would be more difficult in the food sector than with fuel prices.
For example, the union wants supermarkets to have to report their purchase and sales prices to an observatory that monitors grocers’ profits. WIFO economist Josef Baumgartner is skeptical, however, because the producers and retail chains are trade secrets, “and they will not give this data out voluntarily”. Price comparison apps have also been mentioned. According to Rainer Trefelik, chairman of the Federal Trade Department in the Austrian Economic Chamber (WKO), that would be “an insane bureaucratic effort” for retailers.
Brunner relies on voluntariness
However, it can be doubted that the summit will provide for a mandatory measure. Because the ÖVP wants to continue to rely on voluntariness. On Saturday, Brunner brought a new measure into play with the “French model”. This stipulates that food retailers and politicians agree on temporary “anti-inflation prices”. In France, the campaign has been in effect since March and will continue until mid-June. However, not all supermarkets are participating in the measure. In addition, there is no list of products that are to be exempted from inflation.
Neusser believes that freezing the prices of certain foods for a certain period of time, as in France, is worth considering. “Everything that is done on a voluntary basis is certainly good. In Austria, with the social partners, we also have a vehicle that can implement this,” said the IHS boss. Such a plan can be drawn up together with the social partners. However, according to Neusser, the measure in France should not be overestimated.
IHS boss Neusser on fighting inflation
The head of the Institute for Advanced Studies, Klaus Neusser, was a guest in the ORF “press hour” on Sunday. There he spoke, among other things, about the important distinction between inflation control and social policy.
Criticism of Brunner’s statements came from SPÖ finance spokesman Kai Jan Krainer. After a year of record inflation, people often could no longer afford their daily groceries and rent, “but Finance Minister Brunner and the government are just looking on and saying they have done enough anyway”. In view of its “total failure”, the government should clear the way for new elections. NEOS business spokesman Gerald Loacker, in turn, criticized that the previous “unbridled funding for everyone” had led to far higher inflation than in other countries.
