Pedro Sánchez will return to the screens this Tuesday. It will do so after the Cabinet has approved a new plan to mitigate the economic consequences of the war in Ukraine., the third of the year. The President of the Government will gloss in prime time the benefits of the two previous anti-crisis shields and will poke chest at the moderation of inflation.
The estimates of the Coalition Executive give him wings, since calculate that through their measures prices have been contained by around 3.5 percentage points in the interannual rate. Thus they believe that the decline registered since August has placed the Spanish inflation rate below the average for the euro zone.
But Sánchez will be reckless if he does not recognize that the brake on the upward spiral has also been supported by the cheaper natural gas and fuels in recent months. He knows that, instead, he follows the upward pressure on the prices of food, raw materials or intermediate goods. Those same government estimates tell you that basic necessities, such as flour, butter or sugar, have experienced increases close to 40% year-on-year.
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It is in this context, in which uncertainty about the duration of the war also persists, that the plan that Sánchez will announce must be understood. Despite the fact that the devil is in the details, still to be known one hundred percent, everything points to the fact that there will be relief for the shopping cart (direct checks or selective VAT reductions are on the table) and that fuel discounts will be more restrictive, focused only on transport and the primary sector. The latter is an activity that the Government does well to protect.
Sánchez’s crusade is now to stop a rebound effect of inflation that may appear both for temporary reasons and due to the expiration of the anti-crisis measures that one day will have to end. The Bank of Spain has already warned of this last risk. The Government seeks this at the same time that it wants to protect the most vulnerable and without jeopardizing compliance with fiscal objectives. It should not be forgotten that Brussels estimates that measures to mitigate the impact of the energy crisis absorbed 1.6% of GDP in 2022. Much will have to be fine-tuned to avoid subsequent scares and it will always be better to flee from aid to all in the same way that they strangle public accounts. Good luck, because he’s going to need it.