Pedro Sánchez announces €5 billion plan to cushion Middle East war impact on Spain

Pedro Sánchez on Friday unveiled a sweeping €5 billion relief package to cushion the economic shock of the ongoing Middle East conflict, including steep cuts to energy-related taxes.

Announcing the plan after an emergency cabinet meeting, the Spanish Prime Minister said the 80-measure package is designed to shield households and key sectors from surging costs triggered by the war.

“Extraordinary situations require extraordinary responses,” Sánchez said.

The measures, set to take effect from Saturday after publication in the official gazette, include a significant reduction in value-added tax (VAT) on gas and fuel. The move is expected to lower pump prices by up to 30 euro cents per litre—translating to savings of around €20 per tank for an average car.

The government will also cut electricity taxes by 60 percent, suspend the production tax, and reduce VAT on electricity from 21 percent to 10 percent. To support critical industries, Madrid has announced a direct subsidy of €0.20 per litre of fuel for transport operators, farmers, ranchers and fishermen, along with equivalent assistance for fertiliser purchases.

In addition, Sánchez revealed plans for a temporary nationwide rent freeze, though the proposal still requires parliamentary approval following negotiations with coalition partner Sumar. “While these measures cannot fully shield Spain from the consequences of this illegal war, they will help soften the blow and make its impact more manageable,” he said.