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EU Reports Sharp Rise of Inflation Rate

The European Union announced a sharp hike in inflation this year largely due to rising oil and food prices. The high costs are being felt around the 27-member bloc. Lisa Bryant reports from Paris the French government has announced a new plan to tackle rising costs.

European Economic Commissioner Joaquin Almunia announced the new 2008 inflation predictions in Brussels, revising previous predictions upwards from 2.6 percent.

"The biggest changes in our forecast when we compare these figures with the previous ones regards inflation for 2008 for well-known reasons - oil price increases, commodity price increases, food price increases," said Joaquin Almunia. "Inflation is going up to 3.6 percent in the EU - 3.2 percent in the euro area. But prices we hope will start to decelerate in the second quarter of this year."

The high price of oil and food is being felt around the world, and has sparked rioting in some developing countries. But even in richer countries like France, consumers are grumbling about costs.

That includes LIla Grimaud, a mother of three, who lives in the Paris suburb of Ablon-sur-Seine.

Grimaud believes prices actually started rising several years ago, when the euro replaced the French franc. She says the high price of gasoline makes it difficult to use the car, and her family now buys discount brands at the supermarket because they are cheaper.

But 70-year-old Georges Guedj is not so concerned.

Guedj says he relies on himself. He does not drive - he walks to places and therefore does not have to pay for gas. He says he also eats very simply - and foods that are relatively inexpensive, like bread and eggs.

France's conservative government unveiled a new plan to tackle rising prices in the shops through more competition - including encouraging more large supermarkets to be built. French President Nicolas Sarkozy has also pushed the European Union to put more emphasis on its agricultural production, to guarantee food security at home.