The Spanish government will meet tomorrow, Thursday, with social partners to continue discussing measures to mitigate the impact of the war in Iran on businesses, families and workers, according to an interview given on Wednesday by the president of the CEOE, the main representative of companies in Spain before the Government, State bodies, trade union organizations, political parties and international institutions, Antonio Garamendi, on RNE and reported by Europa Press.
‘Yesterday afternoon we had an initial meeting with the third vice-president, and yesterday it was extended, and tomorrow we have a meeting that will be chaired, I understand, by the first vice-president, and several ministries will be present,’ explained Garamendi. The government is working on a comprehensive plan, with short-term and strategic measures, to address the impact of the conflict in the Middle East, which has caused energy prices to skyrocket, with oil showing volatile behaviour and gas on the rise.
The government has argued that it has all the measures that were adopted during the war in Ukraine on the table, including a possible fuel subsidy, and that it does not rule out applying it, although it wants to consult with the social partners and the economic sectors most affected by this crisis. The president of the CEOE has pointed out that ‘these are things that need a little more time’ to know exactly where the greatest impact of the war in Iran is heading.
He stressed that if petrol prices were to be intervened, the solution is not to subsidise fuel, but to apply VAT reductions as requested by petrol station owners. Asked whether he would be in favour of reducing VAT on food to 0%, as suggested by the president of Mercadona, Juan Roig, Garamendi stated that ‘not at present’ and that it would, in any case, be something that would have to be evaluated ‘depending also on what the revenue is’.
‘It is also true that what cannot happen is for the state to make more money from this,’ reiterated the business leader, who pointed out that there are elements that ‘can be touched, even if they do not go to zero’ and that income tax could be deflated, as the CEOE has been requesting for some time. As for the proposals made by left-wing party Sumar to mitigate the impact of the war in Iran, which include intervening in the housing, food and energy markets, capping rent and gas prices, imposing a new tax on large distribution companies, reinstating the tax on energy companies and lowering VAT on basic foodstuffs, Garamendi considered them to be ‘pure populism’.
‘It is interventionism in its purest form, and that is really the biggest reason why no one trusts Spain,’ denounced the leader of the CEOE. ‘What usually happens with populists? They take advantage of crises to raise these issues, and I don’t care whether they are right-wing or left-wing populists. These formulas have already been used in Latin American countries and before the fall of the Berlin Wall. I sincerely believe that trying to raise an issue that goes against the economy is wrong,’ he argued.
Garamendi stated that citizens must be cared for, but ‘that does not mean that someone who, moreover, usually knows nothing about the economy, or businesses, or anything else, should tell us how things should be done,’ he stressed. The potential response would mirror Spain’s 2022 VAT “inflation shield”, introduced following the surge in energy prices after Russia’s invasion of Ukraine.
That package included significant temporary VAT reductions on staple food items: 0% VAT on bread, milk, eggs and fruit and 5% VAT on oils and pasta (down from the standard reduced rate) These measures formed part of a broader €22 billion cost-of-living support programme which also capped gas prices, froze butane costs, subsidised transport and supported freight operators. The government has indicated that a similar package could be introduced if inflationary pressures intensify. Officials are also reviewing potential adjustments to VAT on electricity bills, which was another tool used during the 2022 crisis.