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July 9, 2022, 3:39 p.m. EDT

The sum also rises: Hemingway enthusiasts and other tourists in Spain encounter an inflation rate significantly higher than the U.S.’s

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By Barbara Kollmeyer

It’s an early summer afternoon in Madrid, and the world’s oldest restaurant is abuzz with a cacophony of tourist and local voices, knives and forks, bottles and glasses.

But just as the famed Restaurante Botín sees business returning to normal after the Spanish capital’s pandemic lockdowns, it has another challenge to overcome: soaring inflation. Retail prices in the Iberian nation surged 10.2% in June — a 37-year high and among the loftiest inflation rates in the euro area.

Economic Report: U.S. inflation is starting to cool, this Fed-preferred price gauge signals

The costs of keeping the lights on and diners cool at the 300-year-old establishment have been a strain, reported co-owner and manager Antonio González, who estimated his electricity bill is roughly 70% higher than it was just a year ago. Yet he has only passed 2% of that on to customers.

“We can’t raise prices more, probably, because we survive by our clients and you can’t tell them, ‘Listen, prices are going up 10% because my costs are up that much.’ People won’t understand,” González told MarketWatch in an interview last week.

Spot electricity prices in Spain averaged $162.26 per megawatt-hour between June 4 and July 4, lower than Germany’s $236.41, but more than twice the U.S.’s $72.75 during that same period, according to International Energy Agency data. Behind the doubling and even tripling of prices at times over the past year has been Russia’s invasion of Ukraine and the resulting disruption of global commodity markets.

Read: Euro to slide to parity against the U.S. dollar unless natural-gas situation improves, Citi strategists warn

Resting at the foot of Plaza Mayor, Botín is directly in the path of some of the city’s heaviest tourist foot traffic. That fact helps keep the restaurant’s four available floors occupied, including the famous cavernous chamber and the 16th-century wine cellar, reached by a tiny staircase. The eatery, purchased by González’s grandparents in 1930, has, along with its location, two further bits of good fortune in its favor, according to their grandson: Hemingway and history.

“We lunched upstairs at Botín’s. It is one of the best restaurants in the world,” wrote Ernest Hemingway in the 1926 novel “The Sun Also Rises,” of the eatery famed for its roast suckling pig and lamb dishes. In 1987, Botín earned a spot in the Guinness Book of World Records as the world’s oldest restaurant.

Near the medieval Plaza de la Villa, not far from Botín, a pair of American travelers were working up an appetite to dine at the restaurant, which was on their checklist of Hemingway haunts to visit. While they weren’t likely to notice a slightly pricier menu, Danielle Walsh, 35, and her spouse, Jessica Schilling, 29, had seen plenty of inflation elsewhere.

The Boston couple told MarketWatch that their two-week tour of Spain kicked off with a ticket to Portugal, purchased in February, before war broke out on European soil.

“We actually chose going to Porto because the flights coming to Spain were more expensive,” said Schilling. They then hopped a plane over to Seville, observing that “smaller flights have been really expensive,” and drove to Granada, up to Barcelona and then back down to Madrid.

The couple spoke of their surprise at paying €3, or $3.13, for a bottle of water in Barcelona, while a meal in the Catalán capital was never under €40 or €45 (approximately $41 to$46), even if one could dine for €10 ($10.30) in Granada.

But their biggest shock came from a visit to a Spanish gas station. “It was so high,” Walsh said of the pump price. “We had a Mini. We used half a tank going from Sevilla to Granada and we had to fill it to return [the rental car], and filling half a tank on a Mini, which I can’t imagine is that big, was €45,” she said.

They said buying a half-tank of gasoline for their small SUV back home would have cost half as much, even as they acknowledged that gasoline prices have been rising in the U.S., too. Indeed, average gasoline prices per liter in Spain averaged $2.47 in June, versus $1.44 a year ago, according to GlobalPetrolPrices.com . In the U.S., the price was $1.355 in June, and $0.904 in that year ago.

From the archives (March 2022): Russia’s invasion of Ukraine is adding to inflationary pressures and ‘unsettling’ the stock market, in this strategist’s view

Fury over high gasoline prices in Spain provoked a crippling 20-day strike by truckers in March, and the government recently laid out a €9.5 billion package to help cushion Spaniards, comprising a 20-cent discount on a liter of fuel that’s been extended to the end of the year, reduced taxes on power bills, and direct government relief checks for poorer families.

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