True or False. Is France the country in Europe where inflation is lowest, as Bruno Le Maire asserts?

“Today we have inflation of about 5%. I remind you that this is the lowest among all countries in the eurozone”Bruno Le Maire said on Wednesday 1 June at France Inter. While the general increase in prices weighed on the purchasing power of the French, the Minister of Economy defended the measures taken by the government to curb inflation.

“We have taken very strong measures with the President of the Republic – the first in Europe. We expected this inflationary peak by taking measures to reduce energy prices”, Chief Percy argued. Did these provisions – a freeze on the price of gas and electricity, a 15-cent discount on a liter of gasoline at the pump – enable the government to preserve the purchasing power of the French? Franceinfo got sucked into the little lines of inflation figures.

According to INSEE data, France, which has an inflation rate of 5.2%, is already the country in the eurozone where inflation is the lowest. However, for a more equitable comparison, it is necessary to have a common index with the same method of calculation for all countries. Christophe Plaut, Deputy Director of the Department of Analysis and Forecasting of the French Observatory of Economic Conditions (OFCE), calls for preference to Eurostat figures, among which The indicator is harmonized for all countries in the eurozone..

This changes things a bit. France is still very well positioned on the Eurozone platform where inflation is the lowest, according to Eurostat data, but it does not show the lowest inflation rate. With generalized price inflation of 5.8% between May 2021 and 2022, France is second only to Malta and its inflation is 5.6%.

Inflation has not been high in France since 1985. However, it is still lower than the average inflation in the eurozone: 8.1%. It is also much lower than what is observed in other countries of the eurozone, particularly the Baltic states. Estonia (20.1%), Lithuania (18.5%) and Latvia (16.4%), which borders Russia, bear the brunt of the price hikes.

Why are these countries affected more than France? to Christoph Plaut, This is explained by the weight of energy consumption in Eastern European countries, which is greater than in France. “Inflation is strongly driven by higher energy prices, so inflation is mechanically higher.” The marked difference from one country to another in the Eurozone can thus be explained by the measures taken by different governments to contain the general increase in prices. “If we reduce the price of energy, we reduce inflation”summarizes Christoph Plaut.

Between May 2021 and 2022, energy prices rose 26.8% in France, according to Eurostat, well below the average in the eurozone: 39.2%. Some countries pull this average upwards. In the Netherlands, the price of energy increased by 67.3% between May 2021 and 2022. In Belgium, energy increased by 65.5% year on year.

This high inflation in energy prices is fueling general inflation. Celine Antonin, an economist in OFCE’s Analysis and Forecasting Department, explains this mechanism: “In France, in the first quarter of 2022, the contribution of energy products to inflation was 2.6 points out of 5. That is, half of the inflation in France is related to the energy component. In Germany, energy contributed 4 points indicating inflation. In Spain, it is attributed 6.4 points. Inflation to energy.”

If inflation in France is lower than in Germany, this does not mean that the purchasing power of Germans has fallen more than the purchasing power of Germans. To estimate the loss of purchasing power, wages must also be taken into account. “If prices increase faster than wages, you lose purchasing power”Celine Antonin summarizes.

In fact, if your salary does not rise for a year, inflation corresponds to your loss in purchasing power. When your income increases, inflation has not affected your purchasing power as much. “In France, the loss of purchasing power is slightly greater than in Germany, but it is still comparable, at about 2%. The difference is that France has a lower rate of inflation than Germany, but it has a lower wage increase; while Germany It has higher inflation, but also higher wage increases.”Comments the economist. According to Dars, the basic monthly salary index for all French employees increased by 2.3% during the year. In Germany, nominal wages rose by 4% between the first half of 2021 and 2022, according to Statistisches Bundesamt. (in English)German Federal Institute for Statistics.

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