Spain has the lowest inflation rate in the EU, according to news reports. What are the Spanish under Prime Minister Pedro Sánchez doing differently—and better? First and foremost, gas price caps and the rent breaks are curbing prices. Next year, they will go one step further: VAT on basic foodstuffs will fall, making food cheaper in one fell swoop. Could Spain be the nation for freelancers looking for a better way of life?
Left-ruled Spain now announced, at the end of December, the third major anti-inflation aid package this year to relieve the Spanish population from inflation. This package includes 10 billion euros, bringing the total amount that the government of Pedro Sánchez (of the socialist PSOE) has put in place since the beginning of the year to cushion inflation to 45 billion euros.
First, the aid package includes a one-time payment of 200 euros for about 4.2 million low-income households (up to about 27,000 euros) and an extension of tax cuts on energy bills for the first half of next year. In addition, all pensions are to be increased by 8.5 per cent, particularly low pensions by as much as 15 per cent.
Success in Spain: lower electricity prices and the lowest inflation rate in the EU
There have already been direct aid, concessions on loans and price breaks: rents in the country may increase by a maximum of two percent per year. According to Sanchez, the aim is to ensure that aid reaches those who really need it.
In particular, the gas price break, which Spain and Portugal were the first in Europe to introduce in May, proved to be an effective intervention to curb prices. Compared with November last year, electricity prices fell by over 22 per cent. The gas price break is in place for 12 months and ensures that gas costs a maximum of 50 euros per megawatt hour. By comparison, wholesale gas prices peaked at 1,000 euros per MWh in the summer.
Inflation over the past 12 months slowed to 6.7 per cent in November. It is the lowest rate of the 27 EU member states.
Bread and milk tax-free: Sánchez government will reduce food prices
Currently, food prices are a thorn in the sight of the population, but also of the government. This is because they have risen by 15 per cent compared with the fall of last year.
That’s why Spain’s government announced that it will reduce VAT next year on staple foods such as bread, cheese, milk, fruit and vegetables, and cereals from 4 per cent to 0 per cent. For pasta and cooking oils, the VAT will be cut in half to 5 per cent, he said.
Sánchez also said he would extend subsidies for train commuters for another year and further limit rent increases.
However, the reduction in the price of gasoline for consumers, excluding the transport industry, will be discontinued.
The result of the left-wing government’s policies: economic growth in Spain was more than 5 per cent in 2022 and therefore even exceeded government forecasts. The country will be able to avoid a recession next year.
A study, conducted by payroll company IRIS FMP Global, looked into 44 countries that offer digital nomad visas so that they could analyse which are the best to work in, and which could now be worth reconsidering.
The criteria they used centred around overall quality of life based on crime rates, cost of living, and pollution.
The overall best-scoring country was Spain, which scored well on safety, climate, and overall quality of life.
“It was Spain’s health care that helped the country claim the top spot though, which offers universal coverage for all residents. However, Spain failed to score so well on the cost of living, ranking 18th on the list,” said the report.