Prices without brakes: authorities lift markup restrictions and hope for honesty of supermarkets

The Greek government decided do not extend the profit margin cap on food and supermarket products. The measure, introduced as an emergency tool against high prices and speculation, has ended June 30.

Development Minister Takis Theodorikakos announced this after a meeting in Prime Minister’s residence. According to him, industrialists and retail chains agreed to keep prices stable in July and August, and also not to cancel previously introduced reductions for approximately 2,000 product items.

Formally, this is presented as a transition from emergency administrative control to more “normal” market functioning. But for millions of families who already count their food costs down to the last euro, large companies’ experiment with voluntary moderation looks less like an economic strategy and more like a political bet.

The main thing is several points

• From June 30, the restriction on trade margins on a number of products and supermarket goods will cease to apply.
• The government is not extending the measure introduced at a time of rising prices and high inflation.
• Industry and supermarket chains, according to the minister, promised not to raise prices during the two summer months.
• Price reduction by approx. 2,000 product items should last until the end of August.
• The Ministry estimates the average reduction for these goods to be approximately 6%.
• Since September, the authorities have been promising a new “national social compact” to reduce prices for basic products.
• The government says it will monitor prices for individual items and respond to unjustified increases.

What exactly is canceled

The limit on trade margins was introduced as a temporary measure in the face of rising living costs. It concerned some consumer goods and was supposed to restrain excessive increases in profits against the backdrop of inflation, supply problems, rising energy prices and general pressure on family budgets.

According to the Ministry of Development, this mechanism has produced results: in recent months, prices for about 2,000 goods have decreased by an average of 6%. Among them were food, household goods and other items that regularly appear in the basket of an ordinary Greek family.

The government has now decided that it is no longer necessary to extend the restriction. Authorities attribute this to easing international inflationary pressures and stabilization of oil prices following de-escalation in the Middle East.

That is, the state removes the direct restriction and expects that the market itself will not take advantage of the freed-up space to raise prices. In economic presentations, this may look like trust in entrepreneurship. It looks a little different in the checkout line.

What supermarkets and manufacturers promise

According to Takis Theodorikakos, at a meeting at the Prime Minister’s residence, representatives of industry and supermarkets agreed to maintain prices without new increases during July and August.

They also pledged not to cancel the already achieved reductions of 2,000 commodity items. The Ministry emphasizes that this is not only about one-time discounts, but about maintaining a lower price level during the summer period.

The government says it will monitor the situation by product code. This means monitoring specific items, not just overall inflation figures, which often look calmer than the actual cost of a basic supermarket basket.

However, for now, the main element of this scheme remains voluntary: companies are not obliged to fulfill the promise in the same sense in which they were obliged to comply with the limit on the trading margin.

Why lifting the restriction raises questions

The food market is not the same for everyone. For a high-income family, an increase in the price of meat, butter, baby food or coffee by a few percent can be a nuisance, but not a threat to the budget.

For a pensioner, unemployed person, minimum wage worker, single mother or family with children, even an extra €10-15 per week could mean giving up some shopping. In such households, products have long been chosen not by quality or habit, but by promotion, package weight and the last number on the price tag.

Therefore, talking about “market stability” sounds very different for a person who spends €800 a month at the supermarket and for a person who is already struggling to put together a basket of €30.

If prices begin to rise gradually after the restrictions are lifted, the impact will be uneven. A wealthy buyer will notice this later. The poor customer will feel the pain right away because they don’t have a cushion to cover with savings, a credit card, or giving up one trip to a restaurant.

Can the market calm itself down?

The government is counting on competition, reduced international pressure and public commitments from businesses to keep prices from rising again. This is possible, but not guaranteed.

The Greek food market has shown for many years that rising prices can be easily explained by almost anything: fuel costs, logistics, packaging, climate, war, fluctuations in world markets, rising wages, declining harvests or “new supply conditions.”

When a strict limit is in effect, the state has a clear legal line: excess can be checked and punished. When the restriction is lifted, there remains political pressure, monitoring and the hope that business itself will not want to irritate society.

But the market rarely willingly gives up an opportunity to earn more just because the government has asked it to behave.

What can happen in the summer

In the next two months, the situation will test the new model. Several scenarios are possible.

First: prices will indeed remain stable, and some companies will maintain discounts so as not to conflict with the government and not lose customers.

Second: there will be no direct jump, but a slow increase in individual categories will begin. Some products will rise in price by a few cents, others will disappear from stock, and others will be sold in smaller packaging at the same price. For statistics, this may not look too dramatic. For the family budget, the effect will be quite real.

The third scenario is the most politically sensitive: if inflation accelerates again and the cost of basic products increases significantly, the government will have to return to more stringent measures under the pressure of public discontent.

September and the “social compact”

From September the authorities promise to launch a new “national social agreement” between the state, industry and retail chains. Its stated goal is to significantly reduce prices for goods that are most often used by Greek households.

The full list of categories has not yet been published, the exact size of future reductions has not been announced, and it is not clear whether business obligations will be legally enshrined or will again remain at the level of public promises.

This is where political risk arises. In the summer, the government lifts the restriction and gives the market more freedom. If prices do not rise, the authorities will be able to say that the trust model has worked. If they grow, a new package of measures can be presented in the fall as a decisive rescue for consumers.

Watch your hands: first they let go of the market, then they wait for society’s reaction, and then the state can return as a savior with a new “social agreement” and loud promises of protecting citizens.

Control or political pause

From the government’s perspective, lifting the restriction could be an attempt to show that the economy is returning to normal and no longer requires emergency measures. This is an important political signal for business and investors.

But for buyers, what is much more important is not the signal, but the check at the checkout. If prices remain stable at current levels in July and August, the government will have an argument in its favor. If the cost of basic goods begins to slowly increase, it will become obvious that the restriction was lifted too early.

This will be especially painful for those already living on the edge of poverty. They do not have the opportunity to “wait until September” while a new agreement is prepared. They need to buy bread, milk, vegetables, medicines and goods for children today.

Editorial comment

The abolition of restrictions on trade margins does not in itself mean a disaster. In a normal economy, temporary emergency measures really shouldn’t become permanent. But the problem is that the Greek food market has long not looked like a space where a weak buyer can safely rely on self-regulation.

If the restriction, as the Ministry of Development claims, helped reduce prices by about 2,000 product items, an obvious question arises: why is a tool that supposedly worked being removed at a time when high costs are still a major problem for a large part of the population?

The government is actually exchanging tight control for trust in large companies. Supermarkets and manufacturers promise not to raise prices in the summer. But the promise of business is no guarantee for a family that already has to count every purchase.

People with high incomes will survive even a new rise in prices. For them it will be an annoying but tolerable expense. And for those who buy groceries at discount prices, live paycheck to paycheck or receive a small pension, a few extra euros in the basket means cutting back on food, avoiding other necessary expenses and constantly feeling like there is not enough money again.

The most cynical scenario looks like this: in the summer the market gains more freedom, prices begin to gradually rise, society gets irritated, and in the fall, on the eve of the Thessaloniki International Exhibition, the authorities come out with a new package of measures and announce the return of control as a great victory over high prices.

This is a convenient political scheme: first remove the restriction, then allow the problem to become more visible, and then return as a savior. But for the consumer, such a scenario means that his refrigerator and wallet become part of the election or image game.

The state has the right to refuse direct regulation. But then it must show another real protection mechanism: who checks the prices, what increases are considered unreasonable, what fines will follow and how quickly the average buyer will see the results.

In the meantime, citizens are asked to believe that companies, which yesterday had to be limited by law, tomorrow will voluntarily restrain their own markups. In Greece, this trust may be the most expensive item on the shelf.

Sources: Greek Ministry of Development, ELSTAT: consumer price statistics.

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