Two anti-crisis packages approved by the government to limit the economic impact of the Ukrainian conflict have positioned Spain as a country with strong inflation control in the eurozone, holding steady around 6.8 percent per year according to Eurostat. The numbers contrast with higher pressures in Italy, Lithuania, and the Netherlands or Germany. Yet the aid measures have not halted the steady rise in food costs: in November, and in Galicia specifically, the overall shopping basket rose at roughly three times the headline CPI, about 15 percent. Brussels ordering the government to curb aid starting January further sharpens the sense that cabinet plans will be more surgical than blanket. General subsidies, such as fuel oil, have begun to wind down.
Among the options on the table there is also a value-added tax VAT reduction on some food products. This move, proposed by Aecoc, the association of manufacturers and distributors, has sparked debate about whether firms are using the moment to widen margins and raise prices beyond rising costs. Today there are three VAT rates on groceries: the general rate of 21 percent applied to items like sugary drinks and alcohol; the reduced rate of 10 percent for essential goods such as bread, milk, flour, fruit, and pulses; and a super-reduced rate of 4 percent for other essentials.
Fish products are not included, according to associations such as the National Federation of Fresh and Frozen Fish Retailers, Vigo Shipowners’ Cooperative, and Conxemar. Minister Luis Planas previously ruled out a VAT cut in an interview with Faro last October, though the option has reemerged in discussions within the economics and finance ministries. Prices in November compared with 2021 show sharp gains in items like sugar 50.2 percent, oils 31.5 percent, milk 30.9 percent, eggs 27.1 percent, and cereals 22 percent (with some figures indicating a smaller rise in certain subcategories).
In addition to the VAT cut discussion, Ione Belarra of Podemos recently stated that negotiations with the PSOE were continuing regarding the extension of anti-crisis measures. A direct food cost support voucher of about 300 euros is being considered to help nearly eight million people. In the second package approved in June, the government included a temporary 15 percent increase in the Minimum Vital Income, a ban on suspensions of electricity, gas, and water, 200 euros in direct aid for workers whose household income is below 14,000 euros, and support for the unemployed. The plan also included freezing the maximum price of butane cylinders at 19.55 euros through year-end.
One of the most debated measures is extending the 20-cent-per-liter fuel bonus. The government has not stated exactly how this will play out. Nadia Calviño, the Vice President and Minister of Economic Affairs and Digital Transformation, acknowledged the political and financial sensitivity of the policy. The administration has suggested focusing relief on sectors most affected, such as transportation, agriculture, livestock, and fishing. The question remains whether the bonus could be narrowed to essential sectors while phasing out for others. In neighboring France, households earning under 14,100 euros will receive a 100 euro aid, while the 10-cent-per-liter savings are set to expire soon.
The inverse of the butane cylinder
The price cap on butane cylinders was set by the government on June 25 and kept at 19.55 euros to shield consumers from inflation tied to the Ukraine war. A royal decree froze the cost of liquefied petroleum gas in 8 to 22-pound containers. The new price mark surpassed the previous record of 17.50 euros for cylinders registered in 2013 and 2014. A year earlier the price stood at 16.13 euros, and there were times when it dropped to 13 euros. In 2009 the cost was about 10.50 euros. As of January 1, 2023, given price shifts, butane cylinders mainly used for cooking and water heating could approach or exceed historical highs. The government’s price measure is set to expire on the 31st of the month.