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ELECTRICITY

Spain to cut electricity tax by half to ease inflation pain

Spain will cut the value-added tax on electricity from 10 percent to five percent to shield consumers from soaring inflation fuelled by Russia's invasion of Ukraine, Prime Minister Pedro Sánchez said Wednesday.

Spain to cut electricity tax by half to ease inflation pain
Sánchez's government already slashed the VAT rate on electricity to 10 percent from 21 percent in 2021. (Photo by Pau BARRENA / AFP)

The announcement comes after Sánchez’s Socialists were thrashed Sunday in a regional election in Andalusia, a longtime party stronghold.

Sánchez told parliament the VAT reduction, from 10 percent to five percent, would be approved at an extraordinary cabinet meeting on Saturday “to continue to protect citizens from the effects of the war.”

His government last year slashed the VAT rate on electricity to 10 percent from 21 percent to ease the impact of electricity price rises on consumers.

The latest tax cut will be part of a package of measures which will be adopted on Saturday to help consumers deal with rising inflation, which hit 8.7 percent in May, its highest level in decades.

The government did not provide further details on what measures will be adopted.

It adopted a first multi-billion euro emergency package to cushion businesses and consumers from soaring energy prices in March.

Labour Minister Yolanda Díaz has proposed slashing the price of monthly public transit passes by 50 percent and offering €300 ($315) to people hit hardest by rising prices.

READ MORE: Spain eyes €300 handouts for most vulnerable and further fuel reductions

“Inflation is hitting families hard. … The government has acted quickly and decisively, but it is still not enough,” she tweeted.

Spain’s main opposition conservative Popular Party won Sunday’s election in Andalusia in a landslide, capturing 58 seats in the 109-seat regional parliament, its first ever absolute majority in the southern region.

The Socialists won just 30 seats, its worst ever result in Spain’s most populous region.

 

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ENERGY

Spain’s PM hopes European gas link will become a reality ‘soon’

Spanish Prime Minister Pedro Sánchez said Tuesday he hopes a gas pipeline linking the Iberian Peninsula to central Europe through France could soon become a reality.

Spain's PM hopes European gas link will become a reality 'soon'

Europe is currently undergoing an energy crisis as it struggles to rapidly reduce its dependence on Russian gas following the invasion of Ukraine.

Russia has reduced deliveries and nations are scrambling for supplies to avoid a possible shortage this winter, while prices for gas and electricity have soared.

“Spain has a lot to contribute to help Europe reduce its energy dependence on Russia thanks to our immense regasification capacity,” Sánchez said on a visit to La Palma in the Canary Islands.

Spain currently has six liquefied natural gas (LNG) terminals for processing deliveries made by huge sea tankers back into gas and injecting them into its pipeline network.

But the country has only two low-capacity links to France’s gas network, limiting its current ability to act as a conduit to boost EU gas imports.

Last week, German Chancellor Olaf Scholz said a pipeline bringing gas from the Iberian Peninsula through France to central Europe could make “a massive contribution” to easing the supply crisis, in remarks hailed by Madrid and Lisbon.

Madrid has for years championed the idea of a pipeline across the Catalan Pyrenees with France to significantly increase transfer capacity and insisted such link could be built within months.

“This is something the Spanish government has been demanding from Europe for a long time now… and we hope we can soon make this dream into a reality,” Sánchez said.

Spain is already showing solidarity with its European partners by exporting energy “and we will do so even more when we improve the energy interconnections”, he added.

The pipeline would be similar to the defunct MidCat project, which sought to link Spain to France, but which was halted in 2019 over opposition from environmental groups and a lack of funding.

Spain’s gas network operator Enagas said last week it could have the Spanish section of the pipeline ready within “eight or nine months”.

Sources familiar with the project said it would initially transport natural gas, but would ultimately switch to hydrogen.

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