Spain inflation hits 10.2%, highest level since 1985

Madrid, June 29 (AFP/APP): Inflation in Spain has jumped to its highest level since 1985, largely driven up by soaring energy prices, official data showed on Wednesday.

Inflation has soared worldwide as economies have emerged from the Covid pandemic while Russia’s invasion of Ukraine has pushed commodity prices higher.

Consumer prices in Spain rose sharply to 10.2 percent in June on an annual basis, up from 8.7 percent in the previous month.

It was the highest level since April 1985 with the increase kicking in despite measures introduced by the Spanish government to ease household bills.

“We knew that the effect of gas cuts by (Russian President Vladimir) Putin was going to be reflected in the prices in Spain,” Prime Minister Pedro Sanchez told Cadena SER radio.

He was referring to the sharp reduction in Russian gas imports to Europe in response to the bloc’s military and political support for Kyiv in the face of Moscow’s invasion.

Last week, Spain cut the value-added tax rate on electricity by half to five percent to shield consumers from soaring inflation.

A similar move in 2021 saw the VAT on electricity reduced from 21 percent to 10 percent.

In March, the government unveiled a package of financial measures to ease the impact of soaring prices which includes six billion euros ($6.4 billion) in direct aid for companies and households.

– Opposition slams ‘policy failure’ –

And this weekend, Sanchez’s administration unveiled a new nine-billion-euro ($9.5-billion) aid plan to help the country weather the ongoing fallout of the conflict in Ukraine.

It also extended other measures which had been due to expire on June 30, by another six months until the year’s end, such as a discount of 20 cents per litre of fuel.

The government also announced a direct aid handout of 200 euros to the self-employed and unemployed, and said pensions and disability benefits would also be increased by 15 percent.

Although Sanchez on Wednesday acknowledged the inflation figure was “bad”, he told Cadena SER it reflected “the seriousness of the situation (globally) and the appropriateness of the measures we are taking”.

But opposition leader Alberto Nunez Feijoo, who heads the right-wing Popular Party, said the numbers reflected the failure of government policies.

“Prices have been rising for more than a year and the June figure shows the failure of the government’s erratic policies,” he wrote on Twitter.

Although the rise in inflation is mainly due to increases in fuel and food prices the INE also noted a hike in hospitality sector prices in one of the world’s top tourist destinations.

Core inflation, which is seasonally adjusted and excludes energy, jumped to 5.5 percent in June compared to 4.9 percent in the previous month — the highest since August 1993.

The European Central Bank plans to hike interest rates for the first time in more than a decade in July in efforts to tame inflation in the eurozone.