Paella Costs More to Cook in Spain Even After Food Tax Cut

(Bloomberg) -- Spaniards paid more to cook their beloved paella in January as the price of rice, oil and seafood continued to climb strongly even after the government slashed taxes on food staples.

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Bloomberg’s monthly Paella Index, which crunches data from Spain’s National Statistics Institute, shows that the ingredients for the Mediterranean meal cost 15.6% more than they did a year ago. Rice shot up nearly 20%, while olive oil surged 30.5%.

The higher cost of making paella, which locals usually enjoy on weekends with friends or at family gatherings, highlights a food-price problem that has gripped the euro area’s fourth-biggest economy even as overall inflation remains below that of the wider currency bloc.

Data published on Wednesday by the INE statistics institute showed food and beverage prices rose 15.4% in Spain last month from a year earlier, slightly slower than in December but still more than twice as fast as headline inflation, which ticked up to 5.9%.

That’s even after Prime Minister Pedro Sanchez, who is widely expected to run for reelection later this year, lowered value-added tax on several products in January to try to quell growing discontent over surging costs. He cut VAT by half to 5% on oils and pasta, and removed it altogether on items ranging from vegetables and cereals to fruit and bread.

The overall pickup in prices in January, which ended a five-month easing streak, shows the difficulties Sanchez faces keeping a lid on inflation, which has hurt him in opinion polls where he trails behind the center-right Popular Party.

Inflation has become almost as contentious an issue as the true definition of paella. Believed to originate in the coastal town of Valencia, the traditional recipe consists of chicken, rabbit and green beans. A variation containing seafood and other vegetables and legumes has become world-famous as a trademark Spanish dish.

--With assistance from Jogi Sidhu and Garrett Keyes.

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