Spain has rolled out a sweeping 80-measure economic rescue plan worth €5 billion as the government scrambles to shield households and businesses from the fallout of the Iran war.
Prime Minister Pedro Sanchez announced the emergency package following a delayed and tense Cabinet meeting on Friday, with coalition infighting forcing the government to split the response into two separate decrees – one focused on housing and the other on wider economic measures.
Despite the political drama, Sanchez insisted Spain is ‘better prepared’ than in previous crises, pointing to stronger public finances and a push towards renewable energy.
Fuel prices slashed
The headline measure is a cut in VAT on fuel from 21% to 10%, aimed at bringing immediate relief at the pumps.
Drivers could save up to 30 cents per litre, or around €20 per tank, depending on the fuel type. The government will also reduce the hydrocarbons tax to the lowest level allowed under EU rules.
Unlike during the Ukraine crisis, there will be no blanket 20-cent fuel subsidy – though targeted aid will still be offered.
Direct help for key sectors
Transport workers, farmers, fishermen and livestock producers will receive direct aid of 20 cents per litre, alongside additional support such as subsidies for fertiliser purchases.
Energy bills to fall
Households can expect further relief through cuts to electricity taxes, with VAT on energy reduced from 21% to 10%.
Gas, firewood and pellets will also see a 10% tax reduction, while the price of butane and propane will be capped.
The government is also extending electricity social discounts throughout 2026, boosting support for vulnerable households and banning energy cut-offs for those most at risk.
Boost for renewables and efficiency
The package includes tax breaks for installing solar panels, heat pumps and electric vehicle charging points, part of a wider push to reduce reliance on fossil fuels.
At the same time, energy-intensive industries will benefit from an 80% reduction in electricity grid charges, saving the sector an estimated €200 million.
Crackdown on companies
In a win for coalition partner Sumar, the plan introduces controls on corporate profit margins to stop companies from exploiting tax cuts to boost profits.
Spain’s competition watchdog will be given greater powers to monitor and sanction firms found to be taking advantage of the crisis.
Housing measures split out
One of the biggest sticking points – housing – has been carved out into a separate decree after internal clashes.
Plans include extending rental contracts for up to two years, a measure previously used during the last inflation crisis.
Sanchez admitted there may not be enough parliamentary support to pass it, but insisted the government would push ahead regardless.
A race against rising prices
The package comes as Spain faces mounting pressure from rising fuel and energy costs linked to escalating tensions in the Middle East.
With billions now committed and dozens of measures on the table, the government is betting this rapid-fire response will protect households and prevent another full-blown cost-of-living crisis.
Read more Andalucia news at the Spanish Eye.
