The VAT on pre-made foods that will go up from 8% to 10% starting September 1 is going to be amplified by increasing ingredient costs. This is a painful combination for consumers who will need to set aside 3,200 euros during the next few months in order to pay newly-approved taxes.
Food sector multinationals like Nestlé blame rising prices on weather problems: the prolonged drought in the United States, unseasonal rain in Brazil and problems in Russia that have ruined multiple harvests. But rising producdtion of ethanol, a chemical compound used for fuel to which 40% of the world's corn harvest is dedicated, is also a factor.
Higher food costs is not only bad news for consumers, but also for governments because they will have to increase their inflation indices just at the moment when unrest over rising prices has become one of the main drivers for improving competition among companies and creating new jobs. Due to the global scope of the problem and the fact that underdeveloped countries are at risk, it's necessary that the G-20 summit takes quick action in order to try and find solutions during their emergency meeting scheduled for September.
But the G-20's recent track record, such as the food crisis of 2008, does not provide much room for hope. Coming up with concrete measures to reduce biofuel production and use GMO crops correctly would be a major step forward and would benefit everyone.
