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    Household e-basket reduces inflation

    Despite the advantages of the e-consumer platform, our Parliament did not pass the relevant law last week and called for a new consultation on the whole issue! However, there have been things and miracles on this subject

    By George Koumoulli


    “Before World War II, in 1939, with 1.5 million drachmas we bought a plot of land in Athens. In 1943 for the same amount we bought only one box of matches. In the space of four years we all became… Impoverished millionaires!”

    Dimitris Psathas. (1907-1979)

    Chronographer, playwright

    Inflation is the continuous increase in the general price level of an economy over a specific period of time that causes a fall in purchasing power, as each unit of money (e.g. a euro) buys fewer goods and services. When we say that a country has inflation, e.g. 5%, it means that on average the prices of goods and services purchased by the representative family in that country have risen by 5% in the last 12 months.

    In the 2010s, inflation in Cyprus did not exceed 2%. Suddenly in 2021 it rose to 2.25%, while in 2022 it climbed to 8.1%. Fortunately, last month it fell to 3.9%. But the rise in inflation in recent years has been global. Following the Covid-19 pandemic and lockdown measures, the global economy is currently facing significant inflation, raising concerns about declining households’ real disposable income. The increase in inflation is related to the reopening of the economy after the pandemic containment measures. While demand increased, there was a decline in the supply of commodities and intermediate goods. The war in Ukraine, economic sanctions against Russia and pandemic containment measures in China have further disrupted global supply chains.

    Household e-basket reduces inflation 1

    It is natural for governments to try to rein in inflation because, in addition to falling real incomes and falling in the value of savings, there are other risks, such as rising interest rates, diminishing competitiveness in international markets, discouraging investment, slowing down long-term economic growth. In this article I will not deal with monetary or fiscal policy, which are the classic remedies for curbing inflation, but with the so-called e-household basket or e-consumer platform. According to this system, which, incidentally, was implemented in Greece, the consumer will be able through his mobile or computer to click on each supermarket chain (which will of course participate in the platform) and see the products of the basket and their prices, while he will be able to make his own basket by seeing in which chain the entire list is cheaper.

    I think everyone understands that the more consumers know about prices, the more competition there is between businesses, with the result that prices are lower. This increase in price knowledge is achieved by the e-basket of the household. In times of inflation such as the one we are currently experiencing, competitive markets and strong competition law enforcement play an essential role. Competition is key to keeping prices low for consumers. Greater competition in product markets leads to lower prices through downward pressure on profit margins and costs. This relationship implies that competition can lower prices and help contain inflation. Undoubtedly, the e-consumer platform is not a panacea for radically tackling inflation, but it certainly contributes to curbing prices.

    Despite the advantages of the e-consumer platform, our Parliament did not pass the relevant law last week and called for a new consultation on the whole issue! However, there have been things and miracles on this subject. The president of the Cyprus Supermarket Association said that he strongly disagrees with the draft law of the Ministry of Energy, Commerce and Industry, because the institution of the e-basket constitutes an interference in free competition (!), noting that in a very few months from its implementation medium and small supermarkets will begin to close one after the other. He pleaded with Parliament to reject the bill, saying there was not a single reason to do this program because the market was working flawlessly. In reality, of course, free competition does not flourish with price obfuscation! Businesses that may close because they can’t stand competition are better off closing in the public interest, just as thousands of small grocery stores have closed in recent decades. Now, if our market is “working perfectly”, I refer the President to the prices of medicines, which are twice and three times higher than in other countries.

    But what is more surprising is the representative of the Commission for the Protection of Competition (PSC), who said that the e-basket will potentially create distortions in the market, “since it will allow companies to monitor the behavior of their competitors and there is a risk of collusion or silent collusion of competitors to the detriment of consumers”. This position is inexplicable, since we know that it is in conditions of opacity, not transparency, that companies create cartels or engage in other anti-competitive practices to the detriment of consumers.

    The whole issue was summed up by the Minister of Energy, Commerce, and Industry, George Papanastasiou, after the debate in Parliament on the bill: Our culture, he said, “cannot stand transparency”. It really can’t stand it!



    *Opinions expressed in this article are the author’s own and do not necessarily reflect the editorial policy of CypriumNews.

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