Government extends 20-cent fuel rebate to all drivers

The Government’s road map included two steps: Firstly, the European Council of March 24th and 25th, and then the Council of Ministers of Tuesday 29th. But, aware of the social anxiety and the growing pressure of the last two weeks, which has been very difficult for the Executive, the president announced the main lines of the aid program in the forum ‘Generación de oportunidades’ (Generation of Opportunities), in the Beatriz Auditorium in the capital, an event organized by Europa Press and McKinsey & Co. Sánchez tried to show the empathy that even within his Cabinet was lacking, insisting that the Executive is well aware of the “difficulties” that the citizens and the sectors most affected by the war on European soil are going through, that it is “taking charge” of the problems and will strive “to mitigate as much as possible” the effects of the conflict, ensuring the distribution of “sacrifices in a balanced way” and taking care of the most vulnerable groups.

This is the philosophy that, according to Sánchez, surrounds the royal decree law approved this Tuesday by the Council of Ministers, which was being finalized throughout the weekend and of which the groups were informed at the end. The text will be published in the BOE on Wednesday 30th and the bulk of the package will come into force on Thursday 31st (and the remaining on April 1st) and will last for three months. The reduction of electricity prices by establishing a maximum reference price for gas (the Iberian exception), will be operational once the European Commission gives its approval to the proposal to be presented this week by Spain and Portugal.

As the second vice-president, Yolanda Díaz, welcomed,  there will be no “generalised reduction” in taxes, which is what the PP was demanding. The backbone of the decree law is aid. Starting with the discount of 20 cents per liter of fuel, for which the Government has looked to France as a benchmark. The State will apply the 15 cents discount, and the other 5 cents, as a minimum, will be assumed by the oil companies, some of which, Sánchez recalled, have announced greater cuts. This is the measure that the Executive agreed with the transport drivers last week and which is now extended to all drivers. It is, therefore, a linear reduction without income discrimination, which would have been more difficult to implement, and which will be applied automatically when filling up at service stations.

Government extends the social bonus for electricity

In this series of measures designed for families, objective dismissals due to war-related causes will be limited in order to protect employment, and companies will once again be allowed to use internal flexibility mechanisms, the cuts that “worked so well” during the pandemic. Rent reviews in the next three months will be capped at 2%. In other words, rent will be decoupled from inflation, which is already at 7.6%. The limit will be for large and small tenants. Both measures, the ban of dismissal due to the crisis (which worked in pandemic) and the rent cap (new initiative), are the two that, according to Unidas Podemos, were the hardest to get from the PSOE and to reach an agreement.

Rent reviews will be capped at 2% (as opposed to the 7.6% which is the current CPI) and the amount of the minimum wage will be increased by 15%

In addition, the minimum wage will be increased by 15% for three months, and the social electricity bonus will be extended to 600,000 more families, reaching 1.9 million households. Also, the tax reduction on the electricity bill which was already in force (10% VAT for small consumers, the special tax on electricity at 0.5% and suspension of the tax on electricity generation) will be extended until June 30th.

To support the economic fabric, a new line of ICO credit guarantees for 10 billion will be opened to cover liquidity needs caused by the rise in energy and fuel prices. The maturity of loans guaranteed by the ICO will also be extended. And there will be direct subsidies: agriculture and livestock will receive 362 million, and fishing, 68 million. The electro-intensive industry will have 500 million to compensate tolls by 80%, to reach the maximum in CO2 compensation and to reinforce direct aid to the sector. But there will be more measures for the industrial, exporting and cultural sectors.

The decree will include the measures agreed with the majority representation of transport drivers: the injection of more than one billion euros, the minimum reduction of 20 cents per liter or kilo of fuel, the new fund of 450 million euros for direct aid to freight and passenger transport companies (1.250 euros per truck, 900 per bus, 500 per van and 300 per taxi, VTC or ambulances), the commitment to pass a law allowing truck drivers to work for a fair price (not at a loss, as has been done with farmers and livestock farmers with the food chain law) and the shortening from three to one month the deadline for the return of the hydrocarbon tax.

‘Benefits fallen from the sky’

Sánchez confirmed that this week Spain and Portugal will submit their “exceptional and temporary” proposal to the European Commission to “significantly” lower the electricity bill through a benchmark price for the gas used to produce electricity. He did not anticipate what that price would be, although the Executive, as this newspaper has already advanced, points out that it could be around 50 euros per megawatt hour (MWh), although that detail will have to be finalised with Brussels. The Socialists would like it to be below that level while the purple party would like it to be close to 30 euros. The President insisted that there will be no gas subsidies and that the European energy market will not be distorted. The approval of the Community Executive will come”very shortly”, said the President and the following day it will be in the ‘Official State Bulletin’.

Pending approval from Brussels, the electricity bill will be cheaper immediately in terms of regulated costs, as the settlement of subsidies received by the oldest renewable energy technologies (recore) will be brought forward by one year. These technologies must return revenue of around 1.8 billion euros, which will serve to reduce electricity bill charges. The Government also extends the mechanism that cuts the extraordinary profits (windfall profits) that some power plants receive due to the rise in gas prices, “with certain modifications to reinforce its efficiency and adapt it to European guidelines” until June 30th. UNO Podemos was seeking a tax on electricity, but is satisfied with this measure to reduce profits. Other initiatives to accelerate the deployment of renewables, energy saving and guarantee of supply will also be approved.

The last section is dedicated to increased protection against cyber-attacks. To this end, a new cybersecurity plan will be drawn up with more than 150 essential actions, endowed with more than one billion euros. A Cybersecurity Operations Center will be set up for the General State Administration and its public bodies, and the security of the new 5G communications networks will be strengthened.

The President expects a “significant” drop in the price of energy, which will be applied “immediately” as soon as the European Commission gives its authorization, and this is expected in a “very short” period of time

The measures, said Sánchez, will serve to protect the affected sectors and citizens, to “fairly distribute the effects of the war” and “preserve” the path of economic recovery and job creation that Spain has been following. he president linked his demand for unity to the groups: the country has been hit by the covid-19 pandemic, natural disasters and a war on European soil. “What else has to happen for us to respond in a united way, to put aside quarrels, sectarianism and join forces?”, he asked, in a clear appeal to the groups, and especially to the PP, which he expects to support the Executive this time.

“Unity, justice and determination”

The Government will be guided, he noted, by the policy of “unity, justice and determination”. He believes that if Europe is “united in its response” to Vladimir Putin, Spain must also be united. He insisted that now the consensus that came to fruition at the Presidents’ Conference in La Palma, on March 13th, must be reproduced, so now the socialist leader asks “all political, social and institutional actors” to unite “behind the shock plan” and share the sense of “patriotism”, the commitment to a “just cause” and the way out of the crisis “with pride”. The difficulties, Sanchez acknowledged, without mincing words, will be “extraordinary“, but European values are “at the same time the only possible path to prosperity”.

“What else has to happen for us to respond in a united way?”, asks Sánchez. PSOE and UP closed the agreement at the last minute. The PP is open to support the plan but asks for more tax cuts

Moncloa stressed this Monday that all the groups had been called before the meeting and and proposals from all of them, including the PP, had been included in the decree. Feijóo will find it “very difficult” to dissociate himself, even Yolanda Díaz agreed. On leaving the event, she expressed her “satisfaction” with a set of measures that she foresees as “effective for those who need it most”. Diaz negotiated the drafting of the decree with the other two vice-presidents, Nadia Calviño and Teresa Ribera, and also with the head of the Presidency, Felix Bolaños. But also “cleared” the content directly in a conversation with Sánchez. For the socialists, the pact was closed late on Sunday, but the purple party said that the tug of war, in its technical but “decisive” aspects, lasted until shortly before the president’s conference.

The package of measures was not received with complete hostility by the opposition, although it agrees that it does not know the fine print. The PP showed its group’s willingness to support the plan, although it warns that it does not see the commitment to lower taxes signed in La Palma, or a reduction in superfluous spending. Isabel Díaz Ayuso went further: anything less than lowering taxes is a “waste of time”. Cs believe the plan is insufficient, Vox describes it as a “bluff” and for EH Bildu it is a “palliative measure“, incomplete because “structural” solutions are required such as intervening the energy pool. ERC applauded the shock plan, although it demands “courage” from the Government to face a change in the energy model.