Roundup: Lithuania amid havoc due to increasing food prices

Less than half a year to the upcoming national elections, Lithuania has found itself amid an unexpected havoc due to increasing food prices.

The society's resentment was triggered recently by a few notices on the social networks. In some of them, authors expressed their anger due to unusually expensive cucumbers, tomatoes and other vegetables in the shopping centers.

However, a cauliflower became a symbol of public revolt against food price increase after Nijole Ozelyte, a Lithuanian actress, posted angrily on her FB profile: "When the last time you paid 12 litas (previous Lithuanian currency) for a cauliflower?"

She also shared the then price of the cauliflower, 3.49 euros (3.98 U.S. dollars), and pointed to one particular retail chain in Lithuania.

The resentment was spread over the social networks and reached an extent in which the government was forced to react, while famous economists started to dig what could be the real cause of the alleged price increase.

Lithuania became a member of the euro zone in January 2015, with exchange rate of euro to litas at 1:3.45. It was widely feared that prices for goods and services would significantly increase immediately after euro introduction due to customers-unfavorable price rounding, however, initially the process of transition to the euro was smoother than expected by many.

Nevertheless, some believe that retailers abstained from raising prices right after the euro adoption yet they did so later on.

GOVERNMENT'S REACTION

The government struggled to explain the reasons of price increase and appease the society.

"I can clearly say that this is not due to the euro; most of the goods are being imported from the euro zone countries, therefore, prices changes are due to other reasons than euro, such as market challenges, bad harvest and others," Algirdas Butkevicius, Lithuania's prime minister, was quoted as saying by the local media this week.

He acknowledged that prices of certain food products, fruits and vegetables in particular, in Lithuania rose more significantly in the first quarter this year, compared with the same period in 2015. However, he noted that prices of certain locally produced meat and dairy products were lower this year.

The head of the government instructed the State Tax Inspectorate (VMI) and the Competition Council to monitor markup of certain product groups.

Lithuania's social democrats, the prime minister's party in the ruling coalition, also initiated reduction of value added tax (VAT) to 5 or 9 percent rate instead of the current 21 percent on fresh or chilled meat starting October this year. The proposal will be presented to the government and the parliament.

Loreta Grauziniene, the parliament's speaker, noted later that the proposal could reach the parliament already this summer.

RETAILERS' PRICING POLICIES

Nevertheless, Lithuanian shoppers are suspicious about pricing policies at the largest local retail chains, claiming that companies unjustifiably increased prices as purchasing power of the country's residents have augmented and they are used to buy main staple foods in the shopping centers rather than small shops or market places.

Some of the owners of retail trade networks are the richest people in Lithuania.

However, retailers fire back saying that fluctuating of prices is an everyday reality in the retail sector.

"Depending on the year, one or another vegetable's price increase, or not even vegetables; this is the outcome of natural price fluctuation which have been deserving an ungrounded amount of attention recently," said Laurynas Vilimas, executive manager at Lithuania's Retailers Association.

Nerijus Maciulis, senior economist at Lithuania's Swedbank branch, explained why the price of cauliflower, the certain vegetable to have triggered public rage, went up.

"I want to defend that cauliflower; due to unfavourable weather conditions there is cauliflowers supply shortage in many countries," Maciulis shared his opinion on a social network.

Meanwhile, Vilimas from Lithuania's Retailers Association noted that changes of prices are also influenced by seasonal factors, demand and supply in global markets, as well as costs of local manufacturers.

"The facts show that Lithuania remains to be among the cheapest countries in Europe, as regards food and other basic goods prices," Vilimas added.

What started with a single cauliflower, might end with a public protest against retailers.

Some Lithuanian users on Facebook have called for boycott of shopping in largest retail chains on May 10-12.

It is still unclear how many people would join the action as Lithuanians are used to shop in the shopping centers on daily basis. Endit