Staff reporter

FOR the past eight years consumers in the Balearics have had to cope with the second highest rate of inflation in Spain.
On average, between and 1994 and 2002, the annual rate of inflation in the Balearics was 3.6 per cent, three points above the 3.3 per cent national average and second only to La Rioja where average annual inflation was around 3.8 per cent. However, last year, inflation in the Balearics hit 4.5 per cent, the highest in Spain and the sharpest since 1995, double the European Union average of 2.2 per cent. Although inflation has shown signs of slowing down this year, March's rate was just 0.5 per cent, the lowest in Spain and below the national average, for the past 121 months, inflation is still riding at 3.5 per cent. What is more, the strong euro is putting the spotlight on the high cost of living in the Balearics to non-euro zone visitors while making prices much more transparent for euro zone holidaymakers, in particular the Germans. Between 1998 and 2002, prices went up around 16.5 per cent in the Balearics, well over double the 6.8 per cent rate of inflation in Germany and 6.5 per cent in the United Kingdom during the same period. Recently the European Central Bank has warned Ireland about its runaway inflation and that it is becoming the most expensive member of the euro zone: last year inflation hit 4.7 per cent, not much higher than the 4.5 per cent in the Balearics. With runaway inflation and a shrinking economy, local economists have forecast economic growth of just 0.6 per cent for 2003, the same as last year, which has led to uncertainty and a fall in consumer confidence in the Balearics while higher prices have reduced the local business sector's competitiveness, especially in the tourist sector and service industry. Non euro zone holidaymakers, in particular the British, are going to find the Balearics, France and parts of Italy at least 20 per cent more expensive than last year, according to recent financial reports, hence why some people are either giving the euro zone a miss this summer or looking for value for money.

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