Inflation is starting to tighten its grip on European economies and on the budgets of millions of consumers, including in Cyprus, as the crisis in the Middle East shows no sign of ending soon.
Experts in Cyprus and across Europe say it is still too early to measure the full impact or predict what support measures may eventually be needed. Even so, inflation is already beginning to bite, with energy costs rising across Europe and setting the stage for wider increases in goods and services.
In Cyprus, the first rises in fuel prices are already visible, even though economists say they are not yet fully justified. If current conditions persist, electricity bills are also expected to rise. Electricity Authority of Cyprus chairman George Petrou has said that if international oil prices remain at current levels, bills in May could increase by about 5%, with further rises by August that could reach or exceed 15%.
The first increases are also starting to appear in products linked to the supply chain.
According to the Consumer Protection Service, which used data from e-kalathi, some products recorded price rises between February 24 and March 18. In some categories, increases exceeded 10%.
Rises were recorded in categories including dairy products, frozen pastries and pies, chocolates and biscuits.
In some dairy products, prices rose by between 15% and 28% after the Middle East crisis began. One example cited was a dairy item that sold for €2.45 at the end of February and now costs €3.20.
Aliki Iordanous, head of the Competition Branch at the Consumer Protection Service, said there was no justification for increases in retail product prices because supermarkets and suppliers still hold stock purchased before the war broke out.
She also said the meat price index showed an increase of 33%. Over one year, beef prices rose by 25%, beef mince by 35% and lamb and goat meat by 6.7%.
Iordanous said the foot-and-mouth disease outbreak should not lead to higher dairy prices because milk production has not fallen. She said animals had been culled in 41 units, of which five were cattle units with 1,532 cows, equal to just 2% of the total cattle population. She added that 24,000 sheep and goats had also been culled, representing 5% of the total. “Based on these data, milk production is not reduced to an extent that would justify increases in milk prices,” she said.
Consumers in Cyprus are expected to come under growing pressure as the country remains fully dependent on oil.
The government’s economic team is closely monitoring the situation and says it will intervene if needed. Scenarios have already been drawn up on the possible impact on the Cypriot economy, although an official source said it was still too early to draw conclusions.
As part of that planning, the finance ministry is examining targeted measures to curb inflationary pressure. According to the source text, those would be focused rather than broad-based measures, as the European Commission is not in favour of horizontal support unless new developments in the Middle East lead to greater flexibility.
The article recalls that during the previous inflation wave and the energy crisis triggered by the war in Ukraine in 2022, EU member states introduced a range of measures to ease pressure on households and businesses.
Those measures included a broad reduction in fuel excise duty, cutting motor fuel prices by 8.32 cents per litre. There was also a reduced VAT rate of 9% for households and businesses, 5% for vulnerable consumers, and reduced or zero VAT on certain products.
As inflation eased, those measures were later adjusted and became more targeted. The fuel excise reduction, which had been in force for more than 18 months, was withdrawn, while electricity support was also revised.
Some support measures remain in place. According to the source text, zero VAT on specified baby and family care items, women’s hygiene products, and a range of fresh fruit and vegetables will remain in force until December 31, 2026. Support for vulnerable electricity consumers on special tariff 08 also continues. The Electricity Authority of Cyprus confirms that tariff 08 remains the special domestic tariff for vulnerable customer categories.
Calls have also been growing in recent days for the return of the reduced fuel excise duty.
The article notes that in November 2023, when the reduced tax was introduced, prices stood at €1.55 per litre for petrol, €1.71 for diesel and €1.24 for heating oil. It also says that average prices throughout 2022 were €1.54 for petrol, €1.74 for diesel and €1.28 for heating oil.
Government spokesman Konstantinos Letymbiotis recently said Cyprus had the second-lowest price in the EU for unleaded 95 and the fourth-lowest for diesel, according to the source text.
The article adds that recent figures show fuel prices in Cyprus are now higher than they were in March 2022, when the war in Ukraine began, but lower than in November 2023, when the reduced fuel excise duty was introduced.