Inflation: Price Increases Began Before the Introduction of the Euro and the War in Ukraine, but This is Being Swept Under the Rug

In a time when we are struggling with prices and conversion, and we go shopping with a calculator set to divide by 7.5345, state statisticians have announced that the last kuna inflation was 13.1 percent year-on-year, meaning that prices fell by 0.3 percent compared to November. Although this is the first monthly decrease after a full two years, it is not an indication of a trend. The inflation that we all feel and live with has certainly returned on the wings of the conversion of the kuna to the euro, but also driven by entrepreneurial logic and the government’s ineptitude.

The war is not to blame for everything

However, the euro is not to blame for everything that is happening (or has happened) with prices. Yes, the usual response is that the war, specifically the Russian aggression against Ukraine, has pushed inflation to double-digit growth. Indeed, oil prices have skyrocketed, gas supply has become uncertain overnight, raw material sources (Ukrainian due to the war and Russian due to sanctions) have become unavailable, supply chains have been disrupted, and even some traffic routes. Producers did not ask how much things cost, but rather ‘give what you can’. By May, Croatia had double-digit price growth and entered the zone of galloping inflation.

Oil prices on the world market have since stabilized, Russian gas has been replaced by other sources (LNG), new supply routes have been found, as well as new markets. Just when we got used to the post-pandemic ‘new normal’, we had to look for a new one – and we found it. Of course, as much as it is normal to live with a war in the neighborhood where you are helping the weaker, attacked side.

However, the war is not to blame for all (price) troubles, no matter how much the Croatian government and the entire apparatus of Brussels bureaucrats and leaders of the strongest states want to present it that way. The war is only partially to blame. Everyone forgets that prices began to rise at the beginning of economic growth after the pandemic. At that time, it was considered stimulating, after the pandemic’s economic stagnation in which nothing was succeeding, not even inflation. It was taken for granted that a little inflation would not harm anyone. And so, from the beginning of 2021, in about 15 months, we ‘crawled’ from deflation to a price increase of 6.7 percent year-on-year. Only then did Putin launch the ‘special military operation’.

Inflationary work was also done by consumers

Why this retrospective? If we are in the zone of galloping inflation only because of the war, no one will question the real causes. Everyone will just wait for the end of the war, just so they don’t have to deal with the real sources of the inflationary spiral. In this context, the current desperate battle of the Croatian authorities against the conversion-induced price increases should also be viewed. Well, the culprits have been found – eight out of ten largest retail chains that do not want to present prices to the Minister of Economy Dr. sc. Davor Filipović, associate professor. These are the new ‘public enemies’, all those ‘who think they can, in this situation, cast a shadow or harm the strategic success of the state, the government, society, and all of us’ as Prime Minister Plenković labeled them and immediately ruled: ‘They will not succeed in this.’

Traders have now found themselves in the role of ‘honest intelligentsia’. Namely, the communist government had the slogan ‘workers, peasants, and honest intelligentsia’. Thus, all workers and peasants were honest, only the intelligentsia was questionable, except for ‘honest’ exceptions. In accordance with this communist provocation, the team from Banski dvori is now making moves, only they have their buyers, producers, and honest traders.

But traders (both honest and dishonest) are not the only generators of price growth. Consumers (who are assumed to be honest; after all, so are voters) have also done their part in the inflationary work. Last year, they rushed to stores, and about 11 percent more receipts were fiscalized than in 2021, and the amount was even 24 percent higher: we spent about 50 billion kuna more or, as the tax authorities meticulously reported, 254,331,930,080.83 kuna, down to the last spent kuna and lipa in history. And equally indisputably honest producers raised their prices last year: on the domestic market by as much as 19.9 percent, and when energy is excluded, it is still a high 11.5 percent.

Sloppy conversion

We could also include telecommunications, the entire tourism and hospitality sector, farmers, and state indexing of wages and pensions in this slogan. And here we come to the story of inflationary expectations that Miodrag Šajatović told last week.

Of course, capitalism lives off profit, which is greater the higher the prices are. And everyone has been raising them since the beginning of 2021, and the market accepted this – personified in consumers who agreed to price increases and dug deeper into their wallets. And now everything is being passed on to eight retail chains, which also just want to make a profit. And they were not really committing serious violations. Namely, 151 fines, totaling 234,000 euros, is peanuts for misdeeds that threaten great state achievements.

And again, based on expectations, producers delivered new prices, and traders forwarded them to the shelves. Aside from the technical part, the conversion was done extremely sloppily on the state side. The only thing that needed to be emphasized was dual pricing, and prices could not be raised on January 1. The entire past year was left for everyone to raise prices as they wished.

The blacklists that Dr. sc., associate professor, is now trying to establish should have been compiled six months ago. If a thousand Mikulić’s market inspectors had done this job, there would be no need for any freezing or threats of subsidy cancellations and tax increases. As they say in my area: It is late in the afternoon to go to mass.