Spain approves $9.5B package to fight inflation

The Spanish government on Saturday approved a new €9 billion ($9.5 billion) package aimed at fighting inflation and mitigating the economic effects of the war in Ukraine.

"With the measures that we've passed, the government estimates that we'll contain inflation by 3.5 percentage points. If it weren't for these measures, we'd be talking about 14% inflation," said Spanish Prime Minister Pedro Sanchez at a news conference.

In May, Spain's annual inflation rate hit 8.7%.

This is the country's second round of economic stimulus since the war broke out and will extend key measures already passed such as a €0.20 ($0.21) subsidy on the price of gasoline and diesel until Dec. 31.

It also contains a battery of new aid to soften the blow of inflation, including reducing the already reduced electricity tax from 10% to 5%.

To incentivize public transport, the monthly costs of nationally-owned public transport will be reduced by 50% and regional governments will also be subsidized to reduce costs of their public transport by 30%.

Sanchez also announced a 15% increase in basic pensions and welfare payments, limits on butane prices, more subsidies for energy-dependent industries like transport and €200 ($211) direct monthly payments to certain vulnerable segments of the population.

To help cover the costs of these packages going forward, Sanchez also announced that Spain is designing a plan for windfall taxes on energy companies that would take effect on Jan. 1, 2023.

"Inflation continues interfering with our lives and it is pulling the breaks on Spain's economic recovery," said the Spanish prime minister. "Those who are economically benefiting from this crisis should contribute more to the collective sacrifice."