Government measures do not prevent inflation from exceeding 10%

The government claims it has taken measures of around 15,000m euros, which is just over a point in GDP, to halt the progress of inflation and offset its effects on families and the most vulnerable sectors. However, the adoption of such measures did not prevent the inflation rate from exceeding the double-digit ceiling in June, reaching 10.2%, contradicting forecasts made by the Vice President a few weeks ago. Nadia Calvino, He said he was confident that the rise in prices had peaked when it hit 9.8% in March. Inflation reached its highest level in June.

Obviously, without the aid of 20 cents per liter of fuel, without fuel reduction. VAT on electricity (from 21% to 10% from June 2021 and to 5% from 1st July next), two special taxes on electricity and without it cap price gas If it is used in electricity generation, the inflation rate will be higher. For example, INE forecasts inflation to be almost one percentage point higher without the tax cut (May inflation figure rises to 9.6% from 8.7%) on flat taxes).

In his statements to the Ser channel, the Head of Government stated that the increase in CPI “shows”. seriousness of the situation The “appropriateness” of measures put in place by the Executive to reduce the impact of prices on citizens’ pockets, and the need to reform the European electricity market. Measures already adopted – and other measures announced last Saturday, for example discounts of up to 50% transportation card– According to the Prime Minister on Saturday, they will be able to raise up to 3.5 percentage points from an inflation rate that would have been around 14% or 15% without them. It is also worth asking that the 15,000 million Euros that the state will inject into the economy (in aid and tax cuts) will not result in fueling the fire through more consumption and feeding back the inflation phenomenon.

The interviewed experts find the 3.5-point inflation decline attributed to the government’s measures excessive. “I don’t think it will be very far from that,” he says. Maria Jesus Fernández, senior economist at Funcas. For him, measures against inflation “they are patches Although he admitted that nothing more could be done: “It is not in the hands of the government to stop an inflationary process when the cause is not national”.

When inflation comes from outside and is so significant and pervasive, “there is little that governments can do” to stop it, he agrees to point out: Rafael Domenech, Head of Economic Analysis at BBVA Research. This study service calculates between five and six tenths of the lowest inflation that can support capping gas prices in electricity generation. VAT deduction Increasing electricity from 10% to 5% could add another three-tenths. “If there is anything that can be done, it is to try to avoid the effects of the runoff or take measures in favor of the most vulnerable groups,” he adds.

In the first four months of the year alone, Spain’s energy bill abroad increased by more than 16,000 million year-on-year. “This is impoverishment for any economy that is dependent on outside resources,” he explains. Joseph Emilio BoscoProfessor and Fedea researcher at the University of Valencia. The only thing that can be done is to accept that the whole country is impoverished and see how we distribute it,” he adds. In his view, an income agreement to avoid runoff effects involving the State and retirees in addition to companies and workers is the only effective measure to curb inflation. “Everything has a reason pensions Bosca adds that, in line with the Bank of Spain’s view, it has to rise with the CPI right now.”

Doménech thinks that if runoff phenomena are avoided, the period of hyperinflation will begin to decline after a year. If the spiral of prices and wages is triggered, the rise in the price level will continue for much longer.

“Injecting one percentage point of GDP into the economy represents a very important stimulus and will have an impact on activity,” he comments. Joseph Emilio Bosco. However, he adds, “in a context where purchasing power has deteriorated so much, size is not significant enough to add an inflationary effect.” Maria Jesus Fernández. “Aid focused on the most vulnerable groups is welcome. They can help prevent larger social conflicts with very limited effects on inflation,” he adds. domenech.

“The problem is that some measures are very poorly focused,” says Fernández. In this sense, the three economists 20 cents per liter Generalized fuel price for all consumers, effective from 1 April and extended until 31 December. This is one of the most expensive measures taken by the government. For the second period alone, a budget impact of 4.038 million is estimated, which will benefit any consumer regardless of their income level or origin (including tourists).

“If the price of fuel is reduced by 20 cents, its consumption is encouraged and the budgetary cost of the measure rises,” explains Doménech. vicious circle where this kind of precaution gets stuck. Yet another example: “The gas price is capped, the electricity price falls, this encourages demand to rise, as a result more combined cycle power generation is needed, and as a result, the bill goes up.”

However, there is agreement that the measures are on com.or 15 percent increase minimum vital income or non-contributory pensions, 200 euro check For workers or retirees from families with incomes below 14,000 euros, they can be used to help overcome the rising price pit without adding excess fuel to the inflation fever.

The methodology used by the INE to calculate the evolution of prices, European Statistical Code of Practiceis certified by Eurostat and complies with European Union regulations. However, INE itself has been working with companies in the electricity sector for months to factor free market prices into their CPI calculations, which cover about 70% of families (around 70%). From invoices in settlements caixabank, In January, the research service estimated that 2021 inflation would close the year at 4.7% (rather than the official 6.5%) if liberalized market calculations were taken into account. The INE has flatly rejected such an estimate, but what is clear to the economists consulted is that: “there is an upward trend” Inflation as a result of this factor.

“If there is an additional point of inflation, it can condition the increase in pensions,” says Bosca. this Independent Authority for Financial Responsibility (Airef) estimates that each inflation point requires a higher expenditure on 1,500 million pensions. If they manage to avoid 3.5 percentage points of inflation as the government wants, savings could rise to 5,250 million. This is one of the goals that the executive seeks.

Source: Informacion

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