Spain Extends Measures Put in Place to Ease Inflation Hit

Macarena Muñoz
·2 min read
1
  • Oops!
    Something went wrong.
    Please try again later.

(Bloomberg) -- Spain extended some measures including lower tax on food that the government had put in place to shield households from a surge in living costs, even as inflation eased last month.

Most Read from Bloomberg

The value-added tax rate on certain basic food products will remain at 0% for the first six months of 2024, Prime Minister Pedro Sanchez said at a press conference in Madrid on Wednesday.

Meanwhile, taxes on windfall profits of banks and energy firms will be extended for one year. The tax applied to energy companies will be modified so that strategic investments in certain projects can be deducted, Sanchez said.

Spanish inflation unexpectedly eased to 3.3% in November, retreating for the first time since June thanks to drops in the costs of fuel and tourism. It’s forecast to stay that level this month, with data due Friday.

Inflation will reach the European Central Bank’s 2% target in 2025 in three of the region’s four biggest economies, including Spain. Projections released earlier this month by the central banks of France, Italy and Spain show consumer-price growth is seen converging toward or even dipping below the goal in those countries, which together account for almost half the region’s output.

Spain’s government first put in place an array of household-support policies after Russia’s invasion of Ukraine in February 2022 sent consumer prices surging. Premier Sanchez, who won reelection earlier this year, now has to announce a new economy minister to replace Nadia Calvino, who’s departing to run the European Investment Bank.

Other decisions taken by Spain’s cabinet on Wednesday include:

  • Gradual removal of tax breaks on electricity and gas during the next six months.

  • A ban on bank commissions when elderly people withdraw cash at branches.

  • Extending a ban on home evictions for those in need.

--With assistance from Zoe Schneeweiss.

(Updates with detail on change to windfall tax on energy firms in third paragraph.)

Most Read from Bloomberg Businessweek

©2023 Bloomberg L.P.