This Tuesday, the Council of Ministers renewed the anti-crisis shield with measures to alleviate the effects of the rise in energy prices that the war in Iran has been catapulting since February. The package, which was approved shortly after it was learned that inflation shot up to 4.9% in September, maintains some of the March measures that had declined in the summer, such as the tax reduction on the electricity bill, which will have a VAT of 10%, from the current 21%. But this measure will be applied only in the event that the CPI for electricity grows above 15%. In addition, a limit is incorporated into the regulated gas rate, to avoid a surge when the heating is turned on in the fall, as EL PAÍS reported. The price of a butane cylinder is also set at 19.55 euros until June 30, 2027. With all the measures applied so far, the complete shield deployed in 2026 would amount to 12,000 million euros, causing the Executive to tighten the seams of the fiscal corset to which it has committed to Brussels.
At least three million homes are covered by the so-called last resort gas rate and the Government established that it cannot increase by more than 35% in the October review or more than 15% in the following reviews. Without this cap, calculations indicated that it would have grown around 50%. The safeguard that will activate the VAT reduction on electricity will be known in mid-October, when the details of how much electricity rose in September are published. The Government says that thanks to renewables, homes are better protected from rising electricity prices. The Caixabank research service pointed out this Tuesday that the greater use of combined gas plants in September - which set a higher marginal price in the wholesale market - would have caused the price of electricity to rise, but it will not be official until the National Institute of Statistics (INE) publishes its figures on October 14.
The decree, which has been approved together with the housing measures and lasts one quarter, maintains the tax reductions on fuel (discounts on the special hydrocarbon tax for gasoline and diesel in general). This measure is gradually being deployed again in the expectation that prices will relax at some point. Thus, in October there will be a discount of 20 cents per liter on both gasoline and diesel, a measure that activated the price increase in August. Subsequently, the reduction would be progressively withdrawn if it falls below a price threshold, becoming 13 cents in November and 6 cents in December. But if fuel prices grow above 15% again, we would return to the scenario where the reduction would be 20 cents.
The Executive had graduated the discounts during the summer with the expectation that prices would moderate. However, the closure of the Strait of Hormuz has become entrenched and diesel supplies are in short supply due to Ukraine's bombing of Russian refineries. The threat of the United States banning diesel exports has catapulted prices in the market. The Executive now discounts that prices will remain high for a while but maintains the month-by-month reduction mechanism if prices fall and the safeguard for support in case they remain high.
Up to 20 cents discounts are also approved for professional sectors such as farmers, shipowners and road transport, with the aim that price increases are not transmitted in the value chain. As a novelty there will be a new line for the freight railway, with 15,000 euros in aid per diesel locomotive.
Large expenditure
The Government continues with discounts at the pump despite the fact that Brussels is against supporting with public money any measure that sustains the demand for hydrocarbons and on a general basis. The economic vice president, Carlos Body, assured that the price of gasoline in Spain was lower than in other European countries. “The recipe has worked,” he remarked. In an economy that is still strongly indexed to inflation, the objective of softening the final CPI figure is a priority to contain the rise in prices. Body is satisfied with how the measures adopted so far have cushioned the indicator, and said that in some months they had left the potential inflation in half that would have been affected if they had not had measures.
The Body had met in recent days with the professional sectors most impacted by the rise in energy prices and had warned them that the Executive's ability to maneuver had narrowed compared to the start of the year. The fiscal margin that the Government has left after the large spring package and its continuation in July is very narrow. Economía has negotiated with Brussels which of these measures will not count as excess deficit because they are oriented towards the energy transition. This will not be the case with any incentive for hydrocarbons, but tax cuts on electricity could be part of the cushion that does not count towards the deficit. In any case, the Spanish fiscal path is in the danger zone of skidding.
In addition, the Ministry of Ecological Transition announced that it is modifying the Winter Action Plan (PAI) for 2026 to increase the reserves of liquefied natural gas (LNG) available in the tanks of regasification plants by up to 21 days distributed over the five winter months, compared to the 16.5 days established in last year's PAI. With this modification, the Executive wants to "ensure the availability of gas to respond to sudden increases in demand or tensions in global supply chains." The measure, they say, is part of the reinforcement of strategic sovereignty.
Beyond the approved measures, the vice president believes that the Spanish economy remains strong and is confident in a quarter-on-quarter improvement in GDP of 0.6% during the summer compared to the spring, in line with other analysis houses. The data will be known next month but the Executive says that economic activity resists the rise in prices well.
