Inflation marks a difficult economic development for Spanish households. According to the INE forecast, the price increase so far this year has already reached 4%. The data is extremely disturbing, because the increase in wages does not follow the same rhythm and threat with reducing the purchasing power and standard of living of the Spanish.
For now, wage increases in Spain are, according to the latest data from the Ministry of Labor and Social Economy on collective agreements (which is from August), at 1.5%. Very far from the evolution of inflation advanced by the INE. In fact, with this data in hand, the price increase is 160% higher than the salary.
In fact, the celebrated rise in the minimum interprofessional wage (SMI) would also have fallen short of the rise in the cost of living estimated by the INE. The rise is ‘only’ 1.5%, which leaves the SMI until 2022 (when the Government wants to raise it again) at 965 euros per month in 14 payments.
The significant increase in inflation can be prolonged and maintained throughout the remainder of the year, or it can even increase. The senior economist at Funcas, María Jesús Fernández, has indicated that it may be above 3% or, “even, 4%” for six to seven months if the prices of energy and some raw materials remain high.
Here the key are energy prices. Specifically, the INE, in its advance CPI forecast for September (the highest in the last 13 years), highlights the increase in what households pay for electricity and for fuels and lubricants for personal vehicles.
And the situation can get worse. The price of electricity could continue to rise until March and the price of oil is not corrected downward. For this reason, Fernández has estimated that Spain can suffer a period of several months with high inflation rates.
In any case, Fernández, in statements to Europa Press, has pointed out that so far this century there has not been in Spain any lasting period with high inflation, but rather that they have always been something transient.
Effects edit
In addition to the effect that the rise in the CPI has on the purchasing power of workers, while it lasts this situation can produce a significant rise in household rents, although it will depend on each case.
Many rental contracts include a clause that allows an increase in accordance with the IPC when 12 months have passed since its conclusion. So landlords and tenants will have to be vigilant.
On the other hand, the rise in the CPI, if it remains at 4%, will also have a important impact on public spending. By the end of the year, everything seems to indicate that Congress and Senate will approve that pensions are revalued year by year according to inflation.
This will mean, based on planned pension spending in 2021, that the item for these benefits will rise about 6,520 million euros in 2022.
To this we must add that the Executive, in the Stability Plan presented to the European Commission, announced that next year Social Security will pay a “compensatory pay due to an inflation in 2021 possibly higher than the 0.9% to which pensions have been revalued this year “.
In other words, with the current levels of the CPI, the Government will have to assume an ‘extra’ pay for pensioners of at least 1,900 million. Added to the aforementioned revaluation, they leave an increase in spending on these benefits of 8,420 million.
Thus, in 2022, with these conditions, the public allocation for pensions will have to be, at least, 171,400 million. And it is possibly greater since José Luis Escrivá, Minister of Social Security, has already warned of his intention to raise the minimum pensions above the CPI.
This increase in public spending will become good news for the pockets of Spanish pensioners. The monthly benefit that retirees will receive, which today is 1,193 euros per month on average, will rise to 1,240 euros, 47 euros more. If the CPI remains at 4%, of course.
Follow the topics that interest you
Reference-www.elespanol.com