Inflation: Special tax for Spain’s banks – stock prices across Europe react significantly
Madrid To help consumers shoulder high inflation, Spanish Prime Minister Pedro Sánchez is borrowing money from the banks. His socialist-left-populist government imposed a special tax on them for two years. This should bring the Spanish state 1.5 billion euros per year.
The surprise announcement has pushed shares in the major Spanish banks into the red. Caixabank lost a good nine percent, BBVA and Santander each 5.5 percent. Overall, the market capitalization of the five largest Spanish banks shrank by six billion euros on Tuesday.
Foreign banks also gave way, Deutsche Bank lost around two percent. For the institutes, the cut comes at a time when they were hoping for higher margins once zero interest rates had ended. Given the looming recession, the special tax is extremely bad news.
Sánchez explained the move on Tuesday by saying that the burdens of high inflation and the war in Ukraine must be shared “fairly and equally”. “We will not tolerate any business or individual taking advantage of the crisis at the expense of the vast majority, because the difficulties of the majority cannot be the joy of a minority,” he said at Tuesday’s State of the Union debate.
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He also asked energy companies to pay up and taxed the special profits generated by the high gas price for two years. He wants to earn two billion euros a year with this. Unlike in the case of the banks, the government had already mentioned this tax as an option. Energy stocks reacted much less strongly.
Everything more expensive
This is how high the inflation rate was in Spain in June.
Numerous governments are currently trying to mitigate the consequences of inflation for the population. In Spain, the inflation rate was 10.2 percent in June and thus above the EU average.
In the coming year, parliamentary elections are in Spain and Sánchez” Socialists are well behind the opposition Partido Popular in polls. To help consumers, Sánchez announced, among other things, that local trains would be free for three months.
More: What are other EU countries doing to counter rising prices and supply risks?