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Government's plan for inflation: free pasta

GLOBAL rises in prices for food, raw materials and energy in recent months have been making governments edgy and populations worried. Now the Slovak administration led by Iveta Radičová says it has a plan to temper these price rises and soften their impacts on the most vulnerable people in society. The government says that, among other things, it will distribute flour and pasta to those on state assistance and move to trim electricity bills. But its plan provoked instant derision from the largest opposition party, Smer, which likened it to “ration coupons” for the poor.

Exactly how people will receive their free pasta is still being determined.(Source: Jana Liptáková)

GLOBAL rises in prices for food, raw materials and energy in recent months have been making governments edgy and populations worried. Now the Slovak administration led by Iveta Radičová says it has a plan to temper these price rises and soften their impacts on the most vulnerable people in society. The government says that, among other things, it will distribute flour and pasta to those on state assistance and move to trim electricity bills. But its plan provoked instant derision from the largest opposition party, Smer, which likened it to “ration coupons” for the poor.

The government will shortly adopt legislation which should at least partially reduce food prices, Agriculture Minister Zsolt Simon said after a February 22 meeting with Prime Minister Radičová and Economy Minister Juraj Miškov.

Simon is also charged with proposing a system to secure basic food products for low-income families.

Radičová said that a cut in value added tax on food products is being considered, although she admitted that a similar policy had not worked well in neighbouring countries.

“We have considered this option but experience from the neighbouring countries confirmed that it does not bring the desired effect, which is a drop in food prices,” Radičová said, as quoted by the SITA newswire. “This is why we sought other solutions.”

According to the prime minister, if the regulatory policies of the state are adjusted properly a drop in food prices could be achieved.

Prices in Slovakia in January were 3 percent higher than January last year, and up by 1.9 percentage points compared to December 2010. In an analysis, the Ministry of Finance said it believes a 6.1-percent year-on-year rise in food prices recorded in January was caused by developments in global markets related to last year’s very poor harvest for certain grains and legumes.

Smer leader Robert Fico immediately attacked the government’s proposal to distribute flour, allocated from state reserves, and pasta to the needy.

“Are we somewhere in the jungle where it is necessary to help the people in such a way that cars drive around and people throw flour and pasta, and this will be the solution to the unprofessional conduct and inability of the Slovak government to react to problems?” Fico asked, as quoted by public broadcaster Slovak Radio.

Fico said that “humanitarian workers” get on the stage when there is a huge catastrophe in the country. He insisted that the situation is not caused by the weather or global markets but by what he called the seven-month rule of a “mash-up” right-wing government.

Most market watchers, however, did point to the weather, geopolitical influences, looser monetary policies by central banks, increasing demand in China and India, as well as the production of bio-fuels as being behind the price rises, according to the Sme daily.

A public tender has now been announced to process 45,000 tonnes of grain into flour and pasta for distribution to people eligible for state assistance, of whom there are around 180,000. The deadline for submitting bids is March 15.

Sme reported on Thursday February 24 that food tycoon Andrej Babiš is interested in participating in the tender. It quoted Jaroslav Kurčík, a director of Agrofert, confirming that the firm, which is owned by Babiš, is considering a bid.

Meanwhile, the Trade Unions Confederation (KOZ) said that the idea of giving away flour and pasta is an insult to human dignity rather than a solution.



Energy bills



Miškov, the economy minister, said that there is room for a reduction in energy prices.

“We believe that there is space for cuts in energy prices,” Miškov said, as quoted by SITA. “We will appeal to the Regulatory Office for Network Industries (ÚRSO) to set regulatory policy so as to prevent monopolies from making inappropriate profits.”

Miškov also reiterated comments by the prime minister who said that the government would put great emphasis on good regulatory policy by the state.

“I am not disclosing any secret when I say that Slovakia has the highest energy prices among the V4 countries,” Miškov said, adding that his ministry would not consent to regulatory policy that facilitated such high energy prices.

However, the head of ÚRSO, Jozef Holjenčík, said it is not true that Slovakia has higher energy prices. He said that in the supply of electricity and gas to households Slovakia has lower prices than the European average.

“Distribution fees are also below the European Union average,” Holjenčík said, as quoted by SITA. “The prices are higher only for the transmission of electricity and this is only as a consequence of integrating the 110kV system during the privatisation process into the distribution networks and not the transmission networks, as happened in other states.”


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