SOFIA, Bulgaria—Shopping in the supermarkets has been a challenging endeavor for the citizens of the poorest members of the European Union (EU) such as Bulgaria, Latvia, and Estonia with ever increasing food prices eating up on their relatively small family budgets.
And it's especially so, for Irina Savova, 65, a retiree, from Bulgaria—one of the most recent members of the European Union—who lives on her meager pension of around $200 a month, an income that is hardly enough to get by in a newly established free market trying to catch-up with the rest of the EU economies.
"My pension is just enough to pay my energy bill and live on bread, some dairy products, and even meat sometimes," said Ms. Savova, who worked as a nurse in a hospital for around 35 years before she retired. "Prices of some fresh vegetables are still too high for the season, and people who live on their retirement income simply can't afford to buy them."
The European Union has long been known for its stable economy and low inflation, but a report by the EU's Eurostat data agency, the Statistical Office of the European Communities, released on June 2, revealed that in April 2008, the annual increase in food prices in the EU was 7.1 percent, twice as much compared with 3.6 percent for overall inflation.
The most recent figures indicate that food prices increased at about double the rate of inflation with dairy products, outstripping the other food categories throughout the countries of the European Union.
"Since the end of 2006, but particularly since July 2007, food prices in the EU have increased more rapidly than the overall inflation," the Eurostat report says.
Multiple Causes
Experts say that there are multiple causes for the rapid rise in world food prices, such as droughts and destructive storms, skyrocketing oil and fuel prices, commodity speculators, the declining value of the U.S. dollar, and failed international agricultural policies.
The Eurostat study did not reveal information as to why the food prices have peaked so abruptly. But world leaders converged in Rome this week for a global UN conference to tackle the food crisis that is pushing at least 100 million people into hunger. Some suggested that rising demands for food and bad harvest were factors, including the production of biofuels that might have added to demand for grains, oilseeds and sugar, thus contributing to higher crop prices.
The leaders of the biofuel industries in Canada, the United States, and Europe sent a letter to the UN Food and Agriculture Organization disputing the suggestions of the UN world summit.
"Biofuels play an important role in diversifying our fuel supply, and moderating price," said Gordon Quaiattini, president of the Canadian Renewable Fuels Association. "If the UN is serious about taking on the food price crisis, they must tackle the problem of record oil and gas prices."
How much consumers spend on food throughout the EU, however, reflects the share of food purchases in household consumption expenditure.
This share is about 15 percent of the average of household spending in the entire EU, according to the latest data.
But the weight of food on household spending varies, in comparison to its lowest, 9.5 percent in the United Kingdom and 9.7 percent in Luxembourg; and its highest, 34.5 percent in Romania and 23.2 percent in Lithuania.
Last month's highest yearly increase in food prices were found in Bulgaria, 25.4 percent; followed by Latvia, 21.7 percent; Estonia, 18.3 percent; and Lithuania, 8.1 percent.
The lowest increases in food prices were registered in Portugal, 3.2 percent, Netherlands, 5.4 percent; France, 5.5 percent; Cyprus, 5.8 percent; and Italy, 5.9 percent.
Although the highest peaks in food prices were seen in March and April this year, taken over a long period of time, the food price increases were more in line with the overall inflation, the report concludes.
Moreover, rising food prices impacts the overall annual inflation which depends on the weight of food on household spending and the annual food price changes.
Therefore, the impact of food price increase differs significantly between the European members. The largest upward impacts from food prices on overall annual inflation are expected in Bulgaria, Lithuania, and Romania, while the smallest are expected in Portugal and Luxembourg.
Among the nine food categories, the three main food categories at the EU are meat; bread, cereals and milk; and cheese and eggs. They make up 60 percent of the food component. For the remaining food categories, the lowest price increase was seen for vegetables, and the highest for oils and fats.
In April alone, annual price increases for meat were lowest in Portugal and highest in Lithuania; while the lowest prices for bread and cereals were seen in the Netherlands, and the highest in Bulgaria; and for milk, cheese, and eggs, the lowest prices were in Cyprus and the highest increase for these goods was marked in Estonia.