Spanish Parliament Votes Down Energy Tax

Spain's parliament has voted against a temporary tax on energy firms, a defeat for the minority government planning to reintroduce it by decree. This tax is crucial for upcoming budget negotiations. Opposition includes both Catalan and Basque parties concerned over investment impacts.

In a significant setback for Spain's minority government, lawmakers on Thursday voted to eliminate a temporary tax on energy companies, although the government intends to reimpose the levy by decree. This 1.2% tax, targeting companies with a turnover of at least 1 billion euros, forms a crucial part of the government's strategy as it prepares to enter budget negotiations for the next year.

While Budget Minister Maria Jesus Montero announced plans to approve the tax in the final cabinet meeting of the year set for Monday, achieving parliamentary confirmation could prove challenging. The tax's initial purpose was to alleviate cost-of-living pressures amid high profits for banks and energy companies driven by rising energy prices following the Ukraine war.

Opposition remains strong from Catalan separatists Junts, Basque nationalists PNV, and the conservative People's Party, due to concerns over investment impacts. Meanwhile, left-wing Podemos insists on extending the tax to commence budget talks, despite utility firms' warnings of jeopardizing 30 billion euros in renewable investments. The government faces pressure to either establish a permanent windfall tax or extend the temporary one, with Podemos support hinging on this fiscal approach.

(With inputs from agencies.)