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“Income increase is the only solution to food high prices,” says BoG deputy governor

“The increase in incomes is the only solution in the face of high prices that are not going to decrease,” deputy governor of the Bank of Greece and Professor of Economics at the University of Piraeus., Theodoros Pelagidis, admitted on Tuesday.

Speaking to state radio ERT, Pelagidis pointed out that “high prices will remain, they will continue to increase and decrease the income of the vast majority of citizens.”

The only solution for the citizens’ benefit is the increase in wages.

“What is asked of us is that there should be this adjustment from the salary side. Because don’t wait for food prices to drop. This will not happen,” Pelagidis stressed.

He argued that the high cost of living has two legs. It has wages on one hand and prices on the other, which means that it is not an exclusive problem of prices, it is a problem of wages.”

He estimated that the only solution to accuracy is “the increase in income that comes through the increase in investment and productivity”.

“In the rate, it may not be 4 and 5 and it may be 3% and 2%, but we are not going to see the zero that we saw in previous years, that’s clear, because there are pressures for spending internationally, on issues related to climate change which is also urgent in other issues” he noted.

He added that as the Greek economy has opened, “some food items such as feta cheese and olive oil face international demand. So the price is set internationally. 8 and 9 euros per kilos can become 12 and 15. There is nothing anyone can do about an issue, unless they impose restrictions on the producers, which, how can I say, is not, it is not consistent (…) like us we buy mobiles and laptops and various such goods, imagine if the rest of the countries do the same. We will face a situation of much greater overall high prices.”

“What is happening internationally is that this year and the next, in fact there is an OECD report that will come out shortly, that at the moment inflation internationally is fueled by rising wages, as the executives, the workers anyway try and ask and largely succeed, because labor markets are tight in many countries, like America, they get inflation-adjusted increases in their purchasing power,” he said.

What is asked of us is that there should be this adjustment from the side of salaries. Because don’t wait for food prices to drop. That won’t happen. The rate of increase may decrease and it will decrease, but there is no chance that they will fall because they are also facing an international demand anyway and they are also facing demand from the countries that have increased their incomes and are consuming food,Pelagidis said among others underlining:

Wages are the key. So, wage growth is productivity and investment. This is important.” [source: avgi.gr]

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2 comments

  1. The wages in Greece is a complete disaster. Rich tourists seems like the only reason Greece has not fallen to a 3rd world country… We need a huge increase in our salaries now!!

  2. “in fact there is an OECD report … that at the moment inflation internationally is fueled by rising wages,”

    I think this statement is very misleading. The words “at the moment” are very important. The massive inflation that has happened over the past year or two was demonstrably NOT fueled by rising wages. It was caused by two major factors. Firstly the vast amount of money printed by central banks that was used to fund support schemes for people and businesses during the COVID pandemic. Secondly the supply disruptions caused directly by the Russian invasion of Ukraine and indirectly by the sanctions used as a response. Wage demands are high now because of the loss of purchasing power caused by those two factors, i.e. workers are trying to catch up.

    Obviously it is likely that the current higher demands will make the inflation more sticky and make it harder to get it back to sensible levels BUT it is not the primary driver.