July 11, 2000

The Irish Hoist Their Glasses to the Battle Against Inflation

By BRIAN LAVERY

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UBLIN, July 10 -- Ireland's booming economy has made it harder for Dubliners to find time to grab a pint at the pub these days, what with so many people working late at the office. But they are still angry over the soaring price of Guinness.

Or so thought the Irish government, evidently, when it took the first concrete steps to slow the country's racing inflation rates last week. It began by temporarily capping the prices of all alcoholic beverages and some soft drinks.

An order from the minister for consumer affairs, Tom Kitt, limits prices to May 15 levels for six months, and covers all drinks sold in pubs and restaurants.

This is not the first time the government has interceded to control the cost of buying a drink in a country where hoisting a few is a celebrated part of life. The government capped alcohol prices temporarily in 1997 and 1983. Neither of those efforts did much to suppress prices, and the latest effort may not work either. But as Ireland wrestles with the highest inflation rate in the 15-nation European Union, the government wants to show that it is at least trying to do something.

Economists called the price cap politically motivated, insufficient and a poor substitute for what many have described as a basic lack of competition in the Irish pub business. The government regulates the number of pub licenses in Ireland, and critics have said that one way to keep drink prices down would be to allow more places to sell them. Legislation to do that is likely to be debated later this year.

Pub owners themselves reacted as though the price controls were a bit of a joke, designed to strengthen the government's low public-approval rating. They also noted that the greatest increase in pub prices this year came before May, so the government decree missed the opportunity to make a difference.

"I think the government copped out," said Brian Smyth, 30, who works in central Dublin at J. J. Smyth's pub, owned by his father. "If the price was over the top, it's still over the top."

The price of a pint, 2.50 Irish pounds, or about $3, is up about 5 percent this year, roughly equal to the inflation rate. Mr. Smyth estimated that the price, left unrestricted, could have increased another 2 percent by the end of the year.

Other pub owners reacted more indignantly. Dick Dunne, a third-generation pub owner and chief executive of the Vintner's Federation of Ireland, a trade group that represents more than 6,000 pub owners, called the price cap "a crude and discriminatory measure." "It removes a publican's control over his or her own business," he added.

With almost 10,000 pubs around the country, the Department of Consumer Affairs will have a tough time enforcing the regulation, even though Mr. Kitt doubled the number of inspectors -- to 24.

There is, however, widespread agreement that drink inflation is a relatively minor cause of Ireland's spiral of rising prices, which at 5.2 percent is triple the average of other European Union members. Michael Crowley, an economist at Davy Stockbrokers, estimated that the price cap would hold down the overall inflation rate by two-tenths of a percent at the most this year.

"The bottom line here is that you can't do a lot to hold down inflation rates," he said. "It wouldn't surprise me at all if we had an inflation rate near 6 percent in late July or early August."

For customers, though, a price freeze on a drink is reason enough to buy one. Patrick Murray, 40, a patron at J. J. Smyth's, said the measure would help maintain pub life as a social fixture. "For where the working people go, it keeps prices down to what they can afford," he said.