The eurozone is going on vacation with a new rate hike that leaves the official price of money at all-time highs since the euro began to circulate in 2002. The European Central Bank (ECB) has not gone out of the script and has decided to raise official interest rates 0.25 points this Thursday, which becomes the ninth consecutive rise in just one year.

According to a quick financial calculation, an increase like the one approved this Thursday by the ECB would imply an increase in the cost of an average mortgage of 375 euros per year (31 euros per month).. A blow that adds to the other eight increases that have occurred since July of last year and that has resulted in a Euribor of 4.01% last month. Thus, a household with an average variable mortgage -150,000 euros at 25 years with a differential of one point over the Euribor- that has to review its loan this month is exposed to a monthly payment increase of up to 290 euros (39% ).

The deposit facility —the interest that the ECB demands from commercial banks for parking funds on their balance sheets— stands at 3.75%, while the rate of the main refinancing operations —which conditions the interest at which the banks— rises to 4.25%. Never before since the euro began to circulate has such a high interest rate been reached in the deposit facility, while the rate of the main refinancing operations equals the previous all-time high reached in July 2008.

Interest rates are the most powerful tool that the ECB has in its hand to influence prices in the euro area. When interest rates rise, indebted households and businesses suffer. Variable mortgages become more expensive, but so do credit cards or consumer loans —for example, to finance the purchase of a vehicle—. In addition, the demand for credit is reduced. On the corporate side, the costs of debt rise and borrowing becomes less appealing, which tends to reduce investment. This series of factors ends up cooling the economy. Demand and investment are reduced and, ultimately, inflation ends up coming down.

The ECB's decision adds more pressure to indebted households and companies, but it could be the last (or penultimate) rise decreed by the body chaired by Christine Lagarde. Inflation has set out on a clear downward path —although more slowly than Frankfurt would like— and, above all, the euro area economy is beginning to show clear signs of exhaustion.

Consequently, Lagarde has opened the door for the first time to the possibility of a pause in rate hikes at the next meeting scheduled for September.. “We could go up or stop. But what is decided in September will not be definitive. It could vary from one meeting to another,” said the ECB president at the press conference after the announcement.. Although raising or maintaining are the two options on the table, the ECB president has at times seemed to opt more for the second. “Do we have a further way to go? At this time, I would not say that,” he added.

Everything will depend on the interpretation that the ECB makes of the data that is published in the next month and a half.. “We are moving into a phase where we are going to rely on data. Based on them, we will decide if we go up or pause. What I assure you is that we are not going to cut. That is a definite no,” Lagarde added.

The central bank will be especially attentive to the evolution of wages and corporate benefits, which are becoming, for Lagarde, the engines of inflation. “On other occasions I have said that we had more ground to cover. What I'm saying now is that the data and our evaluation of the data will really tell us if and how much more ground we have to cover.”

Questioned about the situation in Spain —where inflation stood at 1.9% in June compared to an average of 5.5% in the euro area— Lagarde stated that these are good numbers for the economy and the country, but stressed that the situation in other Member States is very different. “In other countries, inflation is still very high and will remain high for a long time,” he added.

In the statement with which the ECB has reported its decision, the central bank insists that core inflation is still too high, although other indicators show signs of relief. The ECB expects inflation to continue declining for the remainder of the year, although it will remain above its 2% target for a long period.

The problem is that, along the way, the growth of the economy suffers. The latest GDP data for the euro area paint a situation of stagnation with a German economy that has already accumulated two quarters in negative. In addition, the indicators that have been known in recent weeks do not invite optimism. The last one was the European survey of bank loans, which reflects an unprecedented fall in the demand for credit in the last 20 years.

The second quarter of the year is usually prosperous for employment, driven by Easter and the arrival of good weather as a prelude to summer, and 2023 was no exception. According to the Active Population Survey (EPA) published this Thursday by the National Institute of Statistics (INE), Spain created more than 600,000 jobs between April and June and reduced unemployment by 365,300 people, marking a historical record of employment thanks to the push of the service sector.

Never before in Spain had there been so many people working. The total number of employed between the months of April and June reached 21 million people, the highest mark in the historical series. “We reached a new all-time high,” said the Prime Minister, Pedro Sánchez, who described the data as “extraordinary” and stressed “the strength of the economy”. This record is the result of the creation of 603,900 jobs compared to the first quarter of the year, which represents an advance of 2.95% in the number of employed. In the last twelve months, which represent the first full year with the labor reform fully in force, Spain has gained 588,700 jobs.

This is the highest job creation recorded in a quarter, according to the historical series of the EPA, exceeding the 569,700 jobs that were generated between July and September 2020, after the destruction of jobs caused by the pandemic during the previous months. This boost in employment has been due to the contribution of the private sector, which gained 610,100 workers between April and June, compared to the loss of 6,200 jobs in the public sphere. In particular, the services sector was the one that grew the most, with 606,000 new jobs more than in the previous quarter, that is, more than the general calculation. In fact, it is the quarter in which the most employment has been created in the service sector in the entire historical series.

In this sense, the general secretary of the Unión Sindical Obrera, Joaquín Pérez, has positively valued the creation of employment, but has called attention to the contribution of the service sector. “Without a doubt, the data from the latest EPA is good data for employment and for the economy, growing employment and permanent contracts. However, the service sector continues to drive job creation, while jobs have been destroyed in industry. Betting on the reindustrialization of the country, on attracting industrial investment and retaining the ones we already have, must be a priority for the next government,” he said.. Along with the services sector, the creation of 60,900 and 1,500 jobs respectively in construction and agriculture has offset the loss of 64,500 jobs in industry in the last quarter.

The rise in employment on the services side coincides with a season marked by the recovery of tourism and the arrival of good weather. According to data from the INE, between April and June the number of travelers who have visited Spain and stayed in hotel establishments has grown by 8% compared to the same period of 2022, with a special growth in the arrival of foreign tourists. The sector expects the summer season to break visitor records from before the pandemic.

The lowest unemployment rate since 2008

At the same time, unemployment fell in the second quarter of the barrier of 3 million people. Specifically, the number of unemployed in Spain fell by 11.7% compared to the previous quarter to 2.76 million, which means 365,300 fewer people —213,300 women and 152,000 men, representing a drop of 12.5% in female unemployment and 10.6% in male unemployment—. This is the sharpest quarterly decline in the historical series for a second quarter of the year. This drop reduced unemployment to its lowest level since the third quarter of 2008 and has placed the unemployment rate in Spain at 11.6%, breaking the 12% barrier for the first time in the last fifteen years.

Unemployment fell in the second quarter in all branches, although the drop in the services sector stands out especially, which lost 208,600 unemployed. It was followed by the long-term unemployed, construction, the group of those looking for their first job and even industry and agriculture, where unemployment fell respectively by 86,200, 23,400, 22,400, 19,100 and 5,700 people between April and June.

In addition, most of the employment created was permanent. In the second quarter, wage earners with an indefinite contract increased by 410,100 people compared to the start of the year, compared to the sum of 95,400 temporary jobs and 97,300 self-employed workers. Thus, at the end of June the number of workers with an indefinite contract exceeded 14.76 million, a new all-time high, while the temporary employment rate rose slightly to 17.35%.. “Almost 15 million people are already permanent: we have more jobs, with better quality and with more stability”, stressed the Minister of Labor, Yolanda Díaz.

The employment and Social Security affiliation data released monthly by the Ministries of Labor and Inclusion, respectively, already pointed to this downward trend in unemployment and upward employment, although in recent months they have reflected a cooling in the rate of employment creation. In June, the last month for which data is available, registered unemployment at employment offices fell by 50,268 people, but Social Security added half as many affiliates as in the same period of 2022.

The National Commission for Markets and Competition (CNMC) has imposed a penalty of six million euros on Naturgy Generación for offering adjustment services for electricity generation, specifically in the market for technical restrictions, at excessive prices and disparate, with respect to their offers in the daily electricity market, without justification, in order to increase their income, reported the regulator.

In addition, in order to compensate for the extra costs caused, a compensatory contribution of 35.5 million is imposed on the settlements of the system operator, to compensate for the damage caused by reducing the costs of the acquisition of energy by the demand. This amount will be distributed among the claim in a number of months equal to those that the action lasted, that is, a total of 22 months.

Company sources indicated that they will appeal this sanction to the courts. Naturgy may file a contentious-administrative appeal against the resolution before the National Court within a period of two months from the day following its notification.

Initially, it was estimated that the contribution for these benefits from the infringing conduct should amount to 43.2 million euros, although in the allegations provided by the company this amount was reduced to 35.5 million euros.

Specifically, the sanction imposed by the regulator on the energy company refers to the actions carried out in the market segment of technical restrictions by its combined cycle plant 'Sabón 3', in the electrical zone of Galicia, during the period from 23 March 2019 to December 31, 2020.

According to the CNMC, 'Sabón 3' took advantage of situations in which competition in the restrictions market was low to increase its offers in the technical restrictions market and thus obtain higher income.

What does the Electricity Sector Law say?

Article 65.33 of Law 24/2013, of the Electricity Sector, determines as a very serious infraction “manipulation of the price of adjustment services by a market agent by making offers at excessive prices, which are unevenly disparate. justified by the prices offered by it in other segments of the production market”.

Likewise, article 69.1.b) of the same Law establishes that “when it is not possible to restitute things or restore them to their natural state, indemnify irreparable damages for an amount equal to the value of the destroyed goods or the deterioration caused, as well as well as the damages caused, within the period established”.

In this way, the body chaired by Cani Fernández indicated that it is appropriate to apply, in addition to actions of a punitive nature, other additional measures of a compensatory nature, which allow the claim to be compensated for the damage caused by this illegal conduct.

The Civil Procedure Law (LEC) is the regulation in charge of regulating all cases related to the garnishment of salaries and pensions. Specifically, in its article 607, the aforementioned law establishes that “salary, salary, pension, retribution or its equivalent, which does not exceed the amount indicated for the interprofessional minimum wage, will be unattachable.”

Therefore, this is the first question to take into account, since a retirement pension cannot be seized if it does not exceed the minimum wage, set in 2023 at 1,080 euros per month.. But, what are the reasons why Social Security can do it?

How are these garnishments applied to the pension?

Pensions, like salary, have a series of obligations. In the case of having debts with the Administration, they may be seized. In this sense, pensions above the minimum wage may be seized according to the following scale, according to the regulations:

On the other hand, if the person is the beneficiary of more than one perception, “all of them will be accumulated to deduct the non-seizable part only once”. Thus, the “wages, salaries and pensions, compensation or equivalent of the spouses will also be cumulative when the economic regime that governs them is not that of separation of assets and income.”

In the event that the pensions were recorded with a permanent or temporary public discount, “the liquid amount that the executed person received, deducted these, will be the one that serves as the type to regulate the embargo.”

The regulations also contemplate the possibility of certain discounts if family responsibilities are accredited, which will be between 10 to 15% in the percentages established in the different embargo sections, except in the last case.

This Thursday, July 27, the European Central Bank (ECB) has once again raised official interest rates to continue with its objective of containing inflation at 2%. Currently, inflation in the euro area is at 5.5% and the underlying inflation data is worrying.

For this reason, the Governing Council of the ECB met again this Thursday to approve a rise of 0.25 points, the ninth in just one year, which is having significant economic repercussions.. The big question, especially for those people who have contracted a variable rate mortgage, is the following: how will this new increase impact? Will mortgage loan installments increase again?

What are the inflation forecasts?

“The Euribor has already reached 4.162% and there is a risk that it will exceed 4.5% in the medium term,” say the experts from the financial comparator HelpMyCash. Therefore, customers with a variable mortgage will see how their installments go up again. “The B side of the rise in interest rates is that the profitability of accounts and deposits is improving, so if you have savings, now you can earn more interest.”

It should be remembered that interest rates are like “the price of money”, that is, “what you have to pay to borrow money”, they explain. The increases that we have experienced in 2022 and that we continue to do so in 2023 are aimed at “controlling the inflationary spiral”.

The inflation forecasts of the European organization for the coming years, as included in the financial comparator, are the following: 5.4% in 2023, 3% in 2024 and 2.2% in 2025.

How will it affect mortgagees?

Undoubtedly, a new rise in rates directly affects the pocket of consumers, especially those who have mortgage debts. Likewise, “the new course of European monetary policy is also going to have a direct impact on people who want to buy a home, since, on the one hand, it will cost them more to get a mortgage and, on the other, it will to come out more expensive”, they indicate.

When rates rise, the Euribor, the mortgage reference index in Spain, will rise again. HelpMyCash forecasts suggest that this index could be between 4% and 4.5% during the third quarter of 2023. Likewise, they calculate that the quotas of certain consumers may rise up to 48%.

Analysts from the financial comparator point out that the ECB is likely to raise rates before the end of 2023 to 4.75%. “It wouldn't even be unreasonable for it to touch 5% at some point.”

How much will the fees go up in July?

With the Euribor data for June 2023, experts present the following example. For a mortgage of 150,000 euros, with a repayment term of 25 years and an interest rate of Euribor +1%, the fee to pay if the review is annual will rise to 252.47 euros. It will go from 625.03 euros to 877.50 euros per month. If the review is semi-annual, a more expensive fee will be paid, specifically 84.25 euros more per month, going from 793.25 euros to 877.50 euros.

And what could happen with the Euribor data for July? The provisional median value for this month is expected to be 4.156%. Therefore, taking into account the previous example, the fees would rise by 255.37 euros if the review is annual and 70.64 euros if it is semi-annual.

One of the main doubts among those people who are close to retirement is the contribution time required by Social Security to be able to collect the full amount of this contributory benefit.. In this sense, one of the main requirements to access the retirement pension is to have contributed, at least, for a period of 15 years throughout your professional life.

Otherwise, you will be able to access a non-contributory pension, a possibility if the contribution period is not reached. On the other hand, the ordinary retirement age in 2023, since it increases gradually until 2027, is 65 years for people who have contributed for at least 37 years and nine months. If this time is not reached, those who have reached 66 years and four months will be able to access 100% of the pension.

Calculate the pension with this simulator

But, what happens if you have contributed for only 29 years? In this case, there is a right to collect the contributory pension, but the full pension cannot be reached if the established retirement age is not reached, that is, 66 years and four months.

Therefore, the amount of the pension will be calculated taking into account the regulatory base, the percentage of which will increase depending on the years of contribution.. With a minimum contribution of 15 years, you can collect the amount corresponding to 50% of the regulatory base. Then, for each of the first 49 additional months, 0.21% will be added to the base. From month 50 to 209, 0.19% is added.

To calculate what pension would correspond to you according to the years of contribution, in this case 29, Social Security has a simulator at its electronic headquarters that can be accessed at this link.