The three decrees of the Spanish government, pending the vote of Junts and Podemos

The reduction in VAT on electricity, the increase in pensions or the reform of unemployment benefits approved by the Spanish government in the last weeks of 2023 are up in the air before the refusal of Junts and Podemos to support the validation of the decrees in which these measures are included.

The Congress of Deputies faces a decisive vote on Wednesday that could have economic consequences, so the groups are accelerating negotiations. These are some keys:

What is being discussed in Congress?

Congress is debating three royal decrees approved in December: one with the eighth package of measures to combat the effects of inflationanother one with the reform of unemployment benefits and a omnibus standard with the pending reforms set out in the recovery plan.

The anti-inflation package includes free suburban and medium-distance trains, a 30% reduction in urban and interurban transport, a 10% reduction in VAT on electricity and gas (in the latter case only the first quarter ) and zero VAT for basic food.

Also the increase in premium pensions by 3.8%, the abolition of commissions for cash withdrawals at the counter for people over 65 years of age or the extension of the ban on evictions for vulnerable households, as well as the extension by one year of the tax on large fortunes and taxes on banking and energy.

A second decree reforms the unemployment benefit, which is extended to hitherto exempt groups, such as those under 45 years of age without family responsibilities, increasing from 480 euros to 570 euros in the first six months and to 540 euros for the next six months, compatible with the job for the first 180 days.

In addition, all employees are allowed to enjoy breastfeeding leave cumulatively and the prevalence of regional agreements over state agreements is introduced.

Why is the validation of the decrees in jeopardy?

JxCAT refuses to support the decrees whereas the judicial reform jeopardizes the application of the amnesty and Podemos also questions its support for the unemployment benefit reform and the anti-inflation package. Without their votes, the Spanish government does not have a sufficient majority to ratify the decrees.

Is the mood lost?

Right now it already has the support from PSOE, Sumar, ERC, PNV, EH Bildu and CC. For its part, Junts has called for the withdrawal of the three decrees and for negotiations on these decrees before they are resubmitted. His demands include the withdrawal of articles of the judicial reform that he believes would undermine the amnesty, tax breaks for companies to return to Catalonia and sanctions for companies that do not.

Podemos’ demands in support of the subsidy reform include withdrawing premium cuts and the anti-inflation package and limiting the increase in the price of rent and food in large stores to 2%.

What happens if the decrees fail?

All measures are already in force because they are included in laws of royal decree published in the BOE, but to remain so they must be validated in the Congress of Deputies. Otherwise, the decrees and their content will diminish.

This implies that the Cercanías will no longer be free, that urban transport will no longer be subsidized and that VAT on electricity and gas will rise to 21%; that of basic foods such as bread, by 4%, and that of pasta and oil, by 10%.

Banks will again be able to charge seniors for withdrawing money at the counter and the increase in pensions will be suspended.

There would be no immediate impact for unemployment benefit recipients as most of the reform does not come into effect until June.

Taxes on large fortunes and banking and energy levies would fall, with the resulting loss of income, which would also mean that wealth would once again be exempt from taxation in communities that have reduced wealth taxes.

Withdrawing reforms to justice, unemployment benefits or public services would jeopardize the receipt of 10 billion European funds linked to these milestones.