Spain to Spend $17.5 Billion to Offset Economic Hit From War

(Bloomberg) -- Spain plans to hand out about 16 billion euros ($17.5 billion) in aid through the end of June to mitigate the impact of the war in Ukraine.

The government will offer some 6 billion euros in tax breaks and direct aid with another 10 billion in loans for small- and medium- sized companies as part of a sweeping package of policies to counter surging costs, Prime Minister Pedro Sanchez said Monday in Madrid. The package will be approved Tuesday by the Cabinet, he said.

Spain, together with Portugal, will send a proposal this week to the European Union to to cap gas prices, on the back of a special authorization announced late last week by Brussels authorizing the two countries to intervene in power markets. 

The government is betting that a combination of economic aide and finding a way to decouple gas prices from electricity costs will help defuse internal tensions. Spanish inflation in February reached the highest in more than 30 years and power prices have been setting new records for months. 

Other measures announced by Sanchez Monday include:

• Households to be offered EU0.20 cents discount on fuel, with the government paying 15 cents and fuel providers the rest. Discount in place through June 30
• Lower electricity charges by 1.8 billion euros this year
• Some 360 million euros in aid for agricultural industry
• Fish industry to receive 68 million euros

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