Gas Price Cap, Rent Controls, and Affordable Food: Why Spain’s Economy is Booming

Publicerad denFörfattareSophie Wenkel

While the economy in some EU countries is stagnating and even slipping into recession, Spain’s economy is showing rapid growth. Spain’s socialist Prime Minister, Pedro Sánchez, has implemented government interventions to regulate prices. This approach has kept inflation low over the past few years and stimulated economic growth. As a result, Spain is now a driving force within the EU and is projected to have the highest economic growth rate in the Eurozone for 2024.
Price Controls as a Successful Economic Strategy
Spain is one of the EU countries that has weathered the COVID-19 pandemic, energy crisis, and inflation surge particularly well. Its economic growth in recent years has far surpassed the EU average, and predictions for 2024 estimate a growth rate of 2.4–2.7%, making Spain the fastest-growing economy in the Eurozone. The Sánchez government took action during the energy crisis by intervening in prices, which helped keep inflation consistently low. Key measures included a gas price cap and rent controls, which helped curb price increases. In addition, the government suspended VAT on essential food items, helping to ease the burden of rising food costs.
Immigration as a Key to Spain’s Prosperity
Another factor behind Spain’s strong economic growth is the influx of skilled workers, particularly from Latin America. This immigration has eased the labor shortage in sectors like technology and hospitality. New immigration policies are expected to support this trend further.
While many European countries focus on restricting immigration, Spain has embraced an open approach. In mid-October 2024, Sánchez presented his plans to the Spanish Parliament, emphasizing that immigration is not only a humanitarian issue but also essential for the country’s economic future:
“It is necessary for the prosperity of our economy and the sustainability of the welfare state.”
The government plans to simplify the recognition of foreign qualifications, introduce a new labor migration program, and reduce bureaucratic hurdles for residence permits. At the same time, integration measures are being expanded.
Lowest Unemployment Rate in 15 Years
Spain’s unemployment rate skyrocketed following the financial crisis of the late 2000s. However, it has now fallen to around 11.3%, the lowest level in 15 years. This improvement is largely due to the robust economic growth under Sánchez’s leadership during recent crises.
Despite being high by European standards, many sectors in Spain, such as technology and construction, are facing a shortage of skilled workers. Rural areas, in particular, are struggling with depopulation and are finding it increasingly difficult to maintain essential infrastructure.
“We have elderly people who need caregivers but can’t find them. Businesses are looking for programmers, technicians, and builders but can’t find them. Rural schools need more children to avoid closing,” said Prime Minister Sánchez.
Sánchez also plans to ask the European Commission to bring forward the implementation of the EU-wide migration pact to next year. Under this plan, migrants and asylum seekers would be more evenly distributed among EU member states based on factors like GDP and population.
Spain’s Financial Market More Stable than France
Spain’s positive economic developments are also reflected in its financial market. Recently, the yields on 10-year French government bonds surpassed those of Spain for the first time. In simple terms, investors now receive a higher return for purchasing French government bonds compared to Spanish ones, suggesting that investors see Spain as a lower-risk country than France, the EU’s second-largest economy.
In January 2024, Spain’s bond yields were still 0.4 percentage points higher than France’s. During the worst of the Eurozone crisis, the difference between Spanish and French bonds was nearly five percentage points.

This article was updated on October 11 to include the information that Spain intends to focus on migration in its labor market policy in the future.
This work is licensed under the Creative Common License. It can be republished for free, either translated or in the original language. In both cases, please cite Kontrast / Michael Thaler as the original source/author and set a link to this article on Scoop.me. https://thebetter.news/spain-economy-boom/

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Portugal caps rents, gives away vacant flats & suspends VAT on basic foodstuffs

Publicerad denFörfattareneuezeit.at

Inflation is driving more and more unexpecting people into poverty. The Austrian People’s Party (ÖVP) and the Greens nevertheless refuse to take action against the skyrocketing prices. The Portuguese government shows that there is another way: it already capped rents last year. Recently, Portugal has started renting out vacant flats and suspended VAT on 44 basic foodstuffs.
Between 2017 and 2022, rents in Portugal increased by 42 percent. The country is one of the poorest in Western Europe. Although the government only raised it in December, the minimum wage is just 760 euros a month. More than half of workers earn less than 1000 euros per month.
The government of the socialist Prime Minister António Costa has therefore limited rent increases. Landlords can increase them by a maximum of two percent. Costa’s next step is to put about 730,000 vacant flats on the market. If a flat remains unoccupied for more than two years, Portugal will have it forcibly rented out.
Putting vacant flats on the market
Owners of vacant flats receive a rental offer from the municipality, to which they must respond within ten days. If they do not accept the offer, they have another 90 days to rent out the flat or use it themselves. If the owners continue to do nothing, “municipalities proceed with the compulsory leasing”, according to the planned law. In this case, the municipality manages the flat and, if necessary, carries out renovation work to make it habitable. They then put the flats on the market for five years at low rents. According to the government, rents may not exceed 35 per cent of the family income. The income – minus the renovation costs – is paid out to the owners. There is an exception for properties that registered as tourist enterprises or local accommodation establishments. Flats that are currently being worked on or are about to be sold are also excluded.
Austria: ÖVP & Greens fueling inflation instead of relieving the burden on tenants
In Austria, the situation is different. Here, too, the government discussed a rent brake at the end of February. In the end, however, the ÖVP and the Greens opted for a housing cost subsidy. While 250 million euros will be paid out as a one-time payment, the increased rents remain the same or rise further in the future. Moreover, the housing cost subsidy ends up back with the landlord after the rent payment. The inflation rate in Austria in February was 11 per cent. Tenants not only have to pay higher prices for energy and electricity like everyone else, but also higher rents.
Gabriel Felbermayr, head of the Economic Research Institute (Wifo), also criticises the government’s approach. “I thought it was clear by now that more and more new cash transfers can cushion social hardship, but do not dampen inflation, instead they even fuel it”. The state does not have these 250 million euros and has to borrow them on the capital markets; if you put new money into the economy, it drives up prices, Felbermayr said. In his view, the rent brake was a way to get out of the price spiral.
Portugal suspends VAT
The government in Portugal on the other hand, is not only putting vacant flats on the market, it is also curbing rising inflation by suspending VAT. For the time being, it is suspending VAT on 44 basic foodstuffs for six months. If necessary, it wants to extend this period. This measure is part of an agreement with producers and retailers to stabilize prices as soon as possible. The government also foresees financial support for farmers and livestock in this framework. The suspension of VAT will make bread, eggs, meat, oil, yoghurt, fish and cheese, among other things, cheaper and more affordable for Portuguese households.
This work is licensed under the Creative Common License. It can be republished for free, either translated or in the original language. In both cases, please cite https://neuezeit.at / Kasija Milošević as the original source/author and set a link to this article on Scoop.me. https://scoop.me/portugal-vacant-flats-vat/

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