Supermarkets under price pressure by Spanish Vice President Yolanda Díaz

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Spanish supermarkets are in the crosshairs of inflation as the country’s deputy leader leads a campaign to get shops to cut prices to help struggling families.

Yolanda Díaz, one of Spain’s deputy prime ministers and a candidate for the top job, has escalated a political battle over the cost of living by pushing major supermarkets to offer an affordable ‘basket’ of 20-30 staples .

Food and energy inflation caused by the war in Ukraine is straining family budgets across Europe and leaving governments struggling to limit the damage. Spain is particularly affected because its relatively low average wages mean that people spend a higher proportion of their income on basic needs.

In an interview with the Financial Times, Díaz said, “Families tell me they only give their children pasta and rice. They don’t have access to fish or meat. Fruit is very expensive. For a family with two or three children, it is extremely complicated. This is the pressing problem this country has.

She said retailers had a duty to cut prices to help consumers, not least because the government had used public funds to support them and other businesses during the coronavirus pandemic shutdowns.

“They have profit margins that allow them to cut their profits a bit and contribute to their country,” she added. “If they don’t act at this serious moment for Spain, the reputational risk for them is very high.”

Consumer price inflation stood at 10.5% in Spain in August, but food and drink prices rose 13.8% year-on-year, the biggest increase since the start of the crisis. data series in 1994, according to official figures this week. Milk inflation is 26%.

Yolanda Díaz, Spain’s deputy prime minister, said retailers had a duty to cut prices to help consumers © Juan Carols Hidalgo/EPA-EFE/Shutterstock

Díaz, a longtime member of the Communist Party, stressed that she was not proposing legislation or state-imposed price controls, but rather pushing for an “agreement” between business and government to ensure that prices for good quality commodities are affordable.

His efforts met with strong opposition. The supermarket sector says it is useless even as Díaz invites its representatives to more meetings next week. The Spanish competition regulator, meanwhile, issued a statement recalling that the fixing of maximum prices between companies is prohibited by national and European law.

As well as being criticized by the highly hostile opposition People’s Party, Díaz was also reprimanded by members of her own coalition government.

Díaz, who is also Minister of Labour, is one of Spain’s most followed politicians. She is a junior partner in the government led by Socialist Prime Minister Pedro Sánchez, but has already flagged him a potential challenge in next year’s election by launching a new political movement called Sumar.

Commenting on his move, Sánchez said this week that there was a need for shared responsibility in business. “We need to have a balanced analysis between what the production chain represents and, logically, the retail trade.”

Ignacio García Magarzo, director of Asedas, a group representing supermarkets and retailers, acknowledged the “serious” cost challenge facing businesses and consumers, but said Díaz’s proposal was “not helpful. to solve problems”. He added that his analysis of profit margins in the food supply chain was unscientific.

Line chart of year-on-year change (percentage) showing food prices rising in Spain

García Magarzo said trying to pressure only the biggest supermarkets has created undue division in the sector. He failed to recognize the fragmented nature of much of Spain’s retail trade and risked leaving shoppers who lacked access to the biggest chains behind.

He called on the government to temporarily reduce or eliminate sales tax to control inflation – and noted that Germany had cut its sales tax in 2020.

The only supermarket to comply with Díaz is the Spanish subsidiary of Carrefour, which said it would offer a basket of 30 “essential” products for €30 until January, replicating what it has been doing in France since June.

Products include Carrefour-branded canned food, pasta, cooking oil and coffee, as well as a selection of pharmacy items and cleaning products.

But after his announcement, Díaz said, “The basket must contain fresh produce – meat, fish, fruit, vegetables and dairy products.” Other major Spanish chains are Mercadona, Lidl and Dia.

Agriculture Minister Luis Planas, a member of Sánchez’s socialist party, chastised his fellow cabinet member, citing the need to protect small retail chains. “We must avoid price wars which would lead to restructuring of the sector which is not in anyone’s interest,” he said.

Defense Minister Margarita Robles accused Díaz of straying into an area beyond her ministerial remit. “I know that [Díaz] does it with the best will, but there are technical and economic aspects that must be known.

Farmers across the continent are under immense pressure from soaring energy and fertilizer prices, adding to the difficulty of keeping prices low.

Alberto Núñez Feijóo, leader of the People’s Party, said: “We have seen once again the frivolity with which the important issues of the people are handled. Meat, milk and vegetable producers can no longer cope because they have to pay more for everything. . . Ignoring the fact that producers can no longer manage seems to me to be the opposite of any reasonable proposal from the government.

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