Consumes have a choice to vote with their feet.

THE COST of living has again topped the headlines this week, with the publication of Eurostat figures showing Cyprus has food prices six per cent above the EU average; hotel and restaurant costs were three per cent above average, but -- more worryingly -- were between 12 and 23 per cent more expensive than those in competitor destinations.

Of course, you don't need official statistics to tell you how expensive the cost of living has become -- every trip to the local supermarket tells the story in itself, while the desperately disproportionate cost of the island's tourism product has long been a complaint of visitors to our shores.

There's no doubt that such statistics make great headlines and provide premium capital to opposition politicians, not averse to sprinkling their attacks with hyperbole. A few months ago we had claims that Cyprus had the most expensive private health care in Europe (really, is that why northern Europeans come to Cyprus for 'health tourism'?), while at the peak of the fuel price spiral last summer some deputies did not hesitate to tell us Cyprus had the most expensive petrol in Europe (when was the last time they filled a tank in the UK?).

What's more, such figures rarely provide us with the broader context. They don't tell us that Cyprus has among the lowest tax rates in the EU, and that local taxation is virtually non-existent (anyone who's lived in Britain will remember the heavy burden of the community charge). They don't weave in the social context of families that give their children a huge kick-start in life -- often buying the first house and car, and providing regular supplies of cooked food so that starting salaries often serve as little more than pocket money.

But such context is scant consolation for beleaguered politicians, who feel they somehow have to act to head off criticism from their opposition counterparts and from pressure groups such as the associations representing large families. Commerce Minister Antonis Paschalides this week claimed credit for forcing supermarkets to bring down the price of milk by 10 cents, but claimed twice as much should have been slashed off, while also demanding a fall in the price of bread.

But the fact is that there is very little the government can do. Cyprus is a small and a remote market, meaning there is little scope for economies of scale, while dependence on imported grain leaves producers at the mercy of international prices. In a controlled economy, the government would subsidise basic foodstuffs and control prices to shield the population from the impact of market forces, but (undoubtedly to the communist government's chagrin) we are now in the European Union and such intervention is impossible.

And the fact is that we would not want a return to such intervention, for while bread and milk may indeed be cheaper, most other consumer goods -- from electronics to clothes or airline tickets -- would be far more expensive. Indeed, the insistence on bread and milk harks backs to a bygone age that in no way corresponds to today's realities. Milk today is a staple only for families with young children, while the breadwinner today is more likely to feed his family on takeaways than the humble loaf.

There are some things for which we should look to the government: most obviously price fixing and monopolies, which it has a duty to monitor and eradicate, but also indirect factors, such as the poor state of public health care and education -- both of which are costing the average family far more than bread and milk by forcing them to spend vast amounts on private lessons and health insurance.

But apart from that it's down to us as consumers to call the shots and change market conditions through our behaviour. Tourists, far more savvy in this respect than us, are already voting with their feet, sending in their verdict on the island by booking in to cheaper destinations that offer greater value for money. Why are we not doing the same? Time and again, commerce ministry surveys mark out Athienitis supermarket in Nicosia as significantly cheaper than its rivals, yet shoppers continue to flock to the more expensive stores. Presumably, they are willing to pay a premium for the more upmarket environment, just as they seem willing to pay a (quite phenomenal) premium for their frappe in whatever trendy cafE[umlaut] is flavour of the month.

Yes, the cost of living has risen, but it is our lifestyle choices and our herd-like mentality that is what is really costing us. It's not the extra ten or twenty cents on a litre of milk that's making the difference for most of us, but the cost of the takeaway and the frappe -- not to mention the Gucci bag that so many cannot live without. And for as long as we continue to pay, you cannot blame the retailers for keeping prices high.

Copyright Cyprus Mail 2009

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