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Italy calls on "Mr Prices" to try to curb inflation

13/12/2007 06:29

By Gavin Jones

ROME (Reuters) - Italy’s government has decided to appoint a special commissioner to try to curb price rises after inflation hit a three-and-a-half year peak in November, but economists see the move as little more than a publicity stunt.

The ombudsman, dubbed "Mr Prices" by Italian media, will inform the industry minister of any "anomalous" or unjustified price increases and can also make proposals for legislation.

Despite its low economic growth Italy has suffered from a stubborn inflation problem for decades, but most analysts say Mr Prices is not the answer.

"This is just a silly attempt by the government to convince people it is doing something to preserve their purchasing power," said Anna Grimaldi of Intesa Sanpaolo.

"The only way to curb inflation in Italy is to increase competition, and there is no need for a scarecrow called Mr Prices to do that."

Vladimir Pillonca of Morgan Stanley said the new figure was "unlikely to have any effect on inflation".

According to an amendment to the 2008 budget currently before parliament, the commissioner will be a senior official from the industry ministry and will be appointed by Prime Minister Romano Prodi for a three-year term.

Italian inflation, based on the EU-harmonised index, hit a 25-month high of 2.5 percent in .....continued below

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November, but is still running half a percentage point below the euro zone average.

However, this relative merit frequently occurs at a time of surging oil prices and invariably proves short-lived.

Italian retail prices respond more gradually to rises and falls in oil costs due to a different structure of excise duties and more regulated pricing rules.

Italians pay more attention to the main domestic price index, which hit a three-and-a-half year high of 2.4 percent last month. The record earned banner headlines in the media, which hardly mentioned that inflation was higher elsewhere.

"Inflation is being driven by rising commodity prices which the government has no control over. I don’t see any anomalous price rises," said Intesa Sanpaolo’s Grimaldi.

Consumer associations have estimated that hikes to administered prices which have already been decided will alone cost the average family an extra 1,360 euros next year, and they demanded that Mr Prices be given powers to punish "speculators".

Like most economists, the head of Italy’s employers’ confederation, showed little enthusiasm for the arrival of the new commissioner.

"In a market economy the proper way to counter increases in prices is by massive injections of competition in all sheltered sectors," Confindustria President Luca di Monezemolo said.

(Editing by Stephen Nisbet)