Spain's government injects 15bn into the economy with a raft of initiatives to soften the effects of inflation

The extension includes new measures to try to inject some oxygen into the economy which is starting to be seriously affected by the endless rise in inflation, which can no longer be considered temporary as it is likely to last at least until the end of this year.

To protect families, industries and companies from the increase in prices, the government will continue with measures such as the discount of 20 céntimos per litre of fuel, a cap on rent and the ban on staff dismissals due to rising energy costs.

It will also now give a cheque for 200 euros to vulnerable families, subsidise the cost of public transport, reduce the rate of IVA, (the Spanish value added tax), on electricity bills and limit the maximum price of a bottle of butane gas, among other measures.

This extension is going to cost the government more than nine billion euros, Prime Minister Pedro Sánchez explained at a press conference to announce the new plan, following the ministers' meeting. Of this sum, 5.5 billion euros is the cost of applying the measures and the other 3.6 billion is the drop in income due to tax reductions.

Taking this into account with the cost of the first set of measures, the total cost to the state this year will be nearly 15 billion euros, which is more than 1% of Spain's GDP, and it is all in an attempt to contain the rise in prices by about 3.5%.

The main measures under this new plan are as follows:

This was the subject of a great deal of debate during the week of negotiations, but in the end the Cabinet gave the go-ahead for a reduction of 50% in the price of monthly season tickets for state-owned transport (such as Renfe), and a 30% cut for season tickets for regional or locally run buses and underground train services, which these authorities are free to cut by up to 50% from their own resources.

The measure will apply from 1 September to 31 December and will be funded by an extraordinary credit of 221 million euros, the Ministry of Transport has confirmed.

The government also approved a direct grant of 200 euros for families with low income, and this can be applied for during July.

This will apply to workers, the self-employed and unemployed who earn less than 14,000 euros a year, in other words households whose income is lower than the minimum wage.

It will be a one-off payment for the full amount and to be eligible to receive it the beneficiaries must reside in households where the combined income of all occupants was less than 14,000 euros in 2021 and whose assets, without taking their home into account, do not exceed 43,196 euros.

This measure is expected to benefit 2.7 million people.

The value added tax on electricity is to be dropped from 10% to 5%, which will provide a saving of around five euros on an average 100-euro bill. The government estimates that this will lead to a reduction in its income of around 220 million euros every three months.

A year ago, when the price of electricity began to rise and was at 85.73 euros per MWh, the government dropped the rate of IVA from 21% to 10%. Now, and despite the measures it has put into effect, such as the cap on the price of gas, the price per MWh is over 200 euros.

The other related measures are also to continue, such as the extension to the welfare subsidy which is helping nearly two million households, the suspension of the tax on electricity generation (7%) and the reduction from the special tax on electricity from 5.11% to 0.5%.

The maximum price of a bottle of butane gas will be limited until 31 December and "will contribute to the wellbeing of the most vulnerable", Sánchez explained.

"We are going to freeze the price of the bottle of butane again, as we did during the coronavirus crisis," said the deputy prime minister, Yolanda Díaz, and this will be an "important support for many households in this country so that cooking or using hot water will not become even more expensive".

No company which is receiving assistance from the government may dismiss staff due to the rising cost of energy. At the end of May, 27,380 workers were still furloughed after the pandemic. This system (which is now known as Mecanismo RED) is still active but with fewer subsidies than before. In any case, businesses that use it - if they can show that they are being affected by this new crisis - will not be able to dismiss their employees.

The government is continuing to restrict rent increases to 2% on contracts which come up for renewal and are supposed to rise in line with inflation.

This was one of the most welcome measures in the first anti-crisis plan because the problem faced by many tenants at that time was that their landlords were insisting that the rent had to increase by the rate of inflation, which could have raised the amount they have to pay each month by 8%.

The discount of 20 céntimos per litre of fuel will continue till the end of the year. Three months ago this was greatly appreciated but it is not having as much effect now because prices have continued to rise. Last weekend petrol was around 2.13 euros a litre and diesel 2.10 euros.

The constant increases have meant that this subsidy is barely noticeable. Hauliers recently asked for the discount to be raised to 40 céntimos per litre for their sector, but the government did not comply.

Businesses in the agricultural, transport and fishing industries will still be able to delay making their monthly payments to Social Security, as this measure has also been extended, and the 4% rate of IVA on surgical masks is also to be maintained until the end of the year.