Irish prices fall to fifth dearest in EU

PRICES IN Ireland continued to fall back towards the EU average last year, according to Eurostat, the bloc’s statistics agency.

Among the 27 members of the union, Ireland was the fifth most-expensive place after Denmark, Sweden, Finland and Luxembourg.

Last year, the price level in Ireland for consumer goods and services was 17 per cent above the average across the 27-nation bloc.

In 2010, it was 20 per cent higher than the average. In 2008, when it peaked, it was 30 per cent above the average.

From the mid-1990s, when Irish prices were in line with the average across the rest of the union, stronger inflation relative to elsewhere pushed up the price level. As the chart shows, by a decade ago Ireland was the second most expensive country among the 27, a position it retained until the recession struck.

A much deeper than average recession has since resulted in a partial reversal of the trend over the previous decade and a half.

The decline in Ireland’s relative price level since 2008 has been the second-largest in the EU after Poland.

Relative to Britain, Ireland’s most important trading partner, prices remain considerably higher.

In the UK prices were just 2 per cent above the EU average, a full 15 percentage points lower than in Ireland. This higher price level makes Irish goods and services less competitive in the British market.

During the bubble-era, price increases in the health and education sectors were among the drivers of higher-than-average Irish inflation. Between 1999 and 2011, Irish education prices rose by 117 per cent compared to 46 per cent across the EU on average, as measured by the harmonised index of consumer prices.

They have also bucked the trend since the recession began. While general inflation has been non-existent since 2008, education prices rose by 14 per cent in the three years to 2011. They rose by just 4 per cent across the EU.

In health in the dozen years to 2011, Irish prices rose by 85 per cent compared to 30 per cent across the EU on average.

As with education, the recession has not squeezed inflation of health prices. Between 2008 and last year, health prices rose by 8 per cent, double the EU average.

Across the EU, price levels vary greatly. In Denmark – the dearest place in the union – prices were 42 per cent higher than the average. Bulgaria was at the other end of the spectrum. Prices in the most recently joined member of the EU were half the average last year.