- The Spanish government will implement a temporary tax on banks and energy corporations.
- The tax is meant to combat rising inflation and utility costs, which rose due to the war in Ukraine.
- The government will make trains free for four months, and increase scholarship stipends for students.
While the US holds its breath waiting for inflation to peak, the Spanish government is taking steps to offer its citizens some relief.
Spanish Prime Minister Pedro Sánchez announced on Tuesday that the government would implement a temporary tax on banks and energy companies in the country, intended to cushion the impact of high inflation and utility costs amid Russia's war with Ukraine, Reuters reported. Electricity prices in Spain reached an all-time high this year, as the war has caused supply disruptions in many countries, and the country's inflation rate hit 10.2% in June, its highest level in 37 years.
The taxes are expected to generate $7 billion over the course of two years, according to the Spanish government. The money is going to fund free fares for short and mid-distance trains between September and December, an extra $2 billion for current scholarship recipients, and the construction of 12,000 homes in Madrid, according to the Financial Times' coverage of Spain's State of the Nation, where Sánchez made the announcement.
Travelers will be eligible for free multi-journey tickets operated by Renfe, Spain's state-owned company. The discount comes after the government created a 50% discount in June to lessen the cost of commuting. Sources from the country's Ministry of Labour told the newspaper El País that they believe the move will lead to over 75 million free train journeys.
At the State of the Nation parliamentary debate, Sánchez said that he was "fully aware" the people of Spain are having a hard time financially and that "more and more, wages don't go as far… that it's difficult to make ends meet."
The tax is a big swing on the part of Sánchez, who is part of the Spanish Socialist Workers' Party, a social-democratic political party in the country. The Spanish government said the tax was designed to limit banks from accruing excess gains from rising interest rates, according to the Financial Times.
"We are asking big companies to ensure that any exceptional benefits obtained during the current circumstances are channeled back to workers," Sánchez said.
Sánchez's announcement led to bank stocks falling sharply, and banking sector analysts aren't happy either.
"This is a crude form of populism. The government argument is that banks are benefiting from rising interest rates," José Ramón Iturriaga, an analyst at financial services company Abante Asesores, told the Financial Times. "But there was no state compensation during the long period when rates were negative."
Sanchez maintains that his tax is in the best interest of the country's working class.
"I'm going to work myself to the bone to defend the working class of this country," he said.