The Spanish Government to approve a temporary reduction in VAT on gas from 21% to 5%
The Spanish President, Pedro Sánchez, announced on September 1st that the Government will approve a temporary reduction in VAT on gas, which will be cut from the current 21 per cent to the super-reduced rate of 5 per cent. The tax reduction, aimed at reducing heating bills, will come into effect in October and will last until December 31st. According to estimates by the Ministry of Finance, the tax collection impact of the measure will be between 190 million euros and 200 million euros during the next three months.
The Third Vice-President and Minister for the Ecological Transition, Teresa Ribera, said that there will be no energy rationing in Spain, neither for families nor for companies: “There is no 100% certainty, but due to the type of infrastructure we have, it is confirmed that it is practically impossible for us to have a supply problem.”
Midcat: Spain and Germany advocate for the construction of a trans-Pyrenean gas pipeline to open new energy sources for Central and Northern Europe
Spain and Germany are calling for the construction of a new gas pipeline across the Pyrenees to make further energy sources available for countries in Central and Northern Europe. France has been reluctant to support the project so far, arguing that a new gas pipeline is expensive, will take too long to complete and will not be able to respond to the current crisis, while calling for short-term solutions. In view of France’s opposition, Spain is also analyzing alternatives such as building a gas pipeline that connects Spain with Italy via the Mediterranean. Yet the Third Vice-President and Minister for the Ecological Transition, Teresa Ribera, said that “the MidCat debate in the EU will not be closed because of one country’s opinion.” The European Commission will soon carry out a study on future infrastructure options linking the Iberian Peninsula to central Europe, according to Bloomberg. The pipeline would serve for a key distributor of green hydrogen in the future.
Autumn of discontent? Unions, Government and employers at loggerheads over rising labour and living costs
The unions are threatening to mobilise in the coming weeks to demand wage increases, while the Spanish Confederation of Business Organizations (CEOE) opposes. The Second Vice-President and Minister of Labour and Social Economy, Yolanda Díaz, has encouraged the unions to take to the streets in September and urged the CEOE and employers to negotiate “for the good of the country.” She added: “Spanish employers are not doing their fair sharefor the country and the unions have every reason to mobilise.” The Minister of Labour and Social Economy has abandoned the conciliatory profile she was previously known for. Ms Díaz launched a new political party “Sumar” in July, ahead of the 2023 Spain elections.
Legislative frenzy in September: dozens of laws still under parliamentary procedure to be discussed and voted in Congress in the coming weeks
The Spanish government has dozens of laws under parliamentary procedure. The Government will present before the Congress the Contingency Plan for energy saving measures and actions in solidarity with the rest of the EU. The Congress will have to vote on a new levy on banks and energy companies, as well as changes to the law regulating self-employed workers, insolvency law, and other matters such as the entrance of Sweden and Finland in NATO or new legislation on social matters such as abortion.
Additionally, a preliminary draft of the General State Budget for 2023 will be presented by the Spanish Government in the coming weeks. The main objective of the General State Budget 2023 will be “to protect the social majority from the economic consequences of the Russian invasion of Ukraine.”
Goldman Sachs and Bank of America expect Spain to escape a recession
Goldman Sachs projects recession for the eurozone, with inflation reaching a new record of 10% in the fourth quarter, due to out-of-control prices, GDP contraction and a rate hike cycle that Spain would partially avoid, maintaining positive growth. “Looking across countries, we have Germany and Italy in clear recession in the second half, while Spain and France continue to grow.” The recession in the eurozone will last until the end of the year, according to the US bank, predicting a contraction of 0.1% in the third and 0.2% in the fourth quarter. Growth will return in 2023.
Bank of America has revised upwards the growth forecast for Spain for 2022, from 4.1% to 4.4%, following a positive performance in the second quarter, when Spain quadrupled the pace of expansion of the OECD and doubled that of the eurozone as a whole, with an increase of 1.1% of GDP compared to the previous quarter. Bank of America recognises the explosion in demand ahead of the first unrestricted tourism season since the COVID outburst.
