Why Europe’s food prices move in clubs – not as one
Tibor Bareith and Imre Fertő
Divergence in the Single Market
Three decades after the launch of the EU Single Market, it might seem natural to assume that consumers across Europe experience food price inflation in a broadly similar way. Yet the reality is different. In 2024, the price of a basic food basket was about a quarter above the EU average in Luxembourg but a quarter below in Romania. This divergence is not limited to price levels: the rates at which food prices rise and fall also vary widely. Even within the euro area, where exchange rate fluctuations should not matter, food price inflation shows little sign of following a single, uniform path.
Understanding why this happens is more than an academic question. For households, food inflation directly affects purchasing power. For businesses, it shapes costs and competitiveness. For policymakers, it complicates the design of effective measures to protect consumers and stabilise markets.
Our new research (Bareith & Fertő 2025) examines monthly food price inflation in the EU27 and the UK between 2005 and 2024. Using methods that identify both structural breaks and patterns of convergence, we uncover a striking reality: Europe does not have one inflation trajectory but several. Countries cluster into what we call “inflation clubs”—groups whose food price dynamics move together. These clubs evolve over time, especially during crises.
Methods and Approach
To study inflation convergence, we go beyond simple averages. The analysis uses econometric methods that detect endogenous structural breaks—moments when inflation dynamics change—and then applies a club convergence algorithm that groups countries according to similar long-term behaviour.
This approach has two advantages. First, it accounts for the fact that inflation series are rarely smooth; they are affected by crises, policy changes, and global shocks. Second, it allows us to capture both the divergence between groups and the convergence within groups, which is a more realistic picture of how markets operate in an integrated yet diverse Union.
Five Inflation Clubs in Europe
The results identify five distinct clubs of food price inflation.
- Club 1 groups Germany with many Central and Eastern European countries, including Poland, Romania, and the Baltic states.
- Club 2 includes Spain, the Netherlands, Croatia, and Slovenia.
- Club 3 is made up only of Belgium and Hungary, forming a somewhat unusual pairing.
- Club 4 brings together Austria, Denmark, France, Greece, Italy, Luxembourg, Portugal, and the UK.
- Club 5 consists of Cyprus, Finland, and Ireland—peripheral economies with strong import dependence.
The composition of these clubs is not stable. Countries can move between clubs, particularly around periods of economic turmoil. This dynamic pattern reveals that integration has not erased national specificities; rather, it has created a system where groups of countries share vulnerabilities but diverge from others.
Crises as Turning Points
The evolution of club membership is closely tied to crises. Our analysis highlights several key moments.
The 2007–08 global financial crisis created the first major rupture, amplifying divergence as countries reacted differently to collapsing demand and rising food import prices. The eurozone sovereign debt crisis of 2010–12 reinforced this divergence, particularly between northern and southern Europe.
The 2013–14 period marked a relative adjustment, as inflation pressures subsided and convergence temporarily increased. But new shocks soon arrived. The 2018 surge in energy prices and global trade tensions again divided clubs, while the COVID-19 pandemic and the 2021–22 energy and fertiliser price shocks produced the most dramatic divergence in decades.
Each of these moments shows that integration does not insulate Europe from fragmentation. On the contrary, crises often expose and intensify the underlying structural differences in supply chains, taxation, and market institutions.
Adjustment Speeds and Persistence
The clubs not only differ in composition but also in how they adjust to shocks. Clubs 1, 4, and 5 tend to revert relatively quickly to their previous paths, with half of the adjustment occurring within a few weeks. By contrast, Clubs 2 and 3 exhibit much more persistence. In these groups, food price shocks linger longer, and in some cases the dynamics are even explosive, meaning that inflationary pressures intensify rather than fade.
This matters greatly for consumers. A family in Germany or France may see food prices stabilise relatively quickly after a crisis, while households in Hungary or Belgium experience a much longer period of high inflation. For policymakers, this persistence is particularly challenging because it reduces the effectiveness of short-term measures.
Why Do These Differences Persist?
Several factors explain the persistence of heterogeneity. Differences in value-added tax rates on food, which vary widely across member states, are one important source. The structure of retail markets also matters: highly concentrated sectors can pass on cost increases more quickly, while competitive markets may buffer them.
Supply chains play a further role. Countries that are more dependent on imports, particularly of energy and fertilisers, are more exposed to global shocks. Geographical position matters too: peripheral economies such as Cyprus, Finland, and Ireland face higher transport costs and limited opportunities for diversification. Finally, policy responses themselves differ. Some governments intervene aggressively with price caps or subsidies, while others rely on market adjustments.
Policy Implications
The findings carry a clear policy message: one-size-fits-all policies cannot effectively manage food inflation in the EU. Instead, strategies need to reflect the specific vulnerabilities of each club.
For countries in the persistent-inflation clubs, strengthening supply-chain resilience, improving retail competition, and aligning indirect tax regimes could help reduce vulnerability. For peripheral economies, lowering transport costs and diversifying import sources should be priorities. More broadly, EU-wide measures such as harmonising VAT rules, standardising packaging, and improving cross-border logistics could help to narrow the gaps between clubs.
At the same time, policymakers should recognise that complete convergence is unlikely. National institutions, economic structures, and political preferences will continue to shape inflation paths. The challenge is not to eliminate diversity but to ensure that it does not translate into persistent inequality for consumers.
Implications for Consumers and Businesses
For consumers, the message is sobering: food price inflation will remain highly uneven across Europe. Shoppers in some countries can expect faster relief after crises, while others will face prolonged pressure on household budgets. For businesses, especially in agribusiness and retail, recognising the club structure is essential for pricing and procurement strategies. Treating Europe as a single inflation environment risks underestimating costs or misjudging demand.
Conclusion: Integration with Divergence
European integration has transformed food markets by lowering barriers, harmonising standards, and facilitating trade. Yet when it comes to food prices at the checkout, differences persist and re-emerge in times of crisis. Our research shows that instead of one European inflation path, there are several, and these paths evolve in response to shocks.
Recognising this heterogeneity is essential for effective policy. The Single Market may be a legal reality, but economically, consumers still live in different inflation environments. Addressing this gap requires policies that are both targeted and flexible, capable of protecting households without assuming that one solution will fit all.
Reference
Bareith, T. and I. Fertő (2025), Heterogeneity in Food Price Inflation Convergence Across the EU: Evidence from Club Dynamics and Structural Breaks, Agribusiness, 2025; 1–12
