Portugal's economy minister has ruled out any government intervention to stem soaring food prices that are hitting households hard, seeing the market as the best price-setting mechanism.
Antonio Costa Silva told TSF radio that enforcing price ceilings or resorting to value added tax (IVA) cuts on basic products would simply not work, citing the example of neighbouring Spain where the effect of such a tax reduction on prices "was quickly eaten up by inflation".
"The market is the best instrument for setting prices...and self-regulation (by retailers) is fundamental, because the other (public) interventions we've seen, even in Europe, may not work," Costa Silva said. "Whenever you set prices administratively, things don't work."
The government will discuss and analyse price evolution with food retailers with the aim of ensuring that they are mindful of price increases that particularly affect families.
Portuguese inflation slowed to 8.2% year-on-year in February from the previous month's 8.4%, but core inflation accelerated, stoked by prices of unprocessed food products, such as fruit and vegetables, which surged 20.11%.
Finance Minister Fernando Medina said last Tuesday that food and economic security authority ASAE's investigations into the profit margins of large food retailers, such as Jerónimo Martins and Sonae, "will tend to mitigate these price increases".
Sonae, owner of Portugal's largest food retailer, on Thursday reported a recurring loss, excluding one-offs, and a drop in profitability.
Asked if there was price speculation by retailers, Costa Silva said that although ASAE's inspections showed gross profit margins of 40% on some products, that "doesn't indicate any illicit act and it's necessary to analyse the net profit margins".
"The worst that can happen is living in a country with continued widespread suspicion, we have to end that," he said.
News by Reuters, additional reporting by ESM – your source for the latest retail news. Click subscribe to sign up to ESM: European Supermarket Magazine.