The left-wing Spanish government has introduced an initiative to mitigate the economic consequences of the war in Ukraine and rising inflation to the tune of 10 billion euros ($10.6 billion).

Prime Minister Pedro Sánchez presented the measures for the upcoming year – an election year – in Madrid on Tuesday. The package scraps some previously introduced measures and introduces new ones.

The aim is to ensure that the aid reaches those who really need it, Sánchez said.

The subsidy of 20 cents per liter for petrol and diesel will be abolished as of January, with a few exceptions for haulage companies, agriculture and fishermen communities. The measure, which was introduced on April 1, 2022, had been criticized because it also benefited higher-income earners who did not really need the help.

Particularly targeted at needy families are the waiver of VAT on basic foodstuffs and the reduction to 5% for vegetable oil and noodles during the first six months of 2023.

In addition, pensions are to increase by 8.5% and particularly low pensions by 15%. Some 4.2 million families with an annual income below 27,000 euros are to receive a one-off payment of 200 euros, a so-called "food cheque."

In order to relieve tenants, rents for existing contracts are frozen for half a year. Free rail travel in local and regional transport will be extended until the end of 2023.