Council of Ministers extends some anti-inflation measures until 31 December

inflacion cesta

Bankinter: This is the seventh package of anti-crisis measures worth some €3.8 billion, bringing the measures for the second half of the year to €8.9 billion. Of note are: (1) the maintenance until the end of the year of the reduction in VAT on staple foods (to 0% from 4% for bread, eggs, fruit and vegetables) and to 5% from 10% for other products such as pasta and oils. This measure is conditional on core inflation being above 5.5% year-on-year; if it falls below this in September, VAT on foodstuffs will return to the usual rate from November 1. (2) Aid is extended to the Autonomous Regions to co-finance the discount of at least 50% on season tickets and multi-journey tickets for public transport. (3) The subsidy on diesel for hauliers, farmers and livestock farmers is extended until the end of the year. In the case of hauliers, the discount of 10 cents per litre is extended until September 30, and 5 cents per litre in the last quarter of the year. It also introduces new features such as the tax deduction for the purchase of electric vehicles until 31 Dec 2024 and a new line of ICO guarantees for first homes for young people and families.

Assessment: The general CPI until May 2022 stands at +3.2% year-on-year, but the underlying rate remains at 6.1%. The European Commission has already recommended their total elimination in 2024, the year in which compliance with fiscal rules returns.

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