The Spanish government will lower the VAT on electricity, gas and gasoline to 10% as part of its emergency plan to combat the war.

MadridThe PSOE and Sumar are finalizing the content of the decree-law to address the consequences of the Iran-Contra affair, which will be approved this Friday in an extraordinary cabinet meeting. The coalition partners must navigate a delicate balance: it must be ratified in Congress next Thursday, meaning it needs support from Junts to Podemos. This has led to a tug-of-war over the measures the emergency plan should include: according to various sources consulted by ARA, the Spanish government will incorporate tax cuts into the package to try to appease Junts; and, in return, the PSOE and Sumar are pressuring Carles Puigdemont's party to endorse housing-related measures, such as extending rental contracts or suspending evictions, which they have thus far blocked in the Spanish Parliament. Housing is, in fact, a key condition. sine qua non from Sumar, ERC, EH Bildu and Podemos.

What taxes would the Spanish government touch in its emergency plan? According to various sources, it would include lowering the VAT on electricity, gas, and gasoline to 10%, as well as temporarily eliminating the tax on the value of energy production and reducing the special tax on hydrocarbons from 5.5% to 0.5%. These proposals were put forward by Junts in their own initiative, which is also scheduled for a vote next week in Congress. Furthermore, the Spanish government is also considering incorporating subsidies for utilities, such as the social bonus, and other housing-related measures to try to reach out to the left. This Thursday, Sumar continued to press for the inclusion of extensions to current rental contracts and a moratorium on evictions, a prohibition that was included in the last two social safety nets and which Junts ultimately rejected.

This Wednesday there was a meeting between the PSOE and Sumar, and on Thursday the meetings continued to finalize the details. "What we will incorporate are measures that have the consensus of the other groups; that's what we will have to explore this afternoon," explained the Vice President for Economic Affairs, María Jesús Montero, in "Breakfasts"Organized by RTVE and EFE. "We would all like to incorporate many more things, but whatever is included must be accepted by the rest," he explained.

The junior partner in the Spanish government does not share this view. Various voices within the Sumar coalition support including housing measures, even without the support of Junts and the PNV, and despite the fact that this could derail the entire text. Their objective, they say privately, is to clarify their roadmap and expose the parties that vote against them. Earlier this morning, in an interview on TVE, Minister Ernest Urtasun stated that "no one would understand" why the two previous decrees included housing measures—despite Junts' reservations—and yet this one does not. "At the moment, the Socialist Party does not want to include the measures for the automatic extension of rents, which for us are absolutely essential," Urtasun emphasized. However, the Minister of Culture declined to "anticipate scenarios" and refused to clarify what Sumar will do if the decree reaches Congress without including the housing measures.

Shortly afterward, Montero explained that the Moncloa Palace will approve a package of measures structured around two main pillars. The first will contain "structural measures" related to the energy transition, designed to ensure Spain is "much better prepared" for future crises. The second will include "urgent and short-term measures" to help the most affected sectors—those that use the most electricity and fuel—and "alleviate the pressure on families, households, and businesses." Montero also avoided commenting on reducing the VAT on food if the conflict drags on: "We are not in that scenario; it's just speculation for the sake of speculation."

Looking ahead to Friday, the Spanish government is "talking" with social partners and parliamentary groups to ensure the decree's ratification in the lower house. In fact, María Jesús Montero has boasted about the Socialists' "experience" in dialogue. Regarding potential support from the People's Party (PP), the Finance Minister lamented that they cannot "trust them" because the PP "always looks for excuses." From Brussels, before the European Council meeting, Spanish Prime Minister Pedro Sánchez guaranteed that the Moncloa Palace will dedicate "all state resources to respond to the economic and social effects of this crisis."

"A few more weeks" for the Spanish budgets

After Pedro Sánchez on Thursday will leave the presentation of the Spanish budget up in the air Given the "seriousness of the international situation," María Jesús Montero clarified that the approval of the public accounts by the Council of Ministers will be delayed "a few weeks" because the decree on the war with Iran has been "a priority." "I would much rather have a budget, but the extension is legal," she argued. She did, however, commit to having a new budget in place by January 1, 2027: "I cannot imagine that we could be without a budget in 2027." Faced with this further delay, Alberto Núñez Feijóo seized the opportunity to call for elections and, in a press conference in Brussels, accused the Spanish government of being a "political zombie."