Uncertainty threatens the end of the year and a 2023 in which inflation could push salaries down, pending budget approval
After weeks of hearing that we’re going to have a hot fall, the calendar has put the economy in its place. And we succeeded after a record summer. The first summer period without restrictions from the coronavirus has been ravaged by international tourists, Spaniards looking to enjoy their holidays, rising costs and in general an economic celebration that translated into good employment figures, economic growth and tax collection. But the September slope is already here. And not just going back to school, that costs an average of 400 euros per family with school-age children. The rise in prices has spread to every facet of life, besides energy, the origin of the problem. The new course (school, work, politics and especially economic) starts with more uncertainties than certainties. And the few that are there, look down.
After the adoption of the first package of measures to deal with the effects of the war in Ukraine and the already rampant inflation in March, the government hoped that April would be the “turning point” month. That is, when inflation could moderate its rise from the 9.8% recorded that month. April took a breather, at 8.3%. But in the end it was just a mirage. Since then, prices have continued to rise year on year, well above 10% in August. Until when, nobody knows. There are “signs” as indicated in the Ministry of Economic Affairs. Signs of a fall in prices, such as those of metal commodities in international markets, as well as those of many agricultural products, the costs of which were overwhelmed once the Russian invasion began. The costs of maritime transport also fell, being put under full pressure in the first half of the year. And some material bottlenecks like microchips for cars are being undone. But very little by little.
Oil is also part of these moderate prices. After crossing $120 a barrel of Brent during the early days of the war, crude oil is now traded in the 1990s amid fears of a recession. It was only at the beginning of the summer that things picked up again and fuel prices were well above two euros per litre. There was even speculation that it could be as high as three euros per litre, an unprecedented figure in Spain. It wasn’t. Oil has been relaxing over the last few weeks of the summer – not without its ups and downs – always pending the decisions of the OPEC cartel, the world’s crude oil producers. September started with a price below $100. Good sign for inflation. But while the price of petrol continues to fall (1.75 euros per litre), that of diesel has skyrocketed to above 1.90 euros. The reason: a large part of the diesel consumed in Europe comes from Russia. And the refineries don’t give more than themselves.
Electricity also does not let go. Despite the Iberian cap, which prevents a 15% higher electricity increase, costs continue to skyrocket. The gas price on the international market is suffering from the tension from Russia and exceeded 340 euros/MWh in August. A year ago it was at 30. Almost ten times less.
The problem for families and businesses is that this sign of energy has already been transferred to the entire shopping cart. Core inflation, excluding these energy products or unprocessed foods, is well above 6% and shows no signs of stopping. It is the worst possible tax for families and businesses, who see their purchasing power drastically reduced. Addressing this situation will be one of the Executive’s challenges before the end of the year.
The three representatives of the social dialogue (government, trade unions and employers) have assumed that workers’ salaries must be increased in order not to fall behind in the face of inflation. The question is to what extent they should do that. 10%, the rate at which prices have risen so far? 5%? A few tenths? The parties have yet to negotiate the lease that they usually all refer to, but none of them makes a clear statement about. Probably not to cloud the negotiations themselves. So far, there has only been one objective item on the table: the 2.6% increase that has been agreed so far in the collective labor agreements.
The final outcome of this increase will depend largely on what the College decides to do with two variables: the civil servants’ salary and the minimum interprofessional salary (SMI). The economic vice president, Nadia Calviño, recently explained that the increase in the public sector should prevent an inflation spiral. That is why he proposed an increase that does not have to come close to the high inflation, above 7% or 8%. The coming weeks will be crucial. Also for the SMI. The second vice president, Yolanda Díaz, awaits the deliberations of the committee of experts and is confident that they “will be as consistent as possible”. The government’s commitment is to raise the minimum wage to EUR 1,050, about EUR 50 more than now, to reach 60% of the average wage.
The public accounts of the state are the cornerstone of any government action. Also in this case, since next year is full of election nominations. Treasury, which is already preparing the draft, has to move to multiple bands. On the one hand, with lower economic forecasts than this year (GDP growth will in any case not exceed 3%), ie a fall in tax revenues due to lower activity; the highest cost of millionaire support plans against the effects of inflation. And all this under the commitment to further reduce the government deficit and debt. Without counting on the parliamentary complexity of getting the backing of the usual partners in Congress to approve the budgets.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
