The Spanish government, led by Prime Minister Pedro Sánchez, convened on December 22 for its last Council of Ministers of the year, where it approved significant economic measures intended to address the aftermath of the pandemic and the challenges posed by the war in Ukraine. These initiatives, valued over €3 billion, include pension increases, public transport subsidies, and the maintenance of energy taxes, all aimed at bolstering economic security for vulnerable families.
Among the key decisions made was the revaluation of pensions, set to increase by 2.8% for contributory pensions starting 2025. This calculation follows the pension reform law which ties annual adjustments to the average year-on-year Consumer Price Index (CPI) from December of the previous year through November of the current year. Although this increase is lower than the previous two years—3.8% in 2024 and 8.5% in 2023—it is expected to benefit nearly 9.3 million pensioners, bringing the average monthly pension to about €1,481.35.
One of the government's priorities is to sustain support for public transport. Starting from September 2022, subsidies have allowed free passes on Cercanías train services and reduced fares for buses and metro services. The government confirmed it would extend these subsidies for another six months until June 2025, supporting state-operated transport lines across the country. This move aims to alleviate the financial burden on daily commuters, particularly relevant as inflation continues impacting household budgets.
The provisions preventing evictions for vulnerable populations will also continue, with the endorsement of extending this measure for another year. Originally instituted during the pandemic, these protections have shielded many families at risk from losing their homes. While the government did not specify whether protections against utility disconnections would remain, the extension signals the administration's commitment to safeguard the most vulnerable.
Another contentious issue addressed during the meeting was the economic tax on energy companies, which will be extended through 2025. According to the government, this includes provisions made with local parliamentary allies such as ERC and Bildu. Yet, the government faces opposition from other political factions. Following this week's annulment of the previous energy tax by Congress, the government must pass the extension as new legislation. Should the measure not secure support, the future of energy taxation could be jeopardized.
The continuation of the social electric discount was also approved. Vulnerable consumers will benefit from significant reductions, remaining at 35% for the general category and 50% for vulnerable households. This mechanism, aimed at easing the financial strain from energy costs, was especially pertinent considering the rising energy prices throughout the past year.
Additional measures discussed include adjustments to energy tax policies and possibilities for maintaining EV purchase incentives through the Moves III plan, which is set to expire at the end of the month. The Asociación Española de Fabricantes de Automóviles (Anfac) expressed the need for government action to prolong these incentives as consumers increasingly lean toward electric vehicles.
Another important financial adjustment under consideration is the reduction of VAT on basic food products and electricity. Although the VAT reductions have provided temporary relief, the government indicated plans to revert to the standard rates starting January 2025. This means the current reduced VAT for basic food items, pegged at 2% due to recent price fluctuations, may no longer apply as the costs stabilize.
The overarching plan also involves passing a budget extension decree to adjust the current year’s fiscal allocations for 2025. Following failure to approve new budgets for consecutive years, this measure will enable the continuation of public finances without interruption. Adjustments anticipated include minimal changes but would forgo salary increases for public employees pending future negotiations.
Overall, the decisions reflect the government’s strategy to address economic pressures and safeguard vulnerable populations during these tumultuous times. With inflation affecting purchasing power and energy prices fluctuated, implementing these measures emerges as pivotal for maintaining public confidence and economic stability.
While these initiatives are welcoming news for many, their effectiveness will largely depend on public compliance and political will. The continued evolution of these policies will undoubtedly warrant close scrutiny as the government prepares for what promises to be another challenging year.
