Spain’s deputy leader Yolanda Diaz cuts supermarket prices

Supermarkets in Spain are under fire due to inflation as the country’s deputy leader launched a campaign to pressure stores to lower prices in a bid to help struggling families.

Yolanda Diaz, a Spanish deputy prime minister and contender for the top job, has escalated a political battle over the cost of living by pushing supermarkets to offer an affordable “basket” of 20 to 30 essential goods.

The food and energy bloat sparked by the war in Ukraine drained family budgets across Europe and left governments struggling to limit the damage. Spain has been hit particularly hard because its relatively low average salaries mean that people spend a higher percentage of their income on basics.

In an interview with the Financial Times, Diaz 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 very complicated. This is the pressing issue they face. this country “.

She said retailers have a duty to lower prices to help consumers, not least because the government has used public funds to support them and support other businesses during the coronavirus-related lockdowns.

“They have profit margins that allow them to cut their profits a little bit and contribute to their country,” she added. “If they do not act in this difficult moment for Spain, the risks of tarnishing their reputation are very high.”

Consumer price inflation hit 10.5 percent in Spain in August, but food and beverage prices rose 13.8 percent year on year, the largest increase since the data series began in 1994, according to official figures this week. Milk inflation is 26 percent.

Spanish Deputy Prime Minister Yolanda Diaz said retailers have a duty to lower prices to help consumers © Juan Carols Hidalgo / EPA-EFE / Shutterstock

Diaz, a longtime member of the Communist Party, stressed that she was not proposing state-imposed legislation or price controls, but instead was pushing for an “agreement” between businesses and the government to ensure access to prices for high-quality basic goods.

Her efforts met stiff opposition. The supermarket sector says they are not cooperating even with Diaz calling its representatives for more meetings next week. Meanwhile, Spain’s competition regulator issued a statement noting that setting maximum prices between companies is prohibited by national law and European Union law.

In addition to being criticized by the reliably hostile opposition People’s Party, Diaz has also been criticized by members of her coalition government.

Díaz, who is also the Minister of Labor, is one of the most watched Spanish politicians. She is a junior partner in the government led by Socialist Prime Minister Pedro Sanchez, but has already indicated a potential challenge to him in next year’s elections by launching a new political movement called Somar.

Commenting on her move, Sanchez said this week that there is a need to share responsibility in business. “We have to have a balanced analysis between what the production chain and, logically speaking, the retail represents.”

Ignacio García Magarzo, president of Asedas, a group that represents supermarkets and distributors, acknowledged the “serious” cost challenge facing businesses and consumers, but said Diaz’ ​​proposal “was not helpful to solve the problems.” He added that her analysis of profit margins in the food supply chain was not scientific.

Line chart of annual change (in percentage) showing that food prices are rising in Spain

García Magarzo said that the attempt to pressure only the biggest supermarkets to do business has created an unjustified division in the sector. It failed to recognize the fragmented nature of many Spanish retailers and risked leaving shoppers who had no access to the biggest chains.

He called on the government to cut or cancel the sales tax temporarily instead to tame inflation – and noted that Germany cut the sales tax in 2020.

The only supermarket to come a long way toward complying with Díaz was the Spanish branch of Carrefour, which said it would offer a basket of 30 “essential” products for 30 euros until January – a repeat of something it had been doing in France since June.

Products include canned foods, pasta, cooking oil and Carrefour brand coffee as well as a selection of pharmacy and cleaning supplies.

But after her announcement, Diaz said: “The basket should contain fresh produce – meat, fish, fruits, vegetables and dairy products.” Other major Spain chains are Mercadona, Lidl and Dia.

Agriculture Minister Luis Planas, a member of Sanchez’s Socialist Party, reprimanded his cabinet colleague, citing the need to protect smaller retail chains. “We must avoid price wars that would lead to the restructuring of the sector, which is not in anyone’s interest,” he said.

Defense Minister Margarita Robles has accused Diaz of incursions into an area outside her ministerial purview. “and I know that [Díaz] He does it at his best will, but there are technical and economic aspects that you need to know.”

Farmers across the continent are under tremendous pressure due to the rising cost of energy and fertilizer, making it even more difficult to keep prices low.

Alberto Núñez Figo, leader of the People’s Party, said: “We have again seen the recklessness with which important people’s issues are dealt with. Producers of meat, dairy and vegetables can no longer afford because they have to pay more for everything… The consideration that producers can no longer manage is the opposite of any reasonable suggestion from the government.”

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