Gold, a staple in a 'green' investment portfolio

In the face of the climate emergency, the economy is tending to decarbonise at a rapid pace. Against a backdrop of rising taxes on polluting industries, a study shows that increasing the share of gold in a diversified investment portfolio reduces its overall carbon footprint without affecting returns.

EU data confirm that Europe experienced its warmest summer ever in 2022 and that global temperatures over the past eight years have been the highest since records began. The pace of global warming urges a drastic reduction in greenhouse gas emissions. This is the only way to avoid the catastrophic consequences associated with climate change.

Given this reality, the process of decarbonising the economy is such an urgent priority that it is conditioning a large part of current political, business and investment decisions. In this regard, a report by the consultancy Urgentem concludes that the inclusion of gold in a diversified investment portfolio “can have a positive impact on portfolio performance from a climate transition perspective”, as it reduces the overall carbon footprint of the portfolio without affecting returns. 

More gold, fewer emissions

The study analysed how diversified investment portfolios with different asset mixes would have performed over five years to determine how the inclusion of gold affects the risk-return profile and the overall carbon footprint.

Their conclusion is that, for example, in a portfolio with 70% equities and 30% bonds, devoting 10% of that portfolio to gold would reduce emissions by 7% while increasing the percentage of gold to 20% would reduce emissions by 17%. Furthermore, there are clear indications that the inclusion of gold in the portfolio improves the risk-return profile.

Although none of the asset mixes analysed would achieve the zero emissions target by 2050, the ones that would come closest would be those that include a higher percentage dedicated to gold. In fact, the only ones that manage to reduce emissions are those that devote at least 20% of their investment to gold.

In terms of the contribution of investment portfolios to the projected global temperature rise up to 2100, gold would also play a very positive role in mitigating its climate impact. The study estimates that devoting half of the portfolio to gold would result in a 40% reduction (more than 1°C) in the warming generated by that portfolio. A portfolio with 70% equities and 30% bonds would generate an increase of 2.96°C, while a portfolio with 45% equities, 5% bonds and 50% gold would only increase it by 1.76°C.

What if emissions taxes were raised?

One of the main policy tools to curb climate change and accelerate the transition to an emission-free economy is the taxation of greenhouse gas emissions. In this respect, analysis of carbon dioxide prices shows that a higher proportion of gold will help reduce the market risk for a portfolio. The more stringent emission reduction policies become, the more desirable it will be to increase the share of gold in the portfolio.

The authors of the study admit that the limited time frame (five years) of the data initially collected and the relative outperformance of gold over this period may have biased expectations of gold returns, but they caution that longer-term analysis also confirms the favourable effect of gold inclusion on the return profile of the portfolio, albeit to a lesser extent.

Moreover, the report’s authors assume that an investor inherits a substantial proportion of the carbon footprint associated with gold mining and production. Their forward-looking analysis, therefore, allows them to assess how much portfolios would be affected by the potential decarbonisation of this precious metal.

If you want to discover the best option to protect your savings, enter Preciosos 11Onze. We will help you buy at the best price the safe-haven asset par excellence: physical gold.

At its annual meeting in Davos, the World Economic Forum announced that a new approach to the functioning of our societies is needed after the pandemic has shown the weakness of the current economic model. Consequently, it proposed to reset the global economic system by promoting a more sustainable model. A paradigm shift with geopolitical ramifications where gold will play a key role.

The Great Reset is the term the World Economic Forum (WEF) has chosen for its initiative that aims to rethink the future of global relations, the direction of national economies, the priorities of society, and the reference of business models. In short, it is the thought that many people had in mind after experiencing the sanitary crisis.

At first glance, it might seem like a utopian vision of the economy of the common good as an alternative model to capitalism, or as the WEF points out, “a major reboot of capitalism is needed”, but in practice, at least for the time being, it is nothing more than a declaration of intent, vaguely defining the way forward, but without specifying the steps to be taken.

That said, in the current economic context of an energy crisis, an inflationary crisis and a debt crisis, caused in part by the pandemic and in part by the sanctions imposed on Russia as a result of the conflict in Ukraine, it is clear that a reset of the established economic model is not only desirable but inevitable.

The loss of credibility of the international monetary system

This economic crisis defined by record levels of public debt frames a global macroeconomic scenario that will lead to a recession in several Western countries. Moreover, the danger of generalised stagflation, i.e. a scenario of high inflation, a slowing rate of economic growth, and where unemployment remains high, is an unavoidable reality that more than one economy will have to face, given that the fiscal and monetary policies that have been applied to tackle the crisis are further increasing the debt of the States.

The increase in macroeconomic volatility has meant that now more than ever, the central banks of many countries are buying gold as if the world were coming to an end in order to protect their reserves. While it is true that countries not aligned with US geopolitical interests have been buying gold on a massive scale for a decade to shield their economies from economic sanctions and the eventual disintegration of the dollar as the world’s reserve currency, it is surprising, or not, that the central banks of Western countries are also joining the ‘gold rush’.

Given this scenario, one might think that the days of the current monetary system are numbered. As the financial analyst, José Luis Cava, explains, “everything points to the fact that there is an agreement between the Central Banks of each Eurozone country and the ECB to harmonise the physical gold reserves of these Central Banks until they reach 4% of GDP”, and he continues, “debt levels have shot up to absolutely unsustainable levels. China, Russia, and India have announced new currencies backed by physical gold”.

What is clear is that whatever the final outcome of the paradigm shift in the global monetary system that is underway, it is obvious that The Great Reset has been underway for years, regardless of what is said or desired from Davos.

If you want to discover the best option to protect your savings, enter Preciosos 11Onze. We will help you buy at the best price the safe-haven asset par excellence: physical gold.

The low yields offered by traditional bank deposits are pushing people to look for safe alternatives to avoid money depreciation. 11Onze offers savings ranging from small to large amounts, always with very low risk.

One of 11Onze’s objectives is to help its community protect their savings and purchasing power. This means trying to get a return on their money, and doing it safely. Currently, 11Onze accumulates proposals that allow you to save from €222 to more than €125,000. We review all the options in a conversation with 11Onze’s product manager, Isaac Sène. In this podcast, we discover not only the current products, but also the three new products that will be made available to the community.

Savings options for everyone

Which savings option suits you best? Choose one based on the minimum capital.

• 222€. This is the cost of the Krugerrand gold coins.
• 525€. Britannia gold coin.
• 3.000€. Buy gold from Preciosos 11Onze. Bullion in custody or at home. In the first year of pooled purchases, Preciosos 11Onze has proven that it is able to protect savings from inflation.
• 3.000€. Investing in 11Onze, as El Gran Salt investors did.
• 4.000€. Available soon. A new product linked to gold. Discover it by listening to the podcast.
• 25.000€. Available soon. New product from an external supplier. All the information soon on 11Onze Recommends. Find out more clues about this fund with the principal sum insured and returns above inflation.
• 125.000€. On 11Onze Recomienda, you can find all the information about Guaranteed Funds. Yields between 2.5% and 165%.

Security at the core

Saving with 11Onze is always based on one maxim: they must be safe propositions. That is why we have made a firm commitment to gold, because of its historical role as a store of value. The fact that money cannot be lost is also clear with the products selected by 11Onze Recomana, funds that guarantee the capital invested. But the clearest proof that security is at the core is provided by El Canut. The 11Onze current account does not work like a normal bank account, which can use the money from the deposits for its expenses. The 11Onze accounts are off-balance sheet, because that is how Electronic Money Institutions (EMI) are regulated. In addition, there is an insurance that guarantees 100% of the amount in the accounts.

What else will 11Onze bring to your community in the near future? The product manager, Isaac Sène, warns that “the next step will be crypto”. Of course, as always, with security at its core.

If you want to discover the best option to protect your savings, enter Preciosos 11Onze. We will help you buy at the best price the safe-haven asset par excellence: physical gold.

People who celebrate Valentine’s Day spend an average of 80€. Is it possible to celebrate it with romantic but surprising gifts that do not lose value? That’s what Càrol Rafales, from the 11Onze product team, and Gemma Vallet, director of 11Onze District talk about in a new episode of Territori 17 on Ràdio Cardedeu.

The most common gifts for Valentine’s Day are, according to Gemma Vallet, “chocolates, flowers and jewelry. This year we foresee an increase in jewelry sales”. Valentine’s Day is a celebration of Catholic origin but intensely amplified from the United States. It is the first big sales day after the Christmas holidays and causes each lover to spend an average of 200 euros, or 24 billion dollars in the United States.

In our country, spending is much more modest, around 80€, and is spent mainly on experiences. Now, however, inflation bites off part of the amount and “with the same money we buy fewer things,” says Càrol Rafales. In this environment Rafales, from 11Onze’s product team, adds that “we must be very responsible with our purchases. For this reason, perhaps instead of jewelry a good option is to buy gold pieces, which retain their value and over time allow us to recover it. As Rafales explains in Territori 17: “you can keep an ingot or a coin, and if in the future you have a need, you can recover that value or even make a profit”.

Is it unromantic?

Is it less romantic to give coins or a gold bar than to give jewelry? “It depends,” says Rafales “maybe in a few years you can resell the gold and with the proceeds make the couple’s trip that they can’t afford now.” Gold, is a long-term relationship and is therefore a good way to invest in the couple’s relationship.

If you want to buy gold coins from 220€, you can fill out this form. In 11Onze we celebrate the Amor amb Or.

If you want to discover the best option to protect your savings, enter Preciosos 11Onze. We will help you buy at the best price the safe-haven asset par excellence: physical gold.

If you also celebrate Valentine’s Day, you must be looking for a unique and special gift that symbolises your love for the person you cherish. At 11Onze we suggest you give ‘Amor amb Or’ as a gift. A gift that will last forever and that retains its value over time. For Valentine’s Day, gift gold coins!

We all know that Valentine’s Day in Catalonia is Sant Jordi, but if you want to give something more than just a rose or a book to the person you love… maybe you want to jump on the bandwagon of romantic gifts for Valentine’s Day. So, if you’ve already ruled out cologne, chocolates, romantic food and other typical gifts… at 11Onze we have a proposal for you that is as classic as it is surprising: give gold.

Gold coins for the person you love

Gold has always had an air of mystery and magic, a timeless gift with a special symbolic meaning that represents love and prosperity. Celebrate special moments with ‘Amor amb Or’. Surprise your loved one with a unique and precious gift that will remind him/her of your love forever.

‘Amor amb Or’ is the perfect gift for those special moments you want to celebrate with the people you love. Whether for a birthday or Valentine’s Day, giving gold coins as a gift will be an unforgettable detail that symbolises love and will maintain its value over time. If you want to give a unique and special gift, give ‘Amor amb Or’.

Preciosos 11Onze offers the option to buy gold coins from €220. For 11Onze members with an El Canut account, shipping is free. For all other buyers, it costs €9.99. If you want to buy gold coins as a gift, fill in this form and an agent will contact you. You will receive a personalized digital postcard with the name of the person to whom you give the gift. It will also need a physical address to send, shortly after, the gold coins.

If you want to discover the best option to protect your savings, enter Preciosos 11Onze. We will help you buy at the best price the safe-haven asset par excellence: physical gold.

Deposits of value are assets, currencies and commodities that do not devalue over time. Gold and other precious metals have historically been the ultimate stores of value, while in recent decades the major shortcomings of fiat currencies have become apparent.

As Investopedia notes, “a store of value is essentially an asset, commodity or currency that can be saved, retrieved and exchanged in the future without deterioration in value” when we exchange it for goods or services: if it is worth ten apples today, we should eventually be able to exchange it for at least ten apples anytime in the future.

Gold and other precious metals have been considered throughout history as the quintessential stores of value because they have a virtually unlimited lifetime. And, if we look at the evolution of gold prices over the last decades, we see that an ounce has gone from trading below $300 when the euro came into circulation in 2002 to over $1,900 today.

On the other extreme, perishable commodities such as apples are lousy stores of value because they decompose within days and lose all their value. Although certain commodities, such as those in the food sector, may temporarily rise in price depending on the market situation, their perishable nature prevents them from being considered stores of value.

Modern money fails as a store of value

Obviously, the euro and other fiat currencies are very poor stores of value because they do not appreciate in value at the same rate as the products and services they are used to purchase. Although our currencies should be a reasonably stable store of value, inflation means that the coffee we used to buy in a bar for one euro a few years ago now costs us considerably more. Our money is depreciating by the day.

Richard Nixon put an end to the gold standard in 1971, which until then obliged the countries of the International Monetary Fund (IMF) to maintain a fixed exchange rate against the dollar and the US Federal Reserve to back its currency with gold. Since then, we have been using fiat currencies, i.e. currencies that are legal tender but are not backed by any valuable asset. All central banks can manufacture money as they see fit and their only collateral is the trust of the public.

Logically, if the amount of money in circulation increases at a higher rate than the goods and services that can be purchased with it, the imbalance between supply and demand causes prices to rise. Therefore, our money is devalued.

A reasonably stable currency is essential for a healthy economy. A poorly functioning monetary unit as a store of value discourages saving and hinders trade. Its ill effects are obvious if we take a look at the cases of hyperinflation that some countries have experienced throughout history.

Precious metals as a safe haven

For more than two millennia, many economies have used gold and other precious metals as an exchange currency because of their durability, relative scarcity and ease of transport. Moreover, in recent decades gold has played an important role as a safe haven asset. Its demand has tended to soar in times of economic uncertainty, as evidenced by last year’s data, the highest demand since 2011. Gold’s long experience attests to its ability to serve as a long-term store of value.

In general, other assets such as real estate, works of art, antiques and certain collectables have also shown that they can play this role. Although their value may fall at times, they tend to appreciate in value over the long term thanks to more or less constant demand and a very limited supply.

Their major disadvantage compared to gold is that they are very illiquid assets: it is difficult to sell them immediately if we want to do so for a reasonable price. Moreover, these markets require a good deal of knowledge and suffer particularly in economic downturns, when there is a greater tendency to turn to stores of value.

What about crypto-assets?

It is more difficult to assess whether crypto-assets will ever be considered stores of value, as they are too new. It is true that bitcoin is based on the principle of scarcity, a characteristic of stores of value: a limited number of bitcoins are generated each year and there is a predetermined cap. However, like so many other crypto-assets, its major drawback is that it has no intrinsic value. Almost all of its value is currently subjective, which is fertile ground for volatility. 

However, as bitcoin becomes widely accepted as a means of payment and is used in an increasing number of transactions, its value will strengthen and the likelihood of it becoming a long-term store of value, beyond occasional volatility, will increase.

If you want to discover the best option to protect your savings, enter Preciosos 11Onze. We will help you buy at the best price the safe-haven asset par excellence: physical gold.

World gold demand increased by 18% in 2022 to 4,741 tonnes, the highest in more than a decade. Huge central bank purchases of gold were instrumental in boosting annual demand to near-record levels.

Gold demand, excluding OTC markets, reached 4,741 tonnes in 2022, an increase of 18% over 2021 and almost the same amount as in 2011, a year of record demand. 

The solid annual increase was driven by extraordinary central bank demand, the highest in 55 years, and a busy fourth quarter despite rising prices. This is according to a World Gold Council report on gold trading through 2022.

Central banks’ gold rush

In the second half of the year, central banks hoarded gold at a frenetic pace. Some analysts attribute this gold rush to a desire to diversify reserves and reduce dependence on the dollar. The more than 800 tonnes acquired since July brought annual demand in this sector to 1,136 tonnes.

This is a 55-year high and more than double the 450 tonnes in 2021. Nor was the price increase an obstacle to demand soaring in the last quarter to 417 tonnes.

These data again highlight the change in the policy of central banks, particularly those in Europe, from what they did in the 1990s and 2000s when they typically sold hundreds of tonnes a year. With the financial crisis of 2008-09, European banks stopped selling and a growing number of emerging economies have shifted to significant purchases.

Central banks such as those of Turkey, China, Egypt and Qatar reported buying gold last year, although the World Gold Council warns that about two-thirds of the gold bought was not publicly reported. In fact, only a quarter of central bank purchases in the fourth quarter were reported to the IMF.

Reported purchases in 2022 were led by Turkey, with almost 400 tonnes. Russia was among the central banks that did not regularly publish information on changes in their gold reserves.

Less jewellery, more investment

As usual, consumption of gold for jewellery was the largest volume, at 2,086 tonnes, although it fell by 3 % from the previous year. Much of this decline in demand occurred in the fourth quarter, due to the rise in the price of gold.

The price increase also affected the demand for gold in the technology sector, which was further weighed down by the deterioration in the global economic environment. The sharp fall in the fourth quarter led to an annual decline of 7 % to 309 tonnes. 

Meanwhile, investment demand reached 1,107 tonnes, 10 % higher than a year earlier. Demand for gold bullion and coins stood at 1,217 tonnes, 2% higher than in 2021, although the fall in gold ETF holdings (-110 tonnes) must be deducted from this amount. It is clear that high inflation encouraged purchases by retail investors.

Annual gold demand

Price rebound

2022 saw a record annual average gold price in the London Bullion Market Association’s Gold Price PM of $1,800 per ounce. The gold price also ended the year with a marginal gain, despite downward pressure from the strong US dollar and rising interest rates.

Although the average price in the fourth quarter was slightly lower both quarter-on-quarter and year-on-year, the strong rebound in November was followed by a continued recovery in the final weeks of the year.

Gold prices had fallen from their all-time high in March, when they reached over $2,000 per troy ounce, to just over $1,600 in the penultimate month of the year, as rising interest rates triggered selling by some investment funds. However, demand from central banks and retail investors halted the decline and set the stage for a strong rally.

Indeed, buoyant retail investment drove bullion and coin demand in 2022 to the highest level in nine years. Strong growth in Europe, Turkey and the Middle East offset the sharp slowdown in China, where demand was affected by the COVID-19 crisis. 

Supply is also growing

In 2022, the gold supply increased by 2 % to 4,755 tonnes. This ended two years of successive declines, thanks to modest increases in all segments. 

Mining production accounted for three quarters of the total, reaching 3,612 tonnes. This is the highest amount in the last four years after a growth of 1 % compared to 2021. Recycling supply saw only marginal gains in 2022 despite strong local currency price increases in many markets.

If you want to discover the best option to protect your savings, enter Preciosos 11Onze. We will help you buy at the best price the safe-haven asset par excellence: physical gold.

In February 2022, we launched Preciosos 11Onze to offer members of our community the opportunity to buy gold to protect themselves against inflation. One year later, the evolution of the gold price proves why this precious metal is the ultimate safe-haven asset when it comes to securing our savings.

Although 2022 was presented as the year to consolidate the economic recovery, the disruption of the supply chain, the rise in the price of raw materials, the debt crisis and the international geopolitical situation ensured an inflationary context that would reduce the purchasing power of many families.

Faced with this scenario, at 11Onze we advised diversifying savings, converting money into assets that would not lose value. It was clear to us that buying gold was one of the few resources people had to safeguard their money. Thus, with the launch of Preciosos 11Onze we provided our community with the best option to protect their savings.

The loss of credibility of the international monetary system triggered a surge in demand for physical gold at major mints around the world. Not only were central banks buying gold to secure their capital reserves in the face of economic uncertainty, but small investors were also buying large amounts of gold to protect their wealth. This has led some gold dealers to deplete stocks of coins and bullion, extending delivery times when new orders are placed.

The antidote to inflation

One year on, rising prices, together with the loss of the real value of the currency, have led to a large reduction in the monetary wealth of the population, who have seen their savings vanish without even leaving the bank. Even so, the upward trend in the price of gold confirms our forecasts.

While year-on-year inflation in Spain in 2022 was 8.4%, Preciosos 11Onze gold has risen by 10.25%. From €1,599 per ounce of gold on 1 February 2022, it has risen to €1,762.86 today. Or in other words, the strong performance of the gold price has counterbalanced the currency stress caused by the loss of value of the euro.

This means that if we had left €10,000 in the bank, these savings would have lost 8.4% of their value, and would be worth €9,160 today. Whereas if we had invested them by buying gold, their current value in gold would have increased by 10.25% to €11,025.

Widespread economic slowdown

According to a report published by the World Bank, global growth in 2023 is expected to slow for the second year in a row and experience its third-weakest pace in almost three decades. This sharp slowdown in growth will be broad-based, stagnating at 1.7% in 2023, and improving slightly to 2.7% over the course of 2024.

It also predicts that investment in emerging markets and developing economies will remain below the average of the past two decades. It points to monetary policies and tight global financial conditions as one of the main causes of the slowdown in growth.

Although economic analysts expect Spain to avoid recession, GDP growth will fall back to 1% in 2023, mainly because most households no longer have a savings cushion to sustain their consumption spending. However, this trend is expected to change in 2024, thanks to the global economic upturn.

In any case, the almost zero growth forecast for the eurozone economy as a whole, and the recession that some of the main exporting countries, such as Germany, will experience, lead experts to agree that the demand for gold will continue to rise in 2023. Perhaps this is why Forbes magazine has published a report explaining why, even today, owning gold is better than owning money.

If you want to discover the best option to protect your savings, enter Preciosos 11Onze. We will help you buy at the best price the safe-haven asset par excellence: physical gold.

We close a year in which the general rise in prices has made it difficult for many families to make ends meet. How will the economy evolve in 2023? What can we do to adjust the family budget? We talk about it with Xavi Viñolas, Editor of 11Onze and Gemma Vallet, Director of 11Onze District, in a new episode of La Plaça, Territori 17’s radio show.

With a year-on-year inflation rate of 8.4%, 2022 has been disastrous for many families who have seen their purchasing power fall to unsustainable levels. Runaway price rises have pushed up the cost of living at a time when many households were just recovering from the shock of the pandemic. What lies ahead for 2023?

This year, we will see whether central banks can halt the rise in prices without neutering the recovery of economies. Financial analysts predict that inflation will fall to 5%, but as Viñolas points out, “in a context of uncertainty and high economic volatility, we have to take any economic forecast with a grain of salt, the same experts told us that current inflation would only last a few months”.

Proactivity in reducing expenses

Now, more than ever, it is necessary to have a piggy bank for possible unforeseen events. But, faced with an economic context that does not favour saving and where our money has lost a good part of its value, it is not easy to reduce our monthly expenses in order to save.

The editor of 11Onze suggests we be proactive and look at reducing some fixed expenses, which are not always difficult to cut. Services contracted on a permanent basis, such as home or car insurance, can be renegotiated, or we can simply switch to a provider that offers a policy without permanence and more suited to our needs, which can be much cheaper.

Likewise, suppliers of utilities, such as electricity, can give us some room for manoeuvre, changing the contracted power or switching from the free market to the regulated market. Modifying the contract or looking for more reasonable offers can mean considerable savings and help us to balance the budget at the end of the month.

If you want to discover fair insurance for your home and for society, check 11Onze Segurs.

The VAT reduction on basic foodstuffs is controversial because of the risk that it will have a very limited impact on consumers’ pockets and end up widening the commercial margins of distribution chains. Given the precarious situation of many families, some experts believe it would be preferable to extend direct aid.

Faced with the rising cost of the shopping basket, one of the Spanish government’s latest decisions in 2022 was to reduce VAT on a large proportion of staple foods over the next few months.

The measure provides for the abolition of this tax on a series of basic products to which the “super-reduced” rate of 4% was applied: bread, bread flour, milk, cheese and eggs, as well as fruit, vegetables, pulses, tubers and cereals. VAT on pasta and olive and seed oils is also reduced from 10% to 5%.

These tax cuts are expected to remain in force until 30 June, although if the year-on-year rate of core inflation (excluding energy and unprocessed food) in March is below 5.5%, they will end on 1 May.

A controversial measure

Theoretically the initiative should serve to alleviate the economy of many families, especially those on low incomes, but there are critical voices that question both its scope and its effectiveness.

The Organisation of Consumers and Users (OCU) considers this reduction to be insufficient. According to this organisation, it should have included “other foods that are also necessary, such as fresh meat or fish”, which will maintain the 10% VAT rate. In addition, the OCU calls for this measure to be applied above all to foods with “a healthier nutritional profile”, such as wholemeal bread.

For its part, the consumer organisation Facua reported to the National Markets and Competition Commission (CNMC) that seven distribution chains had not correctly passed on the VAT reduction in the first week of application. The percentage of irregularities was particularly high in Dia (17%), Carrefour (10%) and Eroski (9%).

More profits for retail chains?

Although the government’s decree-law obliges the tax reduction to be passed on to consumers, one of the great fears is that the distribution chains will take advantage of the VAT reduction to increase their profit margins.

It should be borne in mind that the year-on-year CPI for food stood at 15.3% in November, well above the general CPI. Moreover, December is usually a month when food prices tend to rebound. Therefore, the natural drop in prices that many foodstuffs experience every year in January could be used to justify the application of the VAT reduction.

Faced with this possibility, both Facua and the OCU have called for more controls to avoid non-compliance. In this regard, Nadia Calviño, First Vice-President and Minister for Economic Affairs and Digital Transformation, has warned that the CNMC will ensure the application of the reduction. However, to date it has not been specified how this control will be carried out, nor the possible sanctions.

Little proven effectiveness

The tax technicians’ union, Gestha, considers this VAT rebate to be “ineffective” in the fight against inflation. According to its calculations, the impact on the price of the shopping basket will be hardly noticeable: the reduction of VAT from 4 % to 0 % will save on average 3.85 euros for every 100 euros of purchase, while the reduction from 10 % to 5 % on oil will mean a saving of 1.36 euros for every 25 euros of purchase of this product.

Members of the Catalan Association of Economists also see these types of measures as ineffective in combating inflation, as shown in the Association’s autumn Economic Situation survey. Only 28% of its members rate tax measures aimed at companies and families, such as the reduction in VAT on foodstuffs, positively. Temporary taxes on energy companies (60%), large fortunes (59%) and banks (54%) are much better viewed.

On the other hand, some experts point out that it would have been preferable to use the 661 million euros that the VAT reduction on food will cost to extend the 200 euro cheque that the Spanish government will grant to low-income families. Around eight million people with incomes of up to 27,000 euros will be able to benefit from this direct aid to compensate for the increase in prices.

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