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JOHN LICHFIELD

OPINION: An inflation ‘tsunami’ is about to hit France

The rise in the cost of living in France is among the lowest in Europe - but that does not mean that it's not already causing pain to consumers, and much worse is set to come in January, warns John Lichfield.

OPINION: An inflation 'tsunami' is about to hit France
Photo by Christophe SIMON / AFP

There are lies, damned lies and official inflation figures. According to the official index, the cost of living in France has risen by 6.2 percent in the last year. If you limit that to food prices alone, the figure rises to 10 percent.

No more? It depends how you count and what you count.

A typical “supermarket basket” of 38 of the most used household items – fish-fingers, shampoo, crisps – cost 16.5 percent more at the end of September than 12 months earlier (according to a survey by Le Monde) .

Cooking oil, according to a government survey, is 60 percent higher than it was a year ago; frozen fruit is up by 40.6 percent, margarine 23.5 percent and flour by 23.5 percent. Terrible news if your favourite “French” dessert is “un crumble”.

The official inflation figure of 6.2 percent (the highest since 1985) may be misleading but it is not wrong. It is held down by rents, domestic energy prices and clothes, which have not risen as much as food.

The French government has spent €150 billion – 5 percent of GDP – in the last year to keep down the cost of electricity, gas, petrol and diesel. This mostly explains why inflation in France is so much lower than other countries. Prices are rising at 11.1 percent in the UK, 10.9 percent in Germany, 12 percent in Belgium and at an 8.5 percent average across the European Union.

READ ALSO How France is keeping its inflation (relatively) low

However, France faces a double shock or delayed reckoning in the New Year – what one senior government official describes as a “waterfall” and what Michel-Edouard Leclerc, head of the E. Leclerc supermarket chain, calls a “tsunami”.

The state subsidies on petrol, gas and electricity cannot be afforded indefinitely and are being wound down. Petrol and diesel rebates have already been reduced and will vanish from January 1st. Instead there will be targeted subsidies for poorer families and those dependant on cars for work.

The big price-totems outside filling stations and in supermarket car-parks – a better guide to the gloomy provincial mood than opinion polls – are already showing petrol and diesel at over €2 a litre.

The government’s 2022 freeze on gas prices and the 4 percent cap on electricity bills for households and small businesses will also disappear at the end of next month.

From January, energy price rises will be limited to 15 percent – still much lower than in other countries.  Unfortunately for the government, French people do not compare their power bills with those of “other countries”.

Food price inflation began with the post-Covid boom and was worsened by hot, dry summers and the Ukraine war. It has been lower in France than in other places. A government report this month found that – far from price gouging – the French farming, food and retail industries have been cutting profit margins to prevent consumer prices from rising even higher.

Unfortunately for the government, French shoppers do not (except a very few) look at supermarket prices elsewhere. Faced with a €120 shopping bill that once cost less than less €100, they tend not to say: “Thank God, we are not British or Belgian or German”.

This is what the senior official means when he warns that the country is paddling towards a “January waterfall”. The government had hoped that market prices for petrol and diesel would have fallen by now – compensating for the loss or reduction of state subsidies. They have not.

Electricity and gas bills will shoot up by 15 percent in the New Year – just as France faces the prospect of selective power cuts. Repairs to its ailing fleet of nuclear power plants remain behind schedule.

EXPLAINED What your French energy bills will look like in 2023

Leclerc also warned on Monday that a “tsunami” of new food price rises lies ahead. Inflation was being “normalised”, he said – in other words producers were unwilling to cut their margins indefinitely. A spiral of higher costs and higher prices was being built into the system.

“Felt” or everyday inflation is mostly food inflation. The poorer the family or the individual, the bigger the share of income spent on food. The government has also tried to soften the impact of high prices on the poor. Apart from the energy subsidies, it sent a €100 “cheque” to all households on low or modest incomes this Autumn.

Unfortunately for the government, memories are short and supermarket prices are high – €100 does not go very far when the price of flour and fish-fingers is rocketing.

When power bills explode and food price spike this winter who will thank the government for sparing France the worst of inflation in 2022?

An opinion poll this week found that 89 percent of French people were miserable about their immediate future. France, unlike other countries, does not do passive gloom for long.

Troubled waters, whether a  “waterfall” or a “tsunami”, lie ahead. 

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POLITICS

Why a French minister’s Paris apartment led to her quitting the government

A senior member of Emmanuel Macron's government has resigned after being accused of undervaluing her Paris apartment by the French financial transparency watchdog.

Why a French minister's Paris apartment led to her quitting the government

The minister for relations with local authorities, Caroline Cayeux, has resigned after the France’s “high authority for transparency in public life” (HATVP) deemed that she had “undervalued” her assets in an evaluation of her wealth.

After meeting with the Prime Minister Elisabeth Borne and at the approval of President Emmanuel Macron, Cayeux’s resignation was made official on Monday. Her position will be taken over by Dominique Faure, the current Secretary of State for Rural Affairs.

In a statement on Twitter, Cayeux said that she had presented her resignation to the President and Prime Minister on Sunday.

One of Cayeux’s advisers told Le Monde that “She resigned because she was suspected of something false. After experiencing what happened in July, she did not want to go through all that again.”

Wealth declarations

French politicians including ministers and presidential candidates are required to submit information to the HATVP giving a full list of all wealth and assets held by themselves and their spouse, if they are married.

The controversy for Cayeux refers to two properties  – one Paris apartment in a Haussmanian building, 500 square metres in size and located near the Eiffel Tower at the Place de l’Alma, according to Le Courrier Picard. Cayeux shares the property with her sister, though it is 99 percent under her own name, and the sisters inherited it.

The second property, estimated to be worth at least €200,000, is a farm near Beauvais in the greater Paris region where Cayeux reportedly enjoys collecting draft horses, some of which have taken part in the famous “Route du Poisson” (a competitive horse-driving event between Boulogne-sur-Mer and Paris in northern France).

What next?

The HATVP reportedly believes that Cayeuc under-valued both properties on her declaration of wealth, although there is no suggestion that she omitted any other assets.

The watchdog has not made any further statements on the subject, and will not publish any other communications prior to Thursday, when the results of their examination into all ministers’ assets are set be published on the website.

However, Cayeux’s will not be published, as “according to the law, the declarations of a member of the government who has left office can no longer be made public by the High Authority.”

According to Le Courrier Picard, the former minister, a multimillionaire, has been among elected officials who expressed “opposition to the online publication of [ministers’] assets.”

She is also not the first of President Emmanuel Macron’s ministers to run into issues over declared wealth. Environment Minister, Agnès Pannier-Runacher has recently become the subject of a new investigation by the HATVP.

READ MORE: Explained: Why is France’s environment minister facing a probe over shares?

Pannier-Runacher allegedly did not disclose conflicts of interest regarding her children’s shares in a company created by their grandfather as an early-inheritance scheme. 

What next for Cayeaux

Cayeux, 74, was only appointed a minister in the Macron government in the summer of 2022 and at that time more than 100 public officials signed an open letter denouncing her appointment.

This was due to her vocal opposition to same-sex marriage in 2013 and previous statements saying that it would “[go] against nature”.

She made things worse for herself when she tried to defend herself by saying she had good friends among “those people” – a statement that prompted angry denunciations even from her own cabinet colleagues. 

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