MADRID - Spain will not reinstate the value-added tax (VAT) on essential food until price levels are "more appropriate", Economy Minister Nadia Calvino said on Monday, adding that a downward trend in inflation appeared to be continuing.
On Jan. 1 the government scrapped the value-added tax on essential foods such as bread, cheese, milk, fruit and vegetables and cereals, from the previous 4%, as food prices have hit Spaniards' wallets hard.
The measure was part of a 10 billion euros ($10.8 billion) package approved in December to ease the effects of price rises on consumers - but only until the end of this month.
Calvino said the government will maintain the VAT rate cut, however, and was analysing which other measures could also be maintained beyond June.
"I can confirm that we will maintain the VAT rebate on basic foodstuffs as long as we do not reach price levels that are more appropriate," she told reporters.
"Spain is the country that has seen the sharpest fall in inflation. It fell by 5 (percentage) points in five months. Spain is now among the countries with the lowest inflation," she said.
"We are already at around 3%, even lower when we take the data harmonised with the whole of Europe, and this downward trend in inflation will continue, or so all the data suggest, in the course of June," she added.
Food and non-alcoholic beverage prices climbed 12.9% in the 12 months through April, according to data from the National Statistics Institute. The rate was 3.5 percentage points higher than in the 12 months through March.
Spain faces a snap general election on July 23 after the ruling Socialist Party was routed in municipal and regional votes on May 28. ($1 = 0.9297 euros)
(Reporting by Emma Pinedo and Inti Landauro; Editing by Hugh Lawson)