Spain's parliament rejects energy windfall tax, other government measures

MADRID (Reuters) - Spain's minority leftist government suffered a new setback in the lower house of parliament on Wednesday, when lawmakers rejected several decrees, including an extension of a windfall tax for energy companies and transport subsidies.

The administration of Socialist Prime Minister Pedro Sanchez faces a balancing act in every vote as it weighs concessions to parties from across the spectrum with opposing demands, such as hard-left Podemos and centre-right Catalan separatists Junts.

The arithmetic was further complicated last week when Junts leader Carles Puigdemont said his party would not support the government unless a "trust crisis" between them was resolved.

The rejected decrees included an extension of a temporary windfall tax on energy companies, a pension raise and a six-month extension of temporary subsidies for public transport.

The windfall tax had been expected to fail after lawmakers first voted last month to eliminate the levy, opposed by both Junts and the Basque nationalist party PNV. The parties argue that the tax impacted investments in their respective regions.

The government still had to take it to parliament as a precondition for Podemos to negotiate other legislation, including the budget bill for this year, which is yet to be presented. In the meantime, Spain is rolling over its spending plan from 2023, as it did last year.

The temporary tax of 1.2% for companies with a turnover of at least 1 billion euros ($1.04 billion) was introduced in 2022 to ease cost-of-living pressures for ordinary Spaniards as firms gained from a surge in energy prices following the war in Ukraine.

($1 = 0.9599 euros)

(Reporting by Emma Pinedo, editing by Andrei Khalip and Ros Russell)