Cheapest and Most Expensive European Countries: Cost of Living Guide

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Understanding Price Variations Across Europe

Prices across European countries can vary dramatically, even between neighboring nations like Austria and Hungary or Germany and Poland. This variation raises the question: how do we effectively compare prices throughout the continent? And what are the most expensive and cheapest countries in Europe?

One effective method for comparing price levels is through price level indices. These indices help us understand how expensive or cheap goods and services are in each country by comparing national price levels to the EU average. They are calculated using Purchasing Power Parities (PPPs), which act as an artificial common currency, showing how much people can buy with the same amount of money across different countries.

The data used for these comparisons comes from price surveys covering over 2,000 consumer goods and services across 36 European countries. These surveys provide a comprehensive view of the cost of living in various regions.

Key Indicators for Price Comparisons

There are several price level indices that compare the cost of different goods and services, such as food, drinks, clothing, and hotels. Two main indicators show the overall price level of consumer goods and services:

  1. Actual Individual Consumption (AIC): This measures all goods and services actually consumed by households, including those not directly paid for, such as government-provided health and education services.

  2. Household Final Consumption Expenditure (HFCE): This tracks total spending on individual goods and services by resident households.

In essence, AIC looks at what households use, while HFCE shows what they spend money on. Eurostat often uses AIC for international comparisons because it captures more than just household consumption. The News Pulse has also used AIC figures for its comparisons.

Switzerland and Turkey: A Sharp Contrast

As of 2024, Switzerland is the most expensive country in Europe, with prices at 184% of the EU average — 84% higher than the average. In contrast, Turkey is the cheapest, with prices at 47% of the EU average, meaning they are 53% lower than the average. This makes Switzerland approximately 3.9 times as expensive as Turkey, highlighting the stark differences in price levels across Europe.

A price level above 100 indicates a country is more expensive than the EU average, while below 100 means it is cheaper.

Cheapest and Most Expensive EU Countries

Within the EU, Luxembourg is the most expensive country, with prices 51% higher than the EU average. Bulgaria and Romania are the cheapest members, at 57% of the EU average. This means Luxembourg is about 2.7 times as expensive as Bulgaria and Romania, showing a significant but smaller gap compared to the difference between Switzerland and Turkey.

Ten EU countries have prices above the EU average. Denmark (143%) and Ireland (141%) follow Luxembourg as the most expensive. Among the EU’s four largest economies, Germany (109%) and France (108%) are slightly above average, while Italy (98%) and Spain (91%) are below.

Geographic Patterns in Price Levels

Western and Northern European countries tend to have high price levels. Countries like Switzerland, Iceland, Luxembourg, Denmark, Ireland, Norway, and Finland consistently rank among the most expensive. These are generally high-income countries with strong currencies and higher living costs.

All five Nordic countries — Denmark, Finland, Sweden, Norway, and Iceland — also consistently rank near the top. In contrast, Central and Eastern European countries generally have lower price levels. Romania, Bulgaria, Hungary, Poland, and the Baltic States — Latvia, Lithuania, and Estonia — are all below the EU average. These regions typically record lower labor costs.

Price levels are also lower in EU candidate countries, including Turkey, North Macedonia, Albania, Serbia, and Bosnia and Herzegovina.

Why Are EFTA Countries So Expensive?

Two European Free Trade Association (EFTA) countries — Switzerland and Iceland — ranked first and second in 2024, with Norway in sixth place. According to a 2018 analysis by Lars Svennebye of the EFTA Statistical Office, high workforce productivity and corresponding high salaries were key factors behind the high price levels in EFTA countries.

Factors Contributing to Price Disparities

Filippo Pallotti, a PhD Candidate in Economics at University College London, explained that the most expensive countries to live in tend to be the most productive. Productivity gains in tradable sectors, such as manufacturing and tech, drive up wages economy-wide, even in non-tradable sectors like hairdressing, hospitality, and real estate.

Pallotti noted that hourly labor costs mirror price levels, with around €55 in Luxembourg, €50 in Denmark, and just €11 in Bulgaria. He also highlighted that beyond wages, productivity stems from factors like capital intensity, technology adoption, human capital, institutional quality, infrastructure, and foreign investment.

Earnings Not Included in Price Comparisons

It's important to note that individual or household incomes are not included in price level comparisons. These figures are purely about the cost of goods and services. This means someone living in a high-price country may still be able to afford more if their income is significantly higher.

Price levels vary significantly across different categories. For example, the price level for alcohol and tobacco in the EU was nearly three times higher in Ireland (205%), the most expensive country, than in Bulgaria (69%), the cheapest.

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