By Belén Carreño and Inti Landauro

MADRID (Reuters – Spain announces 16 billion Euros ($17.5billion) in soft loans and direct assistance Monday. The aid will be used to support households and companies as they weather rising energy prices, which are fueling inflation and provoking social discontent.

Prime Minister Pedro Sanchez announced that Tuesday’s package of measures to reduce the impact of Russia’s invasion in Ukraine will be approved by the government.

He stated that the war response shock plan would protect citizens and industries.

On April 1, the three-month plan comes into effect.

For two weeks, truck drivers went on strike over fuel prices. This has caused occasional shortages of goods around the country.

The direct aid package will provide 6 billion euro in tax cuts, and indirect assistance. This was mostly extended from the COVID-19 Pandemic Package. Meanwhile, the 10 billion euros of subsidized loans will go to people who need them. Limits on rent rises and energy price caps will be in place.

The decree will first be approved because of Congress’s weak parliamentary majority.

Spain, which was highly exposed to shocks from outside sources, was one of the hardest hit European nations by the pandemic. It responded with an enormous 140 billion Euro economic rescue plan. Madrid has taken new measures to safeguard its economy, despite protests at home about the rise in energy prices that reached 60% within a year.

Sanchez stopped negotiations at European Council Friday and secured an “Iberian exception”, which would have allowed Spain or Portugal to set gas prices caps.

In the meantime, the government works out details for its final European approval.

According to Unidas Podemos (a junior partner of Spain’s ruling coalition), the cap on gasoline prices should be fixed at 30 Euros per megawatt/hour.

All citizens will be eligible for a subsidy to fuel truckers and transport companies.

According to the plan the government will pay 15% per litre while the gasoline companies will be responsible for at least another 5 cents.

Three-month rent increases will be limited to 2%, a rare measure. Employers won’t be allowed to lay off workers because of economic issues related to the invasion. Furlough plans will however be available.

Borrowers who use intensive energy will receive a 12 month grace period. During this time, the company will have to pay the interest but not principal.

Advocates for consumers have criticised the deal as inadequate. Truckers continue to strike, although less so than last week.

($1 = 0.9136 euros)