Greece takes over as inflation capital of Europe as Irish figure hits 2.9%

GREECE has overtaken Ireland as the inflation capital of Europe.

A year ago Irish inflation, as calculated by European Union statistics office Eurostat stood at 4.6% compared to a low of 1.1% in Germany. The Irish inflation rate was twice the eurozone average of 2.3%.

At the end of December 2003 Irish inflation in EU terms stood at 2.9% with prices rising fastest in Greece where inflation was at 3.1% at year end.

Germany’s lacklustre economy kept inflation low, remaining constant at 1.1%. The eurozone average is now 2%.

Inflation in France and Italy was 2.4% and 2.5% respectively. In the 15-nation European Union, which includes non-euro members Britain, Denmark and Sweden, the inflation rate fell to 1.8% from 2% in November according to Eurostat.

Eurostat figures differ from the Consumer Price Index inflation calculation of the Central Statistics Office which showed Irish inflation at 1.9% in December. However, the CPI takes mortgage rates into account and the EU Harmonised Index of Consumer Prices (HICP) does not.

“The non-inclusion of mortgage interest (which fell by 14.1% in the year) is the main reason for the HICP rate being higher than the CPI rate,” the CSO said.

Commenting on the figures IIB Bank chief economist Austin Hughes said that Ireland’s HICP inflation rate of 2.9% was good compared to the 1.1% inflation rate in the near lifeless german economy.

“In terms of competitiveness we are game ball on these figures,” he said.

Mr Hughes said the arrival of Aldi and Lidl has helped to almost eliminate food price inflation which stood at 0.1% in Ireland at the beginning of the month compared to 2.6% in the rest of Europe.

In clothing and footware Ireland is also coming out well with prices here actually falling by 2.7% compared to a rise of 1% in Europe.

Eurozone inflation got back near European Central Bank comfort levels in December, just as calls have been made for a rate cut to fight a rising euro.

ECB chief economist Otmar Issing said on Tuesday he expected eurozone inflation to fluctuate around 2.0% in the coming months, due to higher oil prices and the impact of tax rises, and then retreat later in 2004.