The Government of Spain has approved the new measures to alleviate inflation and protect the most vulnerable groups

Moncloa Palace, Madrid

The Council of Ministers has agreed a Royal Decree-Law that includes new measures to respond to the economic consequences of the war in Ukraine and extends others already adopted in March and June.

During his appearance at the press conference following the meeting of the Executive, where he also presented the "Cumpliendo" report, the President of the Government of Spain, Pedro Sánchez, stressed that all the initiatives are part of the current context of inflation and are aimed at protecting the most vulnerable groups.

The president recalled that the Executive is committed to allocating the necessary resources to protect the social majority of the country in any scenario, as it did during the pandemic or with the eruption of the volcano on the island of La Palma. The response involves 45 billion euros to protect the middle class and workers from the rising cost of living, energy and food.

Sánchez stressed that electricity and gas tax cuts will be extended, and evictions against vulnerable households will be suspended. In addition, the 2% limit on the annual update of rental contracts is extended until 31 December 2023 and a six-month extension is introduced for leases expiring before 30 June.

New measures in line with economic developments

In order to alleviate the rise in agri-food products, the president announced that VAT will be reduced from 4% to 0% for all staple foods, and from 10% to 5% for olive and seed oils and pasta.

On the other hand, families with an income of up to 27,000 euros will receive 200 euros to reduce situations of economic vulnerability that are not covered by other social benefits.

Pedro Sánchez has also advanced that a line of direct aid of 660 million euros will be established for farmers to offset the increase in the price of fertilisers and agricultural and fishing diesel.

"As we did with energy and fuel subsidies, the Government is going to ensure that VAT reductions and aid to farmers are directly and immediately passed on in food prices", the president said.

Fuel subsidies and public transport subsidies

The President of the Government of Spain, Pedro Sánchez, during his speech at the press conference after the meeting of the Council of Ministers | Pool Moncloa/Fernando Calvo

The Executive has also approved fuel subsidies for the sectors most affected by the rise in fuel prices, such as hauliers, farmers, shipping companies and fishers. The general subsidy of 20 cents per litre of fuel adopted in March will end.

The president stressed that the Government will maintain the direct aids to cover the 30% reduction for urban and interurban public transport in those territories where the regional governments and local bodies complement up to 50% of the price reduction.

This measure is in addition to the free travel on Cercanías, Rodalies and conventional Media Distancia trains and state-owned bus lines for regular passengers, as well as the 50% discount on Avant season tickets during 2023.

Pedro Sánchez has maintained that the initiative represents an "unprecedented commitment to boosting public transport and is in line with the objectives of the green transition and the protection of working families".

Support to the gas-intensive industry

The Government has approved direct aid to the sub-sectors of the gas-intensive industry most affected by high gas costs, with the aim of halting job losses, preventing their closure and ensuring their future viability.

The chief Executive reported that, within the new Temporary State Aid Framework approved by the European Union, 450 million euros in aid will be channelled to the ceramics industry and other sub-sectors, as well as 500 million euros for a new liquidity line from the Official Credit Institute adapted to the needs of this sector.

The Council of Ministers also approved the Strategic Project for Recovery and Economic Transformation (PERTE) for industrial decarbonisation, which will have a public investment of 3.1 billion euros.

"We are not only protecting, but also advancing the transformation and modernisation of this important industry", the president remarked.

Improvements in public health care

With the aim of continuing to recruit doctors and strengthen primary care services, the Government has approved the enhanced active retirement, which will allow primary care health professionals, family doctors and paediatricians at retirement age to continue for the next three years to combine 75% of their pension with their service.

Pedro Sánchez has defended that this is a pioneering project that is incorporated into the National Health System and that demonstrates the Executive's commitment to strengthening the system as a whole and, in particular, primary care, the pillar that has been weakened the most in recent years.

Revaluation of 11.8 million pensions

The Council of Ministers has approved a Royal Decree to revalue the pensions of the Social Security system, of Pensioners and of other public benefits for 2023. The increase, effective from 1 January, represents a general increase of 8.5% in the pensions of the Social Security and State Pension System.

With this increase, the increase in the average retirement pension is 107 euros per month or 1,500 euros per year and will stand at 1,367 euros per month. For an average widow's pension, the increase will be 66 euros per month or 930 euros per year. The minimum pension for single-person households is set at 10,963.40 euros per year and 13,526.80 euros per year for those with a dependent spouse.

The Government also agreed today to and extraordinary increase in non-contributory retirement and disability pensions and the Minimum Basic Income (IMV) by 15%,

Pedro Sánchez stressed that "more than 11 million pensions are going to be revalued to guarantee the purchasing power of our elderly".

Management balance sheet

The President of the Government of Spain, Pedro Sánchez, during his speech at the press conference after the Council of Ministers, in which he also presented the "Cumpliendo" Report of December 2022 | Pool Moncloa/Fernando Calvo

Cumpliendo

The President of the Government of Spain, who presented the "Cumpliendo" report on the second half of 2022, has announced that he will propose that this accountability exercise initiated by his Executive be made mandatory through its inclusion in the Law on Transparency, Access to Public Information and Good Governance.

Protection, fair burden sharing and energy sovereignty

Pedro Sánchez explained that the actions of his progressive government throughout the legislature are based on the protection of the middle and working classes and the productive fabric, on fair burden sharing and increasing Spain's energy sovereignty.

Sánchez listed some of these measures, such as the reduction in electricity and gas taxes, the extension of the electrical social voucher, the creation of the tariff of last resort for community boilers, the fuel rebate, free commuter and medium distance travel passes, the reinforcement of grants, the limitation on the rise in rental prices, supplements in the IMV or non-contributory pensions and specific aid to sectors directly affected by the rise in prices such as agriculture, transport or the intensive gas industry.

To achieve a fair distribution of costs and burdens, he continued, taxes have been lowered for the middle class and workers - IRPF for the self-employed, low and medium incomes, corporate tax for SMEs, or VAT on gas and electricity bills and products such as feminine hygiene products - while "an effort has been asked of those who have the most", capital income above 200,000 euros, large financial and energy entities and large fortunes.

The president defended that the new taxes are not anachronistic in the European context, as governments of all colours have implemented them in recent years, and asked the opposition groups that have announced their intention to appeal them to "reflect on their intentions, because these taxes underpin the fiscal justice that forms part of constitutional values".

In this regard, Sánchez highlighted the importance of dialogue and cited the more than 15 agreements reached within the framework of social dialogue as an example, which have led to the reform of the contribution system for self-employed people, the equalisation of working conditions for domestic workers and the strengthening of the Toledo Pact and the revaluation of pensions.

With regard to energy policy, Sánchez has expressed his satisfaction with the results of the so-called Iberian solution which has allowed the average price of electricity in the last six months to be 54% lower than in Germany, 59% lower than in France and 63% lower than in Italy. "This has resulted in savings for the country as a whole of more than 4 billion euros and an estimated average annual saving of 150 euros on each household's electricity bill", he added.

To this measure, the president added other decisions agreed in Brussels, such as the cap on the price of gas imported from Europe, the joint purchase of gas and the acceleration of the expansion of renewable energies: "These are the proposals that even before the war this government has been advocating in Brussels".

Recovery Plan Opportunities

The president stressed that the battles that are being fought in Europe "today are being fought and won", and in addition to the reform of the energy system, he recalled the approval of the European funds for recovery after the pandemic. The Recovery, Transformation and Resilience Plan submitted by Spain as allowed 31 billion euros to already be received and the addendum approved last week will mean an additional 94.3 billion euros in additional loans and transfers.

The aim of the Plan, Sánchez reiterated, is to continue investing in the modernisation, digitalisation and reindustrialisation of the productive fabric, in infrastructures, and in promoting projects and investments in historically neglected provinces, in order to favour territorial cohesion.

Economic growth

Thanks to all the measures implemented and despite the very adverse context during these years of the legislature, Sánchez said, Spain has the lowest inflation in the Eurozone - 6.8% compared to an average of 11.1% - and has employment levels not seen in the last 15 years thanks to the labour reform. The unemployment rate is currently the lowest since 2008 - 12.7% -, there are half a million more people in work than a year ago, 2.3 million more people with stable employment contracts and a decrease in temporary employment among young people of almost 30 points.

Likewise, the data and growth prospects of the Spanish economy are above the average of the Eurozone and advanced economies and, following the latest revision of the INE's National Accounts, "it is very likely that we will end the year with higher than expected growth, exceeding 5% year-on-year growth of Spanish GDP".

"If one thing is clear, it is that, with each crisis, we are more aware that Spain grows in the face of adversity, and will grow even more when the wind blows in our favour", he said.

Presidency of the EU Council in 2023

The president recalled that Spain will assume the Presidency of the Council of the European Union in the second half of 2023. Its priorities, he said, are fully aligned with those of the European Commission: to make Europe a greener, and more social and digital Europe.

Non official translation