Life costs and the Government sets its pace

Since the beginning of the month, in the wake of the American and Israeli operation in Iran, fuel prices have soared in Portugal, with an average increase of 30% in diesel and 15% in gasoline. This escalation, which only has a recent parallel with the 2022 crisis triggered by the invasion of Ukraine, is already generating negative impacts on the economy and, in the long term, will have much more serious repercussions. Especially if there is no quick solution to the Hormuz issue, as appears to be the case.

One of the most talked about effects in recent days is the significant increase in the basic food basket. According to Deco, basic products for everyday life have reached the highest value since this assessment was made, in addition to other worrying signs, such as the predictable increase in gas for family consumption. It is no coincidence that Banco do Portugal has already turned on the yellow light on its Economic Bulletin monthly, cooling the growth forecast to 1.8% and signaling rising inflation for the end of this year, very close to 3%. This, in an assessment closed on March 13th and which ignores the most serious effects of instability in the Middle East.

Faced with this alarming scenario and the well-founded concerns about the increase in the cost of living, the Government went into hiding. Or rather, it took refuge in the ISP’s automatic review formula which, according to available data, will be producing an absolutely marginal effect in moderating fuel increases. Furthermore, it does not in the slightest affect the State’s fiscal greed, which continues to take almost 60% of what the Portuguese consume at the gas pumps.

Meanwhile, here next door, the Spanish government forced the shock that circumstances imposed: it gave up 11% of direct revenue in VAT on all energy products (fuel, gas and electricity) and robustly cut the Castilian equivalent of the ISP. As a result, this week alone, the average price of a liter of gasoline has already dropped by around 30 cents and by 15 cents in the case of diesel.

Not suspected of being a Sanchist, I recognize the ability that our Iberian neighbors had in reacting energetically and proportionately to an adverse external situation. Around here, we are marking time or waiting for circumstances to change. Always with the State protected and the bill to be paid by companies and families.