Facing pressure to act on inflation, governments worldwide respond

Political pressure and, in some cases, protests have led some EU countries, Turkey, and the U.S. to ease the impact of inflation.

First Look

Óscar Baños and thousands of fellow truck drivers celebrated Saturday after a threat to idle their engines pushed the Spanish government to adopt measures improving work conditions and checking skyrocketing fuel costs driven by inflation.

It’s the latest effort by workers, opposition leaders, and citizens to pressure governments from Europe to the Americas to intervene as surging consumer prices squeeze households and businesses.

Mr. Baños loves hauling freight across Spain as his father did before him, but he was ready to lose much-needed cash during a three-day work stoppage just before Christmas. After days of negotiations, the truck companies called off the Monday-to-Wednesday action after Spain’s transport ministry agreed to demands that include controls to help cushion the blow of rising diesel costs.

“I spent 1,500 euros ($1,694) more in October for the same liters of diesel than I had the year before,” Mr. Baños said recently, while hauling a load of rubber. “With that cost, it is impossible.”

Following the breakthrough, Mr. Baños is cautiously optimistic: The deal has “some positive things that now have to be put into practice. We will see.”

Political pressure has led countries including Poland, Hungary, and the United States to take steps such as instituting caps on gas prices, pledging money for poor households, or releasing oil from strategic reserves. Spain was among places like Turkey seeing more intense efforts such as protests and work stoppages tied to complaints about inflation, which has surged as the global economy rebounded from the pandemic, increasing demand for smaller supplies of energy and snarling supply chains.

While governments are taking action, they have few effective resources to bring meaningful, lasting relief, economists say, offering short-term aid that likely will do little to combat surging prices. That’s up to central banks, some of whom have started raising interest rates to ease inflation.

Spain’s inflation is at a 29-year high of 5.5%, and like countries worldwide, one of the biggest drivers is energy costs: gasoline has risen 63%, while electricity for households and businesses is up 47% over the past year.

This week, dozens of trailer trucks rolled slowly through Madrid in a “slow march” protest. Many truckers feel that while they helped keep the country going when Spain entered a shutdown during the depths of the pandemic, they are being left behind by Europe’s focus on a greener economy that’s moving from diesel engines to electric vehicles.

The government’s late Friday concessions included regulations to make a difficult job easier and attract young people: a ban on drivers loading and unloading trucks and an end to long waits at their destination. Spain also guaranteed a mandate that all trucking companies increase their tariffs in line with diesel costs so competitors don’t undercut each other, eroding profits and driving some to the brink of extinction.

“This is not only about fuel prices, but they are affecting our bottom line and the economic viability of our companies,” said Carmelo González, vice president of the Spanish Confederation of Freight Transport, who led talks with the government.

“This increase of 35% in diesel fuel costs is killing us,” he said.

Jaume Hugas, professor of logistics, innovation, and data science at ESADE business school in Barcelona, said inflation is a common thread through protests by different sectors of Spain’s economy. Strikes by metalworkers last month turned violent, and farmers have rallied against high prices.

Mr. Hugas sees the problem for Spanish truck drivers echoed in other countries like the U.S. and Britain, where a shortage of drivers meant the army had to ensure gas supplies.

“This industry has been suffering a long decline for a long time and has practically received nothing” from authorities, Mr. Hugas said. “I think that with the global collapse in trade that we have seen in Chinese ports and in the U.S., the rise in fuel prices has been the straw that broke the camel’s back.”

Other governments are facing pressure to act on energy prices.

With inflation at the highest level in 39 years, U.S. President Joe Biden has released 50 million barrels of oil from the U.S. strategic petroleum reserve in a bid to ease energy costs, and he announced a deal to make the Port of Los Angeles run 24/7 to ease supply backlogs. But economists say the actions are unlikely to make a big difference in surging prices anytime soon.

Mr. Hugas said the only short-term measure that produces any relief, although limited, is “removing taxes on fuel as the prices rise to stabilize them a bit.”

Hungary instituted a cap on gasoline and diesel costs at the pump as prices hit record highs. It comes as the right-wing governing party faces elections in the coming months that pose the most serious challenge to its power since being elected in 2010. Some economists have called it a political decision that will provide some relief to households but could drive smaller gas stations out of business.

In Poland, the government has blamed the European Union’s anti-coal climate policy for high energy prices, but the head of the International Energy Agency says a surge in demand for fossil fuels plays a bigger role. Opposition lawmaker Michal Krawczyk recently said the ruling Law and Justice Party has clung too long to coal, and “your policy, not the EU’s, has led us to this.”

“This year’s Christmas will be the most expensive in this century,” he said. Opposition leaders are pushing the government to help people in the central European country where consumer prices have surged 7.8% over the past year.

The lower house of Poland’s parliament passed a measure last week promising cash allowances to the poorest families for energy bills. The aid will range from 500 to 1,250 zlotys ($122 to $305) per household, Prime Minister Mateusz Morawiecki said.

It’s part of an anti-inflation package that also includes tax cuts on electricity, heating fuel, and gas for vehicles, officials said.

“The anti-inflation shield will not answer all the problems – that is not possible – but it shows that we are doing all we can to ease this inflation pain, to reduce the costs for the Polish families,” Mr. Morawiecki said.

In Brazil, where inflation has accelerated to 10.74% – its fastest pace in 18 years – and some poor people root through meat scraps for protein, it’s just one complaint in demonstrations against President Jair Bolsonaro’s government in recent months.

In response to rising prices, the country’s central bank has raised interest rates, also done this week by the Bank of England and Norway’s central bank.

Turkey, meanwhile, is slashing rates. President Recep Tayyip Erdogan insists high interest rates cause consumer prices to soar, contrary to conventional economic thinking. Inflation of 21% has left many struggling to buy basic goods such as food.

Thousands of people joined a rally Sunday in Istanbul to protest the soaring cost of living and demand a higher minimum wage. By Thursday, the government said it was increasing the monthly minimum by 50%, from 2,825 lira ($171) to 4,250 lira ($258).

“When we go to the market, we have to be selective. We buy a quarter of what we used to buy,” trade union representative Ahmet Goktas said Sunday.

Hatice Sahin, a municipality worker and single mother of three, said people can’t make ends meet. “The food prices are exorbitant,” she said. 

This story was reported by The Associated Press. Associated Press journalists Monika Scislowska and Vanessa Gera in Warsaw, Poland; Emrah Gurel in Istanbul; Suzan Fraser in Ankara, Turkey; David Biller in Rio de Janeiro; and Frank Jordans in Berlin contributed to this report.