Supermarket grocery prices in the neighbouring regions are compared every few years in a survey by the government’s Price Formation Observatory. In a report released in September (in French) they found that on average prices last autumn in Wallonia, Belgium were 2.2% more expensive but 4.8% cheaper in Lorraine, France and 9.9% cheaper in the German regions home to Trier and Saarbrücken.

The survey looked at goods including food, drink, household liquids and personal hygiene in 21 medium to large supermarkets. The foreign shops were all 30-50km from the border, and where possible prices were taken in supermarkets that trade in several countries.

These results should be used with some caution though. German law prevents in-store surveys, so only the prices paid at the till can be used. This compares to the shelf prices taken in the other three countries. These prices tend to be higher. Also, the survey uses average of prices for identical items found either side of the border. This requirement meant that certain areas of grocery spending were not sufficiently taken into account.

A different approach to this question was taken by the Swiss bank UBS in its 2012 report “Prices and Earnings”.

It compared the prices of 122 broadly similar goods and services representing everything that people buy including food, motoring, housing, electrical goods and so on. UBS did this in 72 business capitals, finding that Luxembourg was roughly 10% more expensive than Paris and Frankfurt and 20% more pricey than Brussels.

Purchasing power

Things look better, though, when looking at spending power. UBS worked out how much stuff can be bought given average annual income. Luxembourg came third out of the 72 towns in the survey, with 25% more spending power than Paris and Brussels and 12% more than those living and working in Frankfurt.

Put another way, you only had to work 11 minutes to earn enough to buy a Big Mac in Luxembourg.

In Paris and Frankfurt, they needed to work five minutes more to pay for the McDonald’s signature dish.

Why is Luxembourg more expensive? The Price Formation Observatory pointed to differences in taxes, regulations and salaries. A major factor is that German and French supermarket groups are part of big, efficient distribution networks. Despite the EU single market, Belgium and Luxembourg are frequently excluded.

Also suppliers and producers often charge higher wholesale prices to Luxembourg shops. As well, competition is tough in Germany, where “hard discount” shops like Lidl and Aldi account for over 40% of market share. This forces the more up-market supermarkets to react.