Due to persistent inflation in Austria, energy suppliers and food retailers are facing government intervention. The governing coalition of Conservatives and Greens has agreed that profits will be skimmed off earlier and to a greater extent by energy companies if they do not pass on price reductions. "If energy suppliers do not immediately begin to lower prices, then we as a republic will ask them to pay accordingly," said Chancellor Karl Nehammer (ÖVP) after the Council of Ministers on Wednesday.

Michaela Seiser

Business correspondent for Austria and Hungary based in Vienna.

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The profit skimming, which is due to be implemented at the beginning of June, is justified by data according to which wholesale prices fell from more than 500 euros per megawatt hour (MWh) to below 150 euros per MWh last year, while prices for private households more than doubled. This not only heats up inflation, but also tempers, said Vice-Chancellor Werner Kogler (Greens).

30 billion euros taken in hand

Part of the profit skimming in the energy sector is to be made available to states and municipalities. This is intended to persuade them to refrain from raising fees without creating a major budgetary burden. Federal fees will also continue to be frozen. A monthly bill with remotely read smart meters as standard is intended to provide more transparency. The legal reporting obligations of energy suppliers to the regulatory authority E-Control are to be strengthened in order to achieve an improvement in the tariff calculator.

The government is also intervening in the food trade. In the future, the purchase prices of the highly concentrated food trade will be published regularly in a transparency report on the basis of defined foodstuffs. Furthermore, the food trade must announce the quantities of food it will make available to non-profit organizations as donations in kind. It must also be disclosed how much food has been destroyed.

So far, the government has relied mainly on one-off payments and grants. A total of around 30 billion euros, or almost a tenth of the annual gross domestic product, was invested. In many cases, this has been done according to the watering can principle, as economists criticize.

It is unclear to what extent these steps will put a stop to inflation. In Austria, inflation is higher and more persistent than in the euro area and Germany. According to a flash estimate by the counting authority Eurostat, the inflation rate was 9.6 percent in April. In March, it was still at 9.2 percent. Consumer prices rose by 7.0 percent in the eurozone in April and by 7.6 percent in Germany.