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The Government tries to close a shock package to mitigate the economic effects of the crisis in Ukraine | Economy

The first vice president, Nadia Calviño.
The first vice president, Nadia Calviño.Rodrigo Jimenez (EFE)

The rise in energy prices can do a lot of damage to the Spanish economy. Traditionally it was calculated that for a 10% increase in oil prices, the GDP lost between one and two tenths. And that was without taking into account gas and the importance that it has taken on as the energy of last resort in the energy transition. In principle, this year’s rebound was robust. But the invasion of Ukraine has turned a corner. Everything will depend on the evolution of the conflict and how long it lasts. Both President Pedro Sánchez and Vice President Nadia Calviño have already put on the blindfold, pointing out in public that difficult times are coming. Since the invasion began, gas has skyrocketed from $90 to $200. And oil, from $98 to $125.

“We are all poorer, part of our income is going abroad to pay for energy. The question now is how we distribute this less wealth and how it is cushioned. If we continue as if nothing happened, we will walk towards disaster”, explains a government source. Hence, the Government seeks a response with several legs.

The first is to curb the sharp rise in energy prices. The meeting on Saturday with the president of the Commission, Ursula von der Leyen, dealt with this matter. The Spanish Executive exerted a lot of pressure for strong measures to be taken to lower the cost of energy. “85% of our energy sources are at reasonable prices. Gas only accounts for 10% but it is defining the whole. Since September we are demanding measures. But the Commission only produced a very limited toolbox. However, with the war in Ukraine, the situation has turned towards the Spanish positions”, underlines this source. The Executive hopes that this Tuesday the Commission will announce more far-reaching measures. It is expected that it will prescribe a cut in the extraordinary profits that are being produced, subjecting them to greater taxation. Until very recently, Spain was alone defending this position. But the crisis with Russia has broken taboos. It is urgent to decouple energy prices from what Putin is doing, as Calviño explained this Monday in an interview on TVE.

Another essential axis to respond to this crisis is an income pact. This Monday the unions and employers met with President Sánchez and several economic ministers. After the summit in Moncloa, both CEOE and Cepyme, as well as UGT and CCOO, disassociated themselves from the Government, saying that salary agreements are a bipartisan issue in which the Executive has no say. However, the Government’s intention is to achieve a great political pact in which wage moderation is agreed in exchange for the containment of business profits. It would be about emulating something similar to the Moncloa pacts of four decades ago. The content is completely open and to be defined. Nothing materialized during the meeting. From this pact would then derive the collective bargaining agreement that employers and unions will sign. Despite these statements, government sources maintain that the idea was well received and that the social agents showed responsibility. “Theorizing is easy and we all agree. But the divergence will come later in the amount that has to be raised,” says a union source. In two years the workers are going to lose more than 10% of purchasing power. How much will be left uncompensated to avoid an inflationary spiral will be a thorny issue that will lead to tough negotiations.

“What would eliminate a lot of tension about the salary increase is the guarantee of recovering the salary guarantee clauses so that in the next three years the purchasing power does not decrease and can even be improved,” said the secretary general of the CCOO, Unai Sordo, in an appearance after the meeting in Moncloa. For his part, the general secretary of the UGT, Pepe Álvarez, indicated that the percentages of salary increases would depend on “the purity” of the salary review clauses that are included in the agreement. Both union leaders mentioned that these pacts should be linked to issues such as company taxation, where they consider that there is still room to collect more.

On the contrary, the president of the CEOE, Antonio Garamendi, replied that he did not share these approaches and that it would be difficult to tackle an inflation problem with guarantee clauses. He also added that it was simplistic to limit dividends, since the valuation of companies on the Stock Exchange depended on them and they are the salary of many entrepreneurs. “Inflation harms the worker, the consumer, but also the company aggressively. The SME cannot transfer the prices because we would leave the market”, pointed out the president of Cepyme, Gerardo Cuerva.

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The other leg will consist of analyzing the way in which the damage inflicted by this crisis can be compensated. This chapter would include aid for vulnerable consumers or the activation of the new ERTE, now called Red. Perhaps for the most affected sectors. It will also try to mitigate the blow that the industry, highly dependent on energy, may suffer. European loans from the Recovery Fund will be added to accelerate the energy transition. Community funding is sought for the Pyrenees gas pipeline and there is talk of a European resilience fund.

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