Spain is putting together another aid package. It is intended primarily to help low-income earners and pensioners. Among other things, VAT is no longer applicable on some staple foods. Spain recently had the strongest growth in the EU and is facing elections.
The left-wing Spanish government is increasing its inflation aid by a further ten billion euros. The package contains both deletions of previous simplifications and the updating of existing and new aids. In the coming year, about 4.2 million households with an annual income of less than 27,000 euros will be paid a one-time bonus of 200 euros, said Prime Minister Pedro Sanchez. All pensions will be increased by 8.5 percent and particularly low pensions by 15 percent. Elections will be held in Spain next year.
The prime minister also announced that basic foods such as bread, cheese, milk, fruit, vegetables and cereals would no longer be subject to VAT. For pasta and cooking oils, the rate will be halved to five percent. The tax cuts on energy would be extended into the first half of the year.
Sanchez also said commuter train ticket subsidies would remain in place for another 12 months. In order to relieve tenants, apartment rents are frozen for six months for existing contracts. It had previously been decided that rents may only be increased by a maximum of two percent throughout 2023. However, the reduction in the price of petrol for consumers, with the exception of the transport industry, agriculture or fishermen, will be discontinued.
The total amount of inflation support since the beginning of 2022 has thus increased to 45 billion euros. The previous two packages had also included direct aid, tax cuts, soft loans and rent caps. Sanchez said the aid provided so far has contributed to strong economic growth of five percent this year. In 2022 Spain achieved one of the highest growth rates in the EU and will probably be able to avoid a recession in 2023 as well.
Like other countries, Spain is also facing significantly higher costs for electricity, gas and food, for example, which are mainly driven by the Russian war of aggression in Ukraine.
