VAT rise to have only partial impact on prices
Athens Plus, 19 March 2010

The government’s recently unveiled austerity package, which is estimated to reduce consumers’ purchasing power by a hefty 8.3 billion euros this year, has sent retailers and traders scurrying for ways to minimize its impact. The National Confederation of Greek Commerce (ESEE) has appealed to its members to display economic and social patriotism and absorb the increases in value-added tax (VAT), a jump primarily from 19 to 21 percent. The appeal seems to have drawn a strong response from a wide range of businesses, which fear that any increases passed on to the consumer under the present circumstances will have a disproportionately adverse effect on turnover.

The Carrefour Marinopoulos supermarket chain has said it is freezing the prices on its generic label goods, while offering discounts of 15 percent on 10,000 products and 40,000 50-euro vouchers this month. The AB Vassilopoulos chain is pricing more than 3,500 products at under 1 euro.

German-owned Aldi and Lidl chains also said they will absorb the VAT increases. Coca-Cola Hellenic announced it will freeze prices for 2010 and Nestle Hellas, which accounts for a major chunk of the Greek food industry’s profits, is said to be readying an extensive program of offers.

Not surprisingly, given the sector’s high prices, the economic downturn, coupled with stiff competition, has not left the Greeks’ favorite pastime of going for a cup of coffee outside the home unaffected. Coffee shops and cafeterias are estimated to have seen a 15 percent drop in revenues since the beginning of the year. US chain Starbucks periodically gives out free samples of its new products for a single day, while the Starbucks card entitles patrons to a 10 percent discount and free Wi-Fi access. The Coffeeright points of the Grigoris chain will not pass the VAT increase on to the consumer. McDonald’s is now selling coffee for between 1 and 2.40 euros. Other chains, such as Everest and Flocafe plus individual operators are expected to follow suit.

Operators in the tourism industry, Greece’s major money-spinner, have not escaped the trend, also promising to absorb the VAT hikes. Deputy Tourism Minister Angela Gerekou said at the International Tourism Bourse (ITB) in Berlin last week that German tourists visiting Greece in 2010 will find prices at the same level as the last few years.

Athens hotels saw capacity utilization rise by 9 percent in January, with the average room price dropping

5.2 percent to 100 euros. In the mean- time, 39 hotels in the Attica area are reportedly up for sale - for an estimated total of 610 million euros - by owners who apparently see no likelihood of making up for last year’s steep losses in business.

The Attiki Odos toll charges will remain unchanged despite the VAT hike, the operating company said.