The government is set to approve on Tuesday a third package of measures intended to update the previous plan to the current inflation context and to mitigate the effects of the war in Ukraine, with a focus on protecting vulnerable groups. After the final cabinet meeting before the year ends, the prime minister is expected to summarize the government’s course and outline measures, including efforts to curb fuel consumption and discounts for the hardest-hit sectors, such as transportation and agriculture.
Hours before approval, the coalition partners are negotiating the remaining provisions, including extending lease agreements and freezing variable-rate mortgages requested by the central left party. Both sides hope to reach an accord on measures to ease the rising cost of living, potentially including a 300-euro allowance for vulnerable families. While not specifically in the draft, the accompanying explanatory note points to significant price increases, especially in food, where basic staples have surged, with flour, butter, and sugar cited as examples. A possible alternative under consideration is a switch to super-reduced VAT on certain foods currently taxed at 10 percent, such as fish. The standard reduced rate already applies to bread, milk, eggs, cheese, fruit, and legumes.
Extending the minimum wage on fuel
There is no sign of a universal 20-cent-per-liter fuel discount that ended at year’s end. Nonetheless, a package of direct aids is being announced to curb rising fuel costs for the agriculture and transport sectors. The draft includes tax relief on electricity and gas bills (0.5% of SCT on electricity and 5% VAT) and a suspension of the electricity generation tax through mid-year, along with a temporary VAT cut to 4% for masks.
On fuel relief, the plan calls for an extraordinary temporary subsidy of 20 cents per liter from January 1 to March 31, 2023. Road transport firms would benefit from a partial refund on the Hydrocarbon Tax for professional diesel, with payments issued by bank transfer after the tax office calculates the benefit amount monthly. In the Basque Country and Navarra, this calculation would be handled by the Official Administration or Tax Office as appropriate.
Shippers that do not qualify for the partial refund—taxis, city buses, road freight operators, mobile services, medical transport, and land and regional passenger services—could receive direct aid ranging from 3,600 euros to 300 euros depending on vehicle type. Beneficiaries would apply between February 1 and March 23 of the following year to receive the payment by transfer on February 28, 2023.
The agricultural sector would also receive direct support to cover higher costs as the price of agricultural diesel rises, with an allowance capped at 20 kuruş per liter when using 2022 consumption as a baseline. The government plans to open a state aid line for farmers facing higher fertilizer costs, with a maximum of 300 million euros from the 2023 General Government Budget. Direct assistance will be provided to the fishing sector based on estimated diesel usage, with budgets from 1,100 to 300,000 euros depending on vessel type and size, under a total package of up to 120 million euros. If fresh catch enters the port, a six-month exemption from port taxes will apply.
Additional aid is anticipated to cover gas-intensive industries, with attention to ceramic manufacturers under the European Union Aid Framework. The draft decree includes extending the 80% toll reduction for electro-intensive industries until June 30, 2023, and maintaining exemptions from underground storage fees and charges through the same date. The maximum liquefied petroleum gas (LPG) quota, such as butane, is also extended to that date.
In another measure, a mechanism is being established to prevent tolls from rising with inflation and to help maritime operators keep price stability on routes deemed of public interest, notably those serving the Balearic and Canary Islands, Ceuta, and Melilla. A free Renfe subscription for Cercanías, Rodalíes, and Media Distancia services within certain corridors is planned for each quarter of 2023, along with a 50% discount on multi-trip passes for select Media Distancia routes in 2023. Additionally, free state intercity buses were announced for part of 2023, with plans tied to quarterly travel goals and service levels that may require at least a minimum number of trips each period.