Spanish premier announces fresh $10.6 billion aid package to fight inflation

OVIEDO, Spain

Spanish Prime Minister Pedro Sanchez on Tuesday announced a fresh €10 billion ($10.65 billion) aid package to fight inflation.

The new measures come on top of €35 billion in aid that Spain has already passed since the war in Ukraine broke out in February.

The new package extends some of the measures previously passed, like free short-distance train travel, but scraps other popular measures like a €0.20 subsidiary per liter of gas.

Other measures that are being extended include tax decreases on the price of electricity and gas, freezing evictions or utility cuts for vulnerable households, and limiting rent increases to 2% per year.

It also responds to the shifting reality of inflation in Spain, where food prices are spiking faster than other consumer products.

To fight food inflation, Sanchez announced that taxes on basic food products will be eliminated, tax on olive oil and pasta will be reduced from 10% to 5%, and 4.2 million working-class households will receive €200 in direct aid to cope with higher grocery costs.

Meanwhile, Spain is making new subsidies available for farmers to deal with rising costs. In exchange, however, they will have to commit to lowering prices.

New lines of help are also being opened for energy-intensive businesses like ceramic manufacturers.

Prior to announcing the new measures, Sanchez highlighted that inflation in Spain in November fell to 6.8%, the lowest rate in the EU. In November, the eurozone average was 10%.

Explaining the drop in inflation, Sanchez pointed to the five previous inflation packages and other measures, including the Iberian price cap on gas.

He said energy in Spain has been an average of 59% cheaper than in Germany in recent months, adding that the price cap has saved Spanish consumers more than €4 billion.

“Ten years ago, Spain was importing rescue plans for banks. Today, Spain is exporting economic solutions to the rest of Europe,” he said, referring to the EU’s recent agreement on an EU-wide price cap on gas.

He also said Spain’s economy will likely surpass expectations and grow by more than 5% for the year. Meanwhile, he said the unemployment rate in Spain has dropped to the lowest level since 2008, 12.7%.

Despite the rosy picture Sanchez painted, Spain’s political scene is not so serene ahead of an election year in 2023.

Spain’s main opposition party, the conservative Popular Party, has slammed Sanchez’s leadership, accusing him of selling Spain to the Catalan separatists in exchange for staying in power.

Last week, Spain passed a criminal code reform eliminating sedition and changing corruption charges in a way that benefits the Catalan politicians involved with the independence process.

Despite that olive branch, Catalan President Pere Aragones on Monday said in 2023 he will prepare a fresh referendum on the region’s independence.