1.5 Euro – Spain

In 2022, Spain's currency situation was defined by its membership in the Eurozone, using the euro (€) as its sole legal tender. The monetary policy for the country was therefore set by the European Central Bank (ECB), not by Spanish authorities. This framework meant Spain was directly impacted by the ECB's major policy shift that year: a decisive move away from the era of negative interest rates and quantitative easing to combat soaring inflation. The ECB initiated a series of aggressive interest rate hikes, raising the key deposit rate from -0.5% in June to 2.5% by year's end, which increased borrowing costs across the Spanish economy.

The primary driver of this shift was record-high inflation, which peaked at 10.8% in Spain in July 2022, significantly above the ECB's 2% target. This surge was initially fueled by global supply chain disruptions and rising energy prices following Russia's invasion of Ukraine, which caused severe imported energy inflation. While the euro's depreciation against the US dollar throughout much of the year exacerbated inflationary pressures by making imports more expensive, it also provided a boost to Spanish exports and the critical tourism sector by making the country more affordable for foreign visitors.

Domestically, the Spanish government implemented a range of fiscal measures to shield households and businesses from the economic shock, including fuel subsidies, direct aid, and caps on energy prices. These actions, while mitigating social hardship, complicated the ECB's inflation fight. By the end of 2022, the combination of ECB tightening and government interventions showed early signs of moderating inflation, but the currency union's unified policy also meant Spain had limited independent tools to address its specific economic conditions, balancing between broader Eurozone stability and domestic pressures.