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MONEY

How Spain’s cost of living increase is worse than in France and Germany

Eurostat data reveals that Spain is the major EU economy where people are having to deal with the biggest rise in prices, from electricity and fuel, to food and travel costs. 

Published: 22 August 2022 09:59 CEST
spain inflation cost of living
The Spanish government has implemented measures aimed at stopping the spiralling costs of electricity, fuel and rent, but the evidence suggests that they haven't been fully effective. (Photo by Gabriel BOUYS / AFP)

Although the price of goods and services has risen exponentially across the European Union over the past year, the EU’s Harmonised Index of Consumer Prices (HICP) showcases how Spain is where the cost difference is greatest, especially when looking at the EU’s largest economies: Germany, France, Italy and Spain. 

The HICP represents the change over time in the prices of consumer goods and services purchased by euro area households.

It’s “harmonised” because all the countries in the EU follow the same methodology, ensuring that the data for one country can be compared with the data for another.

Spain is moving past most of its European neighbours in terms of this harmonised inflation rate. It’s 1.8 percent higher than that of the eurozone and 0.9 percent above the EU average.

Spain’s HICP stood at 10.7 percent in July compared to 6.8 percent in France, 8.4 percent in Italy or 8.5 percent in Germany.

Source: Eurostat

There are 13 other EU nations where the HICP is higher than Spain’s (including Lithuania, Latvia and Estonia where the rate is now above 20 percent), but these are deemed smaller EU economies. 

Based on data from Spain’s National Statistics Institute, the biggest price increases in July 2022 compared to figures from July 2021 were electricity (49 percent more expensive), hotels (33.8 percent more costly), fuel and gas (23.9 percent higher), international flights (+21.6 percent) and grocery shopping (+13.5 percent).

The Spanish government has implemented measures aimed at stopping the spiralling costs of electricity, fuel and rent, but the evidence suggests that they have been less effective than similar methods used in the EU’s other major economies, despite the fact that Spain is less dependent on Russian gas. 

According to Spanish think tank Funcas, the country’s inflation rate will remain in double digits throughout August and will start to drop throughout autumn until reaching 8 percent by December. 

INE reported in mid-July that the country’s 10.2 inflation rate was the highest level the country had experienced since 1985. 

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BANKING

Spain’s Banco Sabadell rejects BBVA merger offer

Banco Sabadell has turned down the offer of a possible merger with BBVA, Spain's second-largest bank, more than three years after it turned down a similar offer.

Published: 7 May 2024 09:12 CEST
Spain's Banco Sabadell rejects BBVA merger offer

Sabadell’s board had “carefully considered the proposal” but had concluded that it was “not in the best interest” of the bank and its shareholders, it said in a statement sent to Spain’s CNMV markets commission.

“The board believes that the proposal significantly undervalues the potential of Banco Sabadell and its standalone growth prospects,” it explained, saying it was “highly confident in Banco Sabadell’s growth strategy and its financial targets”.

It also pointed to the recent “decline and volatility in the BBVA share price” which reflected “the uncertainty around the value of the proposal”.

A merger would have created a banking powerhouse capable of competing with Santander — Spain’s leading bank — as well as with major European banks like HSBC and BNP Paribas.

On April 30, BBVA informed the CNMV it had reached out to its smaller rival “to explore a potential merger between the two entities” but gave no further information on the possible tie-up.

Banco Sabadell confirmed receiving “a written proposal… about a merger” and pledged to “carefully analyse all aspects of the proposal”.

BBVA, which also has operations in Mexico, Argentina and Turkey, is Spain’s second-largest banking group in terms of capitalisation and has 74.1 million customers.

Sabadell, which ranks fourth, operates in 14 countries and has nearly 20 million customers.

News of the merger proposal had won a mixed reaction on Madrid’s Ibex 35 exchange, with analysts saying it was due to the unequal nature of such a tie-up.

The two banks had initially announced a plan to merge in November 2020 with the aim of better weathering the economic crisis triggered by the Covid-19 pandemic.

But it was scrapped just 10 days later, with Sabadell saying that BBVA’s offer did not reflect the real value of its business.

In the ensuing months, Sabadell undertook a major restructuring plan to slash costs that resulted in 1,800 redundancies, with BBVA going through a similar process, shedding 3,000 jobs.

Both have since recovered as has the wider Spanish banking sector which posted record profits in recent months, despite an exceptional windfall tax imposed by Spain’s left-wing government to help households cope with soaring consumer prices.

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