War in Ukraine and haulage strike sees Spanish inflation hit 37-year high

Spanish inflation has hit a 37-year high, driven by the war in Ukraine and exacerbated by a domestic haulage strike.

Consumer prices rose by 9.8 per cent in March compared to the same month in 2021, the highest annual figure since May 1985, according to preliminary figures released by the National Statistics Institute. The monthly rise was 3.0 per cent

Speaking in Congress, Socialist prime minister Pedro Sánchez described the data as “a bad statistic, which affects our economy, our society, in particular the most vulnerable groups”.

The economy ministry reported that the Russian invasion of Ukraine had caused nearly three-quarters of the rise in prices having triggered an increase in energy and food costs. Spain had already been seeing a cost-of-living crisis gather pace towards the end of 2021 as demand surged in the wake of the pandemic.

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However, another factor in recent weeks has been a strike by self-employed lorry drivers, who started blocking roads and ports in mid-March in protest at rising fuel costs. The action affected distribution of food and other goods in many areas of the country, leaving some supermarket shelves empty and some factories at a standstill. Most drivers have now returned to work.

On Tuesday the cabinet approved a €16 billion package of measures aimed at mitigating the impact of the war on the Spanish economy. It included €10 billion in credit for companies, as well as €6 billion in tax cuts and subsidies.

At petrol stations drivers will receive a 20 cent discount for every litre of fuel they purchase, to be funded by the government and energy companies. Also, existing cuts to taxes on energy bills and an energy bill subsidy are being extended.

Other measures include a temporary cap on housing rental increases, decoupling them from the inflation rate.

The measures are due to come into effect on Friday, although they will subsequently face a parliamentary vote.

Meanwhile, Spain is seeking the European Commission’s approval for a plan allowing it greater control over energy prices.

Mr Sánchez said that together these measures “will allow us to flatten the curve soon and stabilise the cost of living”.

The government has said it will spend €1.2 billion of EU funds on taking in Ukrainian refugees this year. Last week it said that 25,000 Ukrainians had already arrived in Spain, with another 9,000-10,000 due to arrive this week. Earlier this month the government approved a €31 million aid package for Ukraine.