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by Belén Carreño
MADRID (Reuters) – Spain has extended until 2024 several measures intended to help its citizens cope with the high cost of living, even as the inflation rate slows.
Like other European countries, Spain has faced rising prices after the COVID-19 pandemic, exacerbated by the impact of the war in Ukraine on the energy sector.
“This new phase will serve to consolidate the progress made over the last five years,” Spanish Prime Minister Pedro Sanchez, who won a new mandate in November after the approval of his program by the firm.
Pedro Sanchez anticipates a gross domestic product (GDP) for Spain increasing by almost 2.5% this year. The government’s previous GDP growth forecast was 2.4%.
Retirement benefits will be increased by 3.8% in 2024 to take into account average inflation over the past year, the head of government said. According to a press release from the Ministry of Social Security, the cost of this increase is estimated at 7.3 billion euros.
The measures include an expansion of subsidies for minors and young people on public transport to all regular users and an extension of the value added tax (VAT) reduction for essential goods such as fruit and vegetables , pastes and cooking oils.
A controversial tax on energy companies’ windfall profits, which brought in around 3 billion euros in 2023, has been amended to allow them to partly offset the 1.2% tax when they invest in energy projects renewable.
A similar tax for banks will remain unchanged in 2024, following an agreement between Pedro Sanchez’s Socialist Party and its coalition partner, the radical left Sumar Party.
Certain measures will be gradually eliminated: the reduction in VAT on energy bills, which reduced the rate to 5% in 2023, will gradually return to 21%, indicated Pedro Sanchez. The 21% VAT rate on gas bills will be reinstated in April, according to a Finance Ministry source.
For electricity, the tax will increase to 10% in 2024, the government said in a press release.
(Reporting by Belén Carreño, Inti Landauro, David Latona and Pietro Lombardi; Writing by David Latona and Charie Devereux; French version Dagmarah Mackos, editing by Kate Entringer)
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