The government reports it has mobilized around 15,000 million euros, just over one point of GDP, to curb inflation and cushion its impact on households and the most vulnerable sectors. Yet these measures did not stop the inflation rate from climbing into double digits by June, reaching 10.2%, contrary to forecasts voiced weeks earlier. Nadia Calviño expressed confidence that price growth had peaked when it stood at 9.8% in March, but inflation continued to rise and reached its highest mark in June.
Inflation slips to 10.2%, the highest in 37 years
Without the 20-cent-per-liter fuel discount, without electricity VAT relief from 21% to 10% starting June 2021 and to 5% from July 1, and without additional measures like an electricity cap when gas is used for power generation, inflation would have risen even more. The national statistical office estimates inflation would be nearly one percentage point higher without the tax cuts, noting a May figure rising to 9.6% from 8.7% on flat taxes.
Working poverty rises: 3.5 million workers struggle to make ends meet
In remarks on a national channel, the Prime Minister underscored the seriousness of the CPI surge and defended the government’s interventions to lessen the price burden on households, including steps to reform the European electricity market. Existing measures and recent announcements, such as discounts of up to 50% on transportation passes, are projected to lift inflation by up to 3.5 percentage points compared with a scenario without them. The 15 billion euro package aimed at aiding the economy is intended to support families without triggering further consumption-driven price pressures.
Experts consulted by the program argued that the 3.5-point inflation decline attributed to government action may be overstated. Maria Jesus Fernández, a senior economist at Funcas, described the measures as temporary fixes and added that curbing inflation when the root causes lie abroad remains beyond the government’s reach.
Rafael Domenech, head of Economic Analysis at BBVA Research, noted that inflation imported from outside is difficult to reverse. He suggested that halting runoff effects and shielding the most vulnerable could moderate the impact, while reductions in gas prices and value-added tax on electricity could shave a few tenths of a point from the rate. He warned, however, that the overall effect depends on external price dynamics and the ability to protect households from downstream costs.
Domenech also highlighted the strain on Spain’s energy bills from abroad, which rose sharply in the first four months of the year. Joseph Emilio Bosco, a professor and researcher at the University of Valencia, described the overall decline in living standards as the country becomes more dependent on external resources. He argued that an income policy agreement involving the state, retirees, businesses, and workers could help dampen inflation, and he noted that pensions may need to rise in step with the CPI to reflect price movements.
Domenech emphasized that avoiding runoff effects could help shorten the inflationary period, but warned that a wage-price spiral could prolong trouble. A fellow economist, Maria Jesus Fernández, acknowledged that aid aimed at the most vulnerable sectors is welcome but warned that if measures are poorly targeted, their inflationary impact could be limited or misdirected.
The 20-cent-per-liter fuel discount remains among the most costly government interventions. For the second period alone, the budget impact is projected at over 4 billion euros, benefiting consumers across income groups and including tourists. Domenech argued that lowering fuel prices boosts consumption, which can paradoxically raise the overall energy bill through greater demand for power generation capacity.
There is broad agreement that the measures contain a mix of short-term relief and longer-term risks. Some economists support a minimum income increase or non-contributory pensions, a 200-euro check for workers or retirees from lower-income families, and other targeted supports to cushion the hit from rising prices without fueling excessive inflation.
The methodology used by the national statistics office to track price changes remains aligned with European standards, and it continues to incorporate pricing dynamics from the energy market into CPI calculations, covering a sizable share of households. Analysts note that liberalized market calculations can shift inflation estimates, though these revisions are contested by authorities. What remains clear is an upward trend in inflation driven by external factors, and the question of policy effectiveness continues to spark debate among economists and policymakers alike.
Experts stress that even a single additional inflation point can raise the cost of pensions and social benefits. A study by the Independent Authority for Financial Responsibility estimates that each percentage point of inflation implies higher expenditure on pensions, and trimming inflation by several points could unlock substantial budgetary savings. The government’s aim to curb inflation by a few percentage points relies on carefully targeted measures that support the most vulnerable without stoking further price pressures.
Overall, analysts note that steering inflation hinges on balancing immediate relief with long-term sustainability. If measures manage to blunt the worst effects of price shocks without inflating demand beyond what the economy can sustain, they may contribute to steadier growth and more resilient households — a goal echoed by authorities and researchers across the spectrum.