This Week on DearExpat,: Surging Electricity Prices, A Record Drop in Unemployment, And More...
By Marta Caro
👋🏻 Hello and welcome to a new season of DearExpat,. As you can see, we have migrated to the leading newspaper platform Substack to harness all its possibilities and to provide a smoother reading experience to our subscribers. The newsletter remains free of charge, but whoever wants to contribute will have access to extra content.
This week the news making headlines on top Spanish media outlets are related to the economy, the kind of news with the ability to turn your recent holidays into a hazy dream of a distant past in the blink of an eye.
But not all of them are that bleak; some of them are spirit-lifting. We are covering the surge in electricity prices, hitting lower classes and small businesses the most; the historical fall of unemployment rates in August, the rise of the minimum wage and the boost in tourism, one of the main drivers of the Spanish economy. And, of course, we are also covering the latest about the coronavirus pandemic. Let’s start with that.
🦠 On Wednesday, 31 August, Spain fulfilled the goal of vaccinating 70% of the population (33.2 million people) before September, becoming the first country of its size to do so. However, the more contagious Delta strain has rendered the objective inadequate. Now health authorities have warned that for herd immunity to be reached, at least 90% of the population must be immunised.
Vaccines have proved to drastically reduce deaths and severe cases, driving down hospitalisations and Intensive Care Units (ICU) admission rates across the country. However, precautions should still be followed since the protection of the vaccine wanes over time. Face coverings are not compulsive, but it is advisable to wear them in enclosed, badly ventilated spaces.
In most of Spain’s territories, bars and nightclubs are still closed to avoid a spike among unvaccinated young people. So far, over 79% of people older than 12 have already been fully vaccinated.
Regions such as Madrid, Andalusia and the Canary Islands have reopened with restrictions. In other territories, business owners have demonstrated and even threatened with hunger strikes if restrictions are not lifted. Meanwhile, young people continue to gather en masse in parks and on the streets to binge drink, putting local authorities under a lot of stress and giving arguments to business owners to reopen by defining clear protocols.
The Health Ministry announced yesterday that the 14-day cumulative incidence now stands at 210,6 cases per 100,000 inhabitants. While it is still a high-risk level, the data point is keeping a steady downward trend.
⚡️ Spain Consecutive Record-Highs in Electricity Prices
Filomena, the snowstorm that plunged the Madrid area into disaster on January 8, lead to a surge in electricity prices, setting a second record high (94€/MWh) since 2002. Now we know it was a harbinger of what would become next.
Over July and August, Spain has witnessed four consecutive record highs, leaving the whole country dumbfounded and many scared to death at the prospect of opening the electricity bill. From 9-13 August, prices increased almost every day, breaking one record after another. On Monday, prices set yet another record high, reaching 124,45 euros per MWh. And only yesterday a new record high was registered at 140,23 euros, putting a strain on the already battered economies of Spanish working and middle classes.
Spain is not the only country that is struggling with unprecedentedly high electricity prices. Germany and the U.K. have seen similar hikes over the summer in the context of high temperatures and the return to pre-pandemic consumption levels.
Spain’s wholesale electricity market, which regulates the prices that companies providing services to households pay, has its peculiarities. Over two-thirds of the energy consumed in Spain is imported. It is sourced from nuclear power plants, coal-fired thermal power plants, renewables and combined cycle plants.
Spain relies heavily on liquefied natural gas, which is now running low because Asia, especially China, is stocking up on gas after a harsh winter, boosting prices from around €16 MWh to €51,50 now. The low output of renewable energies is also soaring prices, as well as the European Commission trading scheme to cut CO2 emissions, which is proving to be very taxing for Spanish consumers.
Teresa Ribera, Spain’s deputy prime minister for the environment, has called on the EU to limit surging electricity prices to unburden ordinary citizens of the rising costs. In an interview with the Financial Times, Ribera warned that it “could provoke a backlash against carbon-cutting initiatives”, and asked for an update of the wholesale market to adapt to a reality in which the costs of different technologies are much higher.
🛑 Electricity Prices, A Hot Political Topic
Unidas Podemos, the junior partner in the coalition government with the Socialist PSOE, as well as the opposition parties, are putting pressure on the socialists to carry out stronger measures to rein in the price hikes.
The main categories on the Spanish electricity bill are consumption, transmission and distribution costs, and fees for promoting renewable energies and covering tariff deficits. The regulated tariff is indexed to the wholesale market, which means the consumption category is at the mercy of the soaring gas prices.
In a bid to reduce its impact, the government has temporarily cut VAT on energy, a short-lived relief since prices have kept surging, eating up the difference. New legislation is being drafted to collect windfall profits from hydroelectric and nuclear generators that have benefited from the high carbon and electricity prices, which account for hundreds of millions. Hydroelectric companies have come under fire for draining reservoirs in Zamora and Cáceres during the mid-August heatwave to profit from high electricity prices., leaving lakes almost at 15% of their capacity.
On Thursday, Unidas Podemos submitted draft legislation to the Congress of Deputies to create Producción Eléctrica Española (EPE), arguing that only 5% of the electricity generated in Spain is public and that countries including France, Italy, Switzerland, the Netherlands and Austria already run their own public electricity companies.
UP’s proposal comes a few days after Teresa Ribera said the government would not limit market prices because it is against European law.
📊 A Decrease in Unemployment in August and the Rise of the Minimum Wage
According to data released on Thursday, unemployment fell by 82,583 people in August compared to July, driving down the number of jobless workers to 3,333,915 workers. For the Labor Ministry, this is the biggest fall in the statistical series that began being created in 1996.
A fall in unemployment was imperative for Nadia Calviño, the first deputy minister, who is also in charge of the country’s finances, to support a rise in the minimum wage. Prime Minister Pedro Sánchez announced on Wednesday the increase had been approved, saying there would be “no economic recovery if it does not reach the pockets of all Spaniards in the form of more jobs, better wages and more dignified pensions”.
The “imminent increase” of €12 to €19 will come in handy after the surge in energy prices, which has pushed up inflation. Consumer prices rose 3.3% in August, the biggest increase since 2012.
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And this is all for now. We are leaving with this stunning poster made by Barcelona-based, French-born artist Malika Favre. If you happen to be in Barcelona around the 24th September, make sure to check out all the activities and free live music the city hall organises every year.