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. Last Updated: 07/27/2016

Prices Soar for EU's New East European Members

BRUSSELS -- When Latvians join film fans across Europe flocking to see King Kong, they need only pay for the ticket to feel inflation squeezing their paychecks tighter than the giant ape's handshake.

At 3.30 lats (4.70 euros, or $5.70), the entry into a Riga multiplex is cheaper than the average 8 euros ($9.70) paid by cinema-goers in other European Union capitals.

But since Latvians earn about half the average EU wage, a monster night at the movies costs them more in relative terms. Ticket prices have more than doubled in the last few years.

Latvia has seen prices rise by 9.8 percent since it joined the European Union in May 2004. A natural consequence, some say, of the economic boom since its market opened to EU trade and investment.

Other new EU members have seen a less dramatic impact. Prices in Poland have risen by just 2.6 percent.

Latvia, one of Europe's fastest-growing economies, is still the EU's poorest country.

The country's central bank expects 2005 economic growth will have outperformed its current forecast of 9.3 percent -- far outpacing the EU estimate of 1.5 percent for all 25 nations.

But on the flip side, the Bank of Latvia said average inflation for the year would be 6.7 percent, compared with a cooler estimate of 2.3 percent for the entire EU.

The sudden price increases were caused by Latvia's delayed decision to peg its national currency to the euro in January 2005, according to Morten Hansen, an economics professor at the Stockholm School of Economics in Riga.

He said the euro gained 20 percent in value in the two years beforehand, leading to a 20 percent increase in the cost of importing goods into Latvia from elsewhere in Europe.

"The sources of inflation could be many things -- overheating economies, people having more money to spend, high growth and higher wages -- but we can see these trends throughout the Baltics," he said.

In neighboring Estonia, where prices have risen by 5 percent since it joined the EU, tourism has pushed up the price of restaurants and taxis in the capital, Tallinn. In rural areas, prices drop substantially -- by some 20 to 50 percent in some cases.

Joining the EU has not meant higher prices for all the new members. In Hungary, the cost of food has fallen since EU membership has allowed in cheap imports from Slovakia. A kilogram of pork leg now costs 923 forints ($4.45), less than the 985 forints ($4.75) a year earlier.

Average inflation in Hungary has increased 3.6 percent since the EU enlargement. Macroeconomic analyst Peter Duronelly said inflation was running at 7 percent for the first nine months of 2004 and that it had fallen to 3.7 percent for the first nine months of 2005.