Spain has the EU's fourth-highest inflation rate: why?

Spain has the EU's fourth-highest inflation rate: who is to blame?

Spain now has the fourth-highest inflation rate in the European Union, at 4.5% year-on-year in August, behind only Lithuania (5.8%), Cyprus (5.2%) and Bulgaria (5.1%). The figure, published by Eurostat, is no accident: it reflects a combination of factors that go beyond the official narrative.

The causes being debated

Some argue that tax pressure and red tape are the main culprits. The argument: taxes and regulations make production more expensive, and businesses pass those costs on to the final price. Punitive inspections and accessibility requirements, for example, are cited as absurd expenses that end up on the consumer's bill.

Others point to external factors, such as the war in the Middle East and the closure of the Strait of Hormuz, which would have driven up commodity prices. However, that explanation does not convince everyone: how, then, do you explain the fact that grain prices are also through the roof?

The demographic factor

One line of analysis points to immigration as a source of pressure on demand. Spain's population has grown by half a million people a year, and that growth, the argument goes, translates into more consumption and therefore more inflation. The idea is controversial, but it is on the table.

Meanwhile, the average citizen feels it in their shopping basket. The question is whether this trend will be corrected or whether Spain will keep drifting towards an Argentina-style situation. The data suggest that, without structural changes, inflation will remain a drag on Spaniards' wallets.