Spain faces high inflation and electoral pressure while the Government debates bringing forward elections

On the same morning that Pedro Sánchez and the first vice president, Carlos Body, expected defeat in the vote on the two Housing decrees, Eurostat placed Spain in the group with the worst inflation in the euro and the markets once again asked for more interest to buy national public debt. And this goes further.

With current inflation of 5% and the Euribor at 3.30%—at the highest levels since 2023—it is not theoretically a good time for any incumbent president of the Government to call elections, but the future looks worse.

If Sánchez took into account only the economic factor, the sooner he calls the elections, the better so as not to suffer more wear and tear. The Spanish economy continues to stand out in growth in the eurozone, but the bonanza is reaching less and less into the pockets of voters, and less will it come in the coming months with the current trend of devilish spiral of prices, rise in mortgages and slowdown in job creation and consumption.

An early election would also allow him, for another year, to fail to fulfill his promise to present the State Budget. It is very opportune for the leader of the PSOE to free himself from this trance, not only because he has to make transfers to nationalist partners, but because with the markets hitting France for its lack of control over its debt and deficit, presenting electoral public accounts would increase the focus on Spain.

The situation bulletin from the Ministry of Economy itself this Friday does not hide worrying data that would advise the PSOE not to rush too much. These are some of them, verbatim: "Registered unemployment experienced the largest increase in a month of September since 2013"; «the household savings rate continued its decline in the second quarter, to 11%, its lowest level since 2023»; «in July, housing mortgages fell more than usual this month, in a context of certain weakening of construction indicators»; «oil closed yesterday at 102 dollars per barrel, around 40% above its level prior to the tensions in the Middle East, while fuels prolong the rebound that began in July»; or "the retail trade index is practically stagnant and our availability of consumer goods shows weakness."

Only behind Housing

In the latest CIS barometer, Spaniards place "the economic crisis" as the country's second problem immediately after housing, when a year earlier it was the sixth, without the current inflation. It is true that the classic paradox of the CIS surveys persists in which Spaniards see their personal economy as good and the general economy as bad, but, even at this point, the trend is downward.

Every month that passes is worse for the CPI. The Funcas studies service assumes that it will not be able to go below 4% for the remainder of the year and places it close to 3% in 2027. That is, another painful increase next year, when the legislature would conclude, in addition to the already intense one that citizens suffer. And everything, as Funcas points out, "subject to high uncertainty."

Even if the war in Iran were to end immediately, the damage to energy production and supply will keep the price of a barrel of oil and gas for many months at higher levels than before Donald Trump's attack on Tehran. With average inflation in the eurozone at 3.8%, the European Central Bank's tendency is to raise the price of money, which will make mortgages more expensive. The 12-month Euribor will not drop below 3% in 2027, services such as Bankinter point out.

Also thanks to inflation and the bonanza until now, the Government has recorded such revenue that it has allowed itself to spend more than 12,000 million in three packages of measures to subsidize the purchase of gasoline and diesel and try to alleviate the price of electricity and gas, but for how long? AIReF sees an adjustment in the State accounts as inevitable starting next year to comply with the euro rules. Funcas estimates it at at least 5.3 billion in 2027 and 11.2 billion in 2028.