Understanding Price Levels Across the EU: A Snapshot of Economic Diversity

Price levels across the European Union (EU) exhibit significant variation, with the highest prices being 2.4 times those of the lowest. These differences are influenced by factors such as tax rates and labour costs. To help compare these variations, Price Level Indices (PLIs) measure and compare the costs of goods and services between countries.

What Are Price Level Indices (PLIs)?

PLIs indicate how much more or less expensive goods and services are in one country compared to another or to the EU average. The overall indicator used is the household final consumption expenditure, reflecting the total spending of resident households on goods and services.

High and Low Price Levels in the EU

According to Eurostat, the EU’s official statistical office, price levels for household final consumption expenditure varied widely across the EU in 2023. Denmark had the highest price levels at 143% of the EU average, followed closely by Ireland at 142% and Luxembourg at 135%. On the other hand, Bulgaria and Romania had the lowest price levels, both at 60%, with Poland at 66%.

To put this into perspective, a basket of identical goods and services costing €143 in Denmark would cost €135 in Luxembourg, €66 in Poland, and €60 in Bulgaria and Romania. Thus, Denmark is more than twice as expensive as Bulgaria for the same basket of goods and services.

The Broader European Landscape

When including countries in the European Free Trade Association (EFTA) and EU candidate countries, Switzerland topped the list with a price level of 174% of the EU average, followed by Iceland at 156%. Turkey had the lowest price level at 42%, followed by North Macedonia at 52% and Bosnia and Herzegovina at 58%.

Moving markets

Key Categories with Significant Price Variations

Alcohol and Tobacco

The EU observed the widest price gap in alcohol and tobacco in 2023, with a price level variation of 3.2 times. The most expensive country, at 211% of the EU average, contrasted sharply with the least expensive at 66%. This variation is primarily due to tax differences.

Restaurants and Hotels

Restaurants and hotels had the second-largest price difference, with prices in the most expensive countries nearly three times those in the least expensive. Bulgaria had the lowest prices at 52% of the EU average, while Denmark had the highest at 152%. Labour costs and local economic conditions primarily account for these differences, not taxes.

Clothing

Clothing exhibited a 1.6 times difference between the cheapest and most expensive countries. Spain, Bulgaria, and Hungary had the lowest prices, while Denmark, Czechia, and Estonia had the highest. Turkey stood out, with prices atonly 30% of the EU average.

Other Notable Variations

  • Food and Non-Alcoholic Beverages: Prices ranged from 74% of the EU average in Romania to 119% in Luxembourg.
  • Personal Transport Equipment: Prices varied from 90% in Slovakia to 129% in Denmark.
  • Consumer Electronics: Prices ranged from 92% in Italy to 113% in France.

Conclusion

The significant price differences across Europe highlight the region’s diverse economic landscape. While some countries, like Denmark and Switzerland, are much more expensive, others, like Bulgaria and Turkey, offer a more affordable cost of living. Various factors such as taxation, labour costs, and local economic conditions contribute to these differences, thereby making the EU a region of great economic diversity.

Understanding these variations through PLIs enables consumers and policymakers to make informed decisions about spending and economic planning, ensuring a comprehensive view of Europe’s economic landscape.

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