Greek inflation spike to be contained

Weaker demand and measures to boost competition will help contain Greece's rising consumer inflation, Finance Minister George Papaconstantinou was on Tuesday quoted as saying.

Greek consumer inflation jumped to a 13-year high of 5.4 percent year-on-year in May, straining household budgets and efforts to restore price competitiveness in the debt-laden country, struggling with a deepening recession. [ID:nLDE65711Y]

Consumer inflation in the 16 countries sharing the euro in comparison inched up to 1.6 percent year-on-year in May from 1.5 percent in the previous month.

Greece has raised its VAT tax rate to 23 from 21 percent to boost revenues as part of efforts to slash its budget deficit by 5.5 percentage points to 8.1 percent of GDP this year.

"The rise in price levels in Greece amidst recessionary conditions has been obviously affected by the increase in indirect taxes," Papaconstantinou told financial daily Kerdos in an interview.

He said the impact would be one-off and would be limited by policies the government is undertaking to boost competition.

"As measures to strengthen competition in markets and check oligopolistic conditions in markets are pursued, part of the rise in (indirect) taxes will be absorbed, while the containment in wages and pressures from falling demand will gradually start to be reflected in prices and a fall in inflation," he told the paper.