Spain approves $17.8B plan to ease economic blow of Ukraine war

OVIEDO, Spain

The Spanish Cabinet approved on Tuesday a €16 billion ($17.8 billion) economic package to mitigate the impacts of the Russian war in Ukraine and tame soaring inflation.

“The unjustified attack has brought a war to Europe’s doorstep and it is already having economic and social effects – the flow of refugees, spikes in energy and commodity prices, and the disruption of supply chains,” said Economy Minister Nadia Calvino.

The soaring fuel prices have already led to a crippling transport strike in Spain, which is losing participants but continues into its third week.

The fishing sector had also halted activity due to gas prices and delivery issues, while several major factories were forced to pause production.

To dampen the knock-on effects of high fuel prices, a key pillar of the government’s package is to reduce the price of gasoline and diesel for everyone by at least €0.20 per liter (around $0.80 per gallon).

The measure will take effect on April 1 and remain until at least June 30.

Affected companies will also be offered hundreds of millions in direct aid and a new €10 billion line of credit to cover liquidity needs. Any of the companies being assisted by the government, however, will be prohibited from firing employees due to high energy prices.

For the first time ever, Spain will also introduce a temporary limitation on rent increases. For the next three months, most landlords will not be able to hike rents by more than 2%.

Meanwhile, welfare payments will be expanded to another 600,000 people and increase by 15% to help the most vulnerable residents of society cope with inflation that has hit 30-year highs.

Boosting energy security and reducing price volatility are other key pillars of Spain’s latest recovery plan. That is why the government announced accelerating investments in green energy and energy efficiency, and changing certain regulations for green energy producers.

Last week’s European Commission meeting also gave Spain and Portugal the green light to put price caps on electricity prices. That price cap still has not been announced because Portugal is in the process of swearing in a new government this week.