COMMISSION STAFF WORKING DOCUMENT Country Report Spain 2020 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2020 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011
Date: 2020-02-26
Institutions: European Commission, Secretariat-General
Subjects: Spain, economic situation, green economy, investment, labour market, macroeconomics, public finance, social policy, structural adjustment, tax system

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 26.2.2020  SWD(2020) 508 final  COMMISSION STAFF WORKING DOCUMENT Country Report Spain 2020 Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2020 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011 {COM(2020) 150 final}  
 
 
CONTENTS 

Executive summary 

1.  Economic situation and outlook 

2.  Progress with country-specific recommendations 

3.  Summary of the main findings from the MIP in-depth review 

3.1. 

Introduction 

3.2. 

Imbalances and their gravity 

3.3.  Evolution, prospects, and policy responses 

3.4.  Overall assessment 

4.  Reform priorities 

4.1.  Public finances and taxation 

4.2.  Financial sector 

4.3.  Labour market, education and social policies 

4.4.  Competitiveness, reforms, and investment 

4.5.  Environmental sustainability 

Annex A: Overview table 

Annex B: Commission debt sustainability analysis and fiscal risks 

Annex C: Standard tables 

Annex D: Investment guidance on Just Transition Fund 2021-2027 for Spain 

Annex E: Progress towards the Sustainable Development Goals (SDGs) 

References 

5 

9 

16 

20 

20 

20 

21 

25 

29 

29 

37 

46 

63 

80 

84 

93 

94 

100 

102 

107 

1 

 
 
 
LIST OF TABLES 

Table 1.1: 
Table 2.1: 
Table 3.1: 
Table 3.1a: 
Table 3.2: 
Table 3.3: 
Table 4.2.1: 
Table 4.4.1: 
Table C.1: 
Table C.2: 
Table C.3: 
Table C.4: 
Table C.5: 
Table C.6: 

Key economic and financial indicators – Spain 

Overall assessment of progress with 2019 CSRs * 

Outward spill-over heat map for Spain 

Spill-over effects of a 10 year public investment programme in Spain 

Current account balance and net international investment position sensitivity analysis 

MIP matrix 

Financial soundness indicators, all banks in Spain 

Investment barriers 

Financial market indicators 

Headline Social Scoreboard indicators 

Labour market and education indicators 

Social inclusion and health indicators 

Product market performance and policy indicators 

Green growth 

LIST OF GRAPHS 

Analysis of unit labour costs 

Composition of GDP growth 

Investment rate, 2015 prices 

Contributions to potential growth 

Net lending / borrowing by sector 

Capital intensity and capital productivity 

Employment and GDP - levels compared to 2008 

Graph 1.1: 
Graph 1.2: 
Graph 1.3: 
Graph 1.4: 
Graph 1.5: 
Graph 1.6: 
Graph 1.7: 
Graph 1.8: 
Graph 2.1:  Overall multiannual implementation of 2011-2019 CSRs by February 2020 
Graph 3.1: 
Graph 3.2: 
Graph 3.3:  Gross external debt by sector-type of financial assets 
Graph 4.1.1:  Debt as% of GDP - ES 
Graph 4.2.1:  Loans to the private sector 
Graph 4.2.2:  Overvaluation gaps based on price/income, price/rent and fundamental model-

Analysis of the rate of change of net international investment position 

Current account and net international investment position 

Regional disparities on selected indicators 

based benchmarks 

Graph 4.2.3:  Sources of financing of the Spanish economy, 2018 
Graph 4.2.4:  Government support to SMEs 
Graph 4.2.5:  Debt breakdown by sector 
Graph 4.2.6:  Households: Breakdown of y-o-y changes in debt-to-GDP ratio 
Graph 4.2.7:  Non-financial corporations: breakdown of y-o-y changes in debt-to-GDP ratio 

2 

15 
19 
20 
22 
23 
27 
38 
71 
94 
95 
96 
97 
98 
99 

9 
10 
10 
11 
11 
12 
13 
13 
16 
21 
21 
23 
32 
38 

39 
39 
40 
41 
41 
42 

 
 
 
Graph 4.2.8:  Gap to the fundamental-based and prudential benchmarks for household and NFC 

debt 

Graph 4.2.9.a: GDP per head and house price growth 
Graph 4.2.9.b: Change in share of households living in rented accommodation 
Graph 4.2.10:   Population with housing costs over 40% of their income 
Graph 4.3.1:  Key labour market indicators 
Graph 4.3.2.a: Employment rates of graduates (20-34) 3+ years after graduation, and gap to 

average per level of education, 2018 

In-work poverty rate 

Graph 4.3.2.b: Pupils enrolled in dual VET (as% of total pupils in upper-secondary VET, 2017) 
Graph 4.3.3:  Population (25-64) by educational attainment 
Graph 4.3.4:  At-risk-of-poverty or social exclusion rate and its components 
Graph 4.3.5: 
Graph 4.3.6:  Estimated coverage ratio of regional minimum income schemes, 2018 
Graph 4.3.7.a: Average  family benefits per  child (PPPs/month) – 2019 
Graph 4.3.7.b: Children support in 2019 from taxes and benefits (pps/month) - breakdown by decile 
Graph 4.4.1:  Changes in current account and drivers 
Graph 4.4.2:  Trade balance by product type (Jan-Sep) 
Graph 4.4.3:  Trade balance in services 
Graph 4.4.4:  Share of high-tech exports 
Graph 4.4.5.a: Expenditure by international tourists, 2018 
Graph 4.4.5.b: Tourism demand, employment and GDP; annual growth 
Graph 4.4.6:  Real GDP growth and its supply-side determinants 
Graph 4.4.7:  A decomposition of Spain’s productivity gap to the EU average 
Graph 4.4.8:  TFP growth, management practices indicator and employers’ educational attainment 
Graph 4.4.9:  Evolution of business and public R&D intensity, 2000-2017 
Graph 4.4.10:  Regional competitiveness index, 2019 
Graph 4.4.11:  GDP per capita (in PPS) in Spain, 2017 
Graph 4.4.12:  GDP per capita by NUTS2 regions: level in 2010 and growth rate 2010-2017 
Graph 4.4.13:  Unemployment rate and population educated to tertiary level, 2018, Spain NUTS2 

regions 

42 
44 
44 
45 
46 

53 
53 
55 
57 
57 
58 
59 
59 
63 
63 
64 
64 
65 
65 
66 
67 
68 
69 
76 
77 
77 

78 

3 

 
 
 
LIST OF BOXES 

Box 2.1: EU Funds and programmes to address structural challenges and to foster growth and 

competitiveness in Spain 

Box 3.1: Public investment and potential spill-overs 

Box 4.1.1: General government debt 

Box 4.1.2: Spending reviews 

Box 4.2.1: Housing affordability in the recovery 

Box 4.3.1: Monitoring performance in light of the European Pillar of Social Rights 

Box 4.3.2: How vocational education and training can contribute to address skills needs 

Box 4.3.3: Child poverty in Spain 

Box 4.4.1: Tourism industry 

Box 4.4.2: Management practices and productivity 

Box 4.4.3: Investment barriers and challenges in Spain 

18 

22 

32 

33 

44 

47 

52 

59 

65 

68 

71 

4 

 
 
 
EXECUTIVE SUMMARY 

remain 

and  public, 

Spain has to sustain continued growth and jobs 
creation amid old and new emerging challenges 
(1). Spain has enjoyed six years of strong economic 
growth  accompanied  by  dynamic  job  creation; 
between 2013 and 2019, real GDP grew by 16.5% 
and employment by 14%, well above the euro area 
average. However, some structural weaknesses and 
crisis  legacies  have  not  been  fully  overcome  yet. 
The  still  high  external  and  internal  debt,  both 
private 
source  of 
vulnerability. Unemployment has declined, but too 
many  people  remain  without  a  job  or  struggle  to 
make  a  decent  living.  Economic  efficiency,  as 
measured  by  total  factor  productivity,  remains 
subdued, due to low innovation in many firms and 
regions, regulatory fragmentation, market barriers, 
labour market segmentation, and skills gaps. Spain 
is also one of the European countries most exposed 
to  climate  change,  which  poses  important  policy 
challenges  for  water  and  waste  management, 
energy  and  resource  efficiency,  emissions  and 
renewable energy. 

a 

The  Spanish  economy  is  on  a  moderating 
growth  path.  Real  GDP  growth  is  expected  to 
have slowed down from 2.4% in 2018 to 2.0% in 
2019.  Economic  activity  is  expected  to  moderate 
further  to  1.6%  in  2020  and  1.5%  in  2021, 
remaining  above  the  euro  area  average.  The  job 
creation  recorded  since  2014 
to 
continue  but  slow  down.  Unemployment  is  set  to 
decline to 12.8% in 2021, which is still higher than 
before  the  economic  and  financial  crisis  and  well 
above the 7.3% forecast for the euro area. 

is  forecast 

through  public 

Supporting  growth,  productivity  and  the  green 
transformation 
investment 
would  have  positive  spill-overs  on  other 
Member  States.  Simulations  show  that  a  fiscally 
neutral investment programme financed by indirect 
taxes and focused on boosting skills, research and 
innovation,  as  well  as  on  addressing  challenges 
related  to  energy,  water  management,  carbon 
emissions  and  climate  change,  would  support 
Spanish  growth  and  increase  productivity,  while 

(1)  This  report  assesses  Spain’s  economy  in  light  of  the 
European  Commission’s  Annual  Sustainable  Growth 
Strategy,  published  on  17  December  2019.  In 
this 
document, Commission sets out a new strategy  on how to 
address  not  only  the  short-term  economic  challenges  but 
also  the  economy's  longer-term  challenges.  This  new 
economic agenda of competitive sustainability rests on four 
dimensions:  environmental  sustainability,  productivity 
gains, fairness and macroeconomic stability 

5 

facilitating the green transition. It would also have 
a small but positive impact on the rest of the euro 
area.  

Spain  has  made  limited progress  on  the  2019 
country-specific recommendations (CSRs) (2):  

There  has  been  some  progress  in  the  following 
areas: 

  Measures are being implemented at central and 
regional  level  to  modernise  and  increase  the 
capacity  of  public  employment  services,  as 
well as to improve their cooperation with social 
services. Weaknesses persist in some regions.  

There  has  been  limited  progress  in  the  following 
areas: 

  The  institutional  framework  governing  the 
management  of  public  finances  has  not  been 
strengthened.  Recommendations 
stemming 
from  spending  reviews  by  the  independent 
fiscal authority (AIReF), if implemented,  have 
increase  efficiency  and 
the  potential 
effectiveness  of  public  spending  in  several 
policy areas. 

to 

  The  newly  created  governance  structure  for 
public procurement is not yet fully operational. 
The  adoption  of 
the  nation-wide  public 
procurement  strategy  envisaged  for  2018  is 
delayed. 

  Efforts to reduce the use of temporary contracts 
in  the  private  sector  are  showing  limited 
success.  Action  has  focused  on  fighting  abuse 
and not on the drivers of the widespread use of 
temporary  contracts.  The  on-going  review  of 
the  effectiveness  of  hiring  incentives  may 
suggest avenues for reform. 

  The  government  has  not  yet  taken  action  to 
simplify the system of  national unemployment 
assistance.  Coverage and adequacy of regional 
minimum income schemes remain low in many 
regions.  Measures  taken  in  2019  to  improve 
support  for  families  are  positive,  but  can  have 
very limited impact on poverty reduction. 

(2)  Information  on  the  level  of  progress  and  actions  taken  to 
address  the  policy  advice  in  each  respective  subpart  of  a 
CSR is presented in the overview table in Annex A. 

 
                                                           
                                                           
Executive summary 

  A  new  strategy  for  vocational  education  and 
training  (VET)  sets  out  measures  to  improve 
the  attractiveness  and  quality  of  intermediate 
implementation  may 
VET  education. 
contribute to reducing early school leaving and 
addressing  the  lack  of  technical  skills  in  the 
labour market.  

Its 

indicators 

individual 

of the other SDGs. This notwithstanding, some of 
the 
are 
underlying 
significantly  lower  than  the  EU  average  (share  of 
early  school  leavers,  people  at  risk  of  poverty, 
research  and  innovation,  perception  of  corruption, 
recycling of municipal waste, land degradation and 
water). (3) 

rail 

  There  has  been  limited  progress  on  fostering 
innovation, resource and energy efficiency and 
on  developing 
infrastructure. 
Improvements  in  the  funding  and  governance 
of  the  research  and  innovation  system  have 
been  modest.  On  electricity  interconnections 
with  neighbouring  countries,  work  is  ongoing 
but further progress is needed.  

freight 

  The  Law  on  Market  Unity 

remains  an 
important tool to promote better regulation and 
overcome  market 
its 
implementation is proceeding slowly. 

fragmentation,  but 

indicators  of 

The 
the  Social  Scoreboard 
supporting the European Pillar of Social Rights 
point  to  a  number  of  challenges.  Although 
improving,  the  employment  rate  remains  low, 
including  for  women.  Many  young  people  leave 
school  early  or  are  neither  in  employment  nor  in 
education and training. Social transfers (other than 
pensions)  have 
impact  on  poverty 
reduction, particularly among children.  

limited 

targets  under 

There  was  some  progress  on  reaching  the 
national 
the  Europe  2020 
Strategy.  Spain  is  on  track  to  achieve  its  tertiary 
education  attainment  target.  There  was  some 
reduction  in  the  high  share  of  people  at  risk  of 
poverty. Sizeable gaps remain on employment and 
early  school  leaving  rates,  even  though  both  have 
been  improving.  Spain  is  currently  on  track  to 
achieve  its  targets  for  renewable  energy,  but 
further investment will be needed. Spain is still not 
on  track  to  meet  its  targets  for  energy  efficiency 
and  continued  investment,  notably  in  buildings, 
will be required. There was little progress towards 
the targets for R&D investment. 

Spain is making progress towards achieving the 
Sustainable  Development  Goals  (SDGs).  Spain 
has  made  most  evident  progress  with  SDG 3 
“Good 
and  well-being”.  Moderate 
improvements are also recorded for a broad range 

health 

findings  of 

The  main 
review 
contained  in  this  report  and  the  related  policy 
challenges are as follows:  

in-depth 

the 

  Spain's  net  external 

liabilities  declined 
further.  On  the  back  of  robust  GDP  growth 
and  a  continued  current  account  surplus, 
Spain's  net  external  liabilities  have  continued 
reducing  at  a  steady  pace,  but  they  still 
amounted  to  just  below  80%  of  GDP  in  Q2-
2019. 

  The reduction of private debt has continued, 
but  remains  high.  Total  private  debt  is 
projected to have decreased to 132% of GDP in 
Q2-2019. However, the pace of debt reduction 
has  slowed  down  for  both  non-financial 
corporations and households.  

  The  government  debt-to-GDP  ratio  has 
continued its slow decline, but remains very 
high.  Government  gross  debt  is  expected  to 
decline slightly from 96.7% of GDP in 2019 to 
96.0% in 2021, mainly driven by GDP growth. 
Spain’s government deficit remains stubbornly 
high, as the level of taxation is low in relation 
to  expenditure.  Risks 
fiscal 
sustainability remain significant in the medium 
to long term. In particular, government plans to 
permanently  re-link  pensions  to  the  consumer 
price  index  and  to  dissociate  initial  pension 
levels  from  changes  in  life  expectancy  would, 
in  the  absence  of  adequate  compensatory 
expenditure 
measures, 
significantly  in  the  medium  to  long  term  and 
worsen  inter-generational  equity.  This  occurs 

to  overall 

increase 

pension 

(3)  Within the scope of its legal basis, the European Semester 
can help drive national economic and employment policies 
towards the achievement of the United Nations Sustainable 
Development  Goals  (SDGs)  by  monitoring  progress  and 
ensuring  closer  coordination  of  national  efforts.  The 
present report contains reinforced analysis and monitoring 
on the SDGs. A new annex (Annex E) presents a statistical 
assessment  of  trends  in  relation  to  SDGs  in  Spain  during 
the past five years, based on Eurostat’s EU SDG indicator 
set. 

6 

 
                                                           
in a context where future adequacy of pensions 
is expected to be, on average, above than in the 
EU,  and  poverty  mostly  affects  younger  age 
groups, including children. 

in 

recent 

  Unemployment  is  still  very  high,  despite  its 
rapid  decline 
years.  The 
Commission expects the unemployment rate to 
continue  declining  to  12.8%  in  2021.  High 
unemployment  affects 
in  particular  young 
people  and  low-skilled  workers.  New  action 
plans aimed at improving the support to young 
and long-term unemployed workers hinge upon 
a  strengthened  capacity  of  public  employment 
services.  The  22.3%  increase  in  the  minimum 
wage 
labour  costs, 
especially  in  some  sectors  and  regions.  Its 
impact  on  employment  and  in-work  poverty 
has not been quantified yet. In the meantime, a 
new  increase  has  been  agreed  in  2020  and 
further  ones  have  been  announced  until  2023. 
The  new  government  has  also  announced  its 
intention  to  revisit  aspects  of  the  2012  labour 
market  reform,  which  is  recognised  to  have 
underpinned  strong  job  creation  during  the 
recovery. 

in  2019  has 

raised 

  The  widespread  use  of  temporary  contracts 
weighs  on  productivity  growth  and  fuels 
inequality and in-work poverty. The share of 
employees  on  a  temporary  contract  is  the 
highest  in  the  EU,  at  around  26%.  This  has 
negative  impact  on  human  capital  formation, 
impeding  faster  labour  productivity  growth. 
Temporary  contracts  are  increasingly  shorter 
and  commonly  used  even  in  sectors  with  little 
seasonality.  Employment  subsidies  are  not 
effective at promoting stable employment. 

  Labour  productivity  growth  has  been 
relatively  weak  in  recent  years.  It  even 
decreased  slightly  in  2018  and  2019.  Total 
factor productivity however, has grown broadly 
in line with the EU average. 

Other key structural issues analysed in this report, 
which  point  to  particular  challenges  for  Spain’s 
economy, are the following:  

  Spain’s innovation performance is below the 
EU average in all regions.  Innovation suffers 
from  public  and  private  underinvestment  in 

Executive summary 

of 

small 

knowledge 

R&D,  and  the  coordination  of  research  and 
innovation  policy  across  different  levels  of 
government  remains  a  challenge.  Lack  of 
cooperation  between  academia  and  businesses 
hampers 
diffusion.  Business 
innovation is constrained by the low absorption 
capacity 
firms.  Regulatory 
fragmentation  across  regions  also  makes  it 
more difficult for firms to scale-up. Regulatory 
barriers  continue  to  restrict  competition  in 
certain  professional  services  and  in  retail.  A 
more  effective  implementation  of  the  Law  on 
Market  Unity  would  promote  competition  and 
better 
regulatory 
fragmentation.  

regulation,  and 

reduce 

  The  low  innovation  performance  of  the 
economy  is  also  related  to  shortages  of 
technical  skills.  High  early  school  leaving 
rates  undermine  equal  opportunities  and 
contribute  to  the  high  share  of  low  skilled  in 
the  population.  The 
low  attractiveness  of 
vocational  education  and  training  amplifies 
shortages  of  medium  to  high  technical  skills. 
School-to-work  transitions  remain  difficult,  as 
job  opportunities  are  limited  and  often  of  low 
quality.  At  the  same  time,  the  economy  does 
not  create  enough  high-skilled  occupations, 
reflecting its low innovation dynamics.  

its 

number 

information 

potential.  Very 

  Spain  is  improving  on  digitisation,  but  the 
low 
and 
of 
communication  technologies  specialists  and 
the  slow  uptake  of  digital  technologies  by 
small and medium-sized companies hampers 
exploiting 
small 
enterprises,  which  represent  a  large  proportion 
of  firms  in  Spain,  cannot  reap  the  benefits  of 
digitisation  as  easily  as  larger  companies  do. 
Small and medium-sized enterprises often refer 
to 
and 
of 
communication  technology’s  specialists  as  a 
constraining factor for taking greater advantage 
of  the  digitising  trend.  There  is  room  to 
continue improving the very good performance 
of  Spain  in  the  provision  of  digital  public 
services. 

information 

shortage 

a 

  The  share  of  people  at  risk  of  poverty  or 
social  exclusion  continues  to  decrease  but  it 
is still high, particularly for children. Labour 
market  challenges  and  the  low  impact  on 

7 

 
Executive summary 

greenhouse  gas  emissions  keep  growing  most. 
To  reduce  the  current  reliance  on  carbon-
intensive  road  freight,  investments  need  to 
focus on making better use of the rail system.  

  The  Commission’s  proposal  for  a  Just 
Transition Mechanism under the next multi-
annual  financial  framework  for  the  period 
2021-2027  includes  a  Just  Transition  Fund, 
a  dedicated  just  transition  scheme  under 
InvestEU,  and  a  new  public  sector  loan 
facility with the EIB. It is designed to ensure 
towards  EU  climate 
that 
neutrality  is  fair  by  helping  the  most  affected 
regions  in  Spain  to  address  the  social  and 
economic  consequences.  Key  priorities  for 
the  Just  Transition  Fund  are 
support  by 
identified in Annex D, building on the analysis 
of  the  transition  challenges  outlined  in  this 
report. 

transition 

the 

  Territorial  cohesion  challenges  persist. 
Regional  disparities  exist  in  the  areas  of 
employment,  educational  outcomes,  early 
school  leaving  rates,  poverty  and  inequality. 
Despite  a  significant  improvement  in  digital 
infrastructure,  the  urban-rural  divide  persists. 
At  the  same  time,  Spain  faces  problems  of 
ageing and depopulation in rural areas, as well 
demographic  pressures  in  the  major  urban 
areas. 

  Stronger 

and 

would 

render 

sustained 

coordination 
between  the  national,  regional  and  local 
authorities 
the 
implementation  of  policies  more  effective. 
Coordination  amongst  different 
levels  of 
government  is  key  and  remains  a  challenge  in 
policy  areas  where  both  national  and  regional 
levels  are  involved  in  reforms.  These  include 
better  regulation  and  the  implementation  of 
internal  market  rules,  as  well  as  active  labour 
market  policies,  education,  health  care  and 
social services. 

poverty  of  social  transfers  result  in  one  of  the 
highest risks of poverty or social exclusion for 
children  in  the  EU  The  weakness  of  family 
benefits  and  income  guarantee  schemes  limits 
the poverty reduction effect of social transfers. 
Regional  minimum 
income  schemes  are 
estimated  to  only  reach  20%  of  their  potential 
beneficiaries  nationwide,  with  strong  regional 
disparities. Even though fertility rates are much 
below the population replacement level, family 
benefits in Spain remain the lowest in the EU. 
They  reach  only  half  of  the  children  at  risk  of 
poverty  or  exclusion  as  a  strict  means  test  for 
child  benefits  results  in  low  coverage,  and  tax 
allowances  are  of  limited  benefit  for  lower 
income families.  

  Incomplete  connections  for  energy  and 
goods  transport  by  rail  prevent  Spain  from 
fully benefitting from the EU single market. 
Progress  in  electricity  interconnections  with 
neighbouring  EU  countries  would  help  Spain 
achieve the interconnection 2030 target (which 
should  allow  at  least  15%  of  the  electricity 
produced by its power plants to be transported 
across  its  borders  to  neighbouring  countries). 
Investment  is  also  needed  to  enable  more 
freight  to  be  transported  by  rail.  Notably, 
support  is  needed  to  advance  on  connections 
with  France  and  Portugal  and  to  ports  and 
logistic hubs. 

  Spain  is  one  of  the  Member  States  most 
exposed  to  climate  change.  Climate  change 
adaptation, 
risk  prevention  and  disaster 
resilience require investment. Infrastructure for 
water and waste management is uneven across 
the  country,  posing  significant  environmental 
challenges.  In  some  urban  areas,  air  quality  is 
also  an  issue.  At  the  same  time,  Spain’s 
environmental  tax  revenues  remain  among  the 
lowest in the EU. 

  Further  action  would  accelerate 

the 
transition  towards  clean  and  sustainable 
mobility,  as  well  as  the  decarbonisation  of 
energy and the increase in energy efficiency, 
in  particular  at  building  and  district  scale. 
Spain is bound to miss its 2030 CO2 emissions 
targets,  if  it  does  not  implement  the  ambitious 
policies  outlined  in  the  draft  National  Energy 
and Climate Plan. Transport is the sector where 

8 

 
  
1.  ECONOMIC SITUATION AND OUTLOOK 

Graph 1.1:  Composition of GDP growth 

(*) years 2020-2021 are a forecast 
Source: European Commission 2020 winter interim forecast. 

to 

are 

related 

Risks  to  the  outlook  are  mainly  on  the 
downside.  Risks 
external 
developments  such  as  further  restrictive  measures 
on  trade,  a  more  protracted  slowdown  in  world 
GDP growth than anticipated, geopolitical tensions 
and  the  UK’s  withdrawal  from  the  EU.  On  the 
upside, trade tensions could be resolved faster than 
assumed,  giving  rise  to  a  stronger  rebound  of 
foreign trade. Domestic risks refer to the impact of 
than 
uncertainty,  which  could  weigh  more 
expected 
investment 
decisions. 

consumption 

and 

on 

is  estimated  that  potential  growth  will 
It 
continue 
to  rise.  Potential  output  growth 
plummeted  during  the  crisis,  reaching  -0.5%  in 
2012.  Since  then,  it  has  kept  increasing,  and  it  is 
estimated  to  reach  1.5%  by  2021,  converging  to 
the  euro  area  average  (see  Graph 1.2).  About  two 
thirds  of  this  increase  come  from  labour.  The 
contribution of capital and total factor productivity 
(TFP)  to  potential  output  is  now  in  line  with  the 
euro area average, after a post-crisis increase.   

Economic outlook 

The  Spanish  economy 
is  now  set  on  a 
moderating  path.  After  expanding  by  2.4%  in 
2018,  GDP  growth  decelerated  to  2.0%  in  2019, 
still well above the euro area (see Graph 1.1). (4) In 
2019, the reported quarterly composition of growth 
has  been  very  volatile,  but  overall,  domestic 
demand  weakened  compared  to  the  previous  year 
due 
lower  private  consumption  and 
investment, whereas the contribution of net exports 
to  growth  became  positive.  Lower  private 
consumption  growth  has  been  partly  due  to  weak 
demand  for  durable  goods,  possibly  related  to 
technological uncertainty in the automotive sector, 
and  to  an  increase  in  precautionary  savings  by 
households.  

to  both 

Economic  activity  is  expected  to  decelerate 
further  to  1.6%  in  2020  and  1.5  %  in  2021, 
despite a small rebound of consumption. This is 
mainly  due  to  a  declining  contribution  of  net 
exports  to  growth.  Private  consumption  growth  is 
expected  to  increase  slightly  and  then  stabilise  as 
households’ financial position improves and some 
of  the  temporary  factors  limiting  car  purchases 
gradually 
is 
expected  to  grow  at  a  lower  rate  than  disposable 
income  over  the  forecast  horizon,  resulting  in 
additional increases in households’ savings rate. 

fade  away.  Still,  consumption 

Net  exports  should  moderate  but  continue 
supporting  growth.  The  contribution  of  net 
exports  to  growth  has  been  positive  since  mid-
2018  due  to  unusually  low  import  growth,  partly 
reflecting weakness in the demand for durable and 
investment  goods.  The  import  intensity  of  final 
demand is expected to return to its historic average 
as  the  demand  for  durable  and  investment  goods 
recovers,  pushing  up 
import  growth.  Export 
growth is projected to remain subdued amid trade 
tensions  and  weak  global  growth.  As  a  result,  the 
contribution of net exports to growth is expected to 
diminish  in  2020  and  become  broadly  neutral  in 
2021. 

(4)  GDP  and  inflation  forecasts  are  based  on  the  European 
Commission 2020 winter interim forecast, which has a cut 
off  date  of  4  February  2020.  All  other  data  refer  to  the 
European Commission 2019 autumn forecast, which has a 
cut-off date of 24 October 2019. 

9 

-6-5-4-3-2-101234512131415161718192021Real GDP (y-o-y%)Private consumptionPublic consumptionInvestmentChanges in inventoriesNet exportspps.forecast 
                                                           
  
 
1. Economic situation and outlook 

Graph 1.2:  Contributions to potential growth 

Graph 1.3: 

Investment rate, 2015 prices 

(*) Potential output estimates based on the European 
Commission 2019 autumn forecast 
Source: European Commission.  

(*) years 2019-2021 are a forecast 
Source: European Commission 2019 autumn forecast. 

the 

Both  capital  intensity  and  the  productivity  of 
capital  in  Spain  are  below  the  euro  area 
average,  although 
capital  allocation  has 
improved.  In  the  pre-crisis  period  investment 
flowed  to  non-tradable  sectors,  and  in  particular 
construction,  which  at 
time  had  high 
profitability  but  low  productivity.  This  resulted  in 
high  capital  intensity,  but  low  productivity  of 
capital  (see  Graph 1.4).  This  trend  was  reversed 
during  the  recovery,  as  net  capital  formation  did 
not  keep  pace  with  strong  job  creation.  This 
resulted  in  a  decline  in  capital  intensity,  but  an 
increase  in  the  productivity  of  capital  relative  to 
the euro area, suggesting that capital allocation has 
improved. Total factor productivity also improved 
slightly relative to the euro area, also suggesting a 
the  quality  of 
structural 
investment. 

improvement 

in 

Investment 

Investment  is  expected  to  recover  slightly  over 
the  forecast  horizon  after  a  weak  end  of  2019.  
Equipment  investment  growth,  which  has  been 
negatively 
the 
impacted  by  weakness 
in 
manufacturing  sector 
to  recover 
slightly,  in  line  with  final  demand.  Residential 
investment is set to decelerate further as the cycle 
matures,  whereas  non-construction  investment  is 
expected to recover somewhat after contracting in 
2019.  

is  expected 

As  a 
share  of  GDP,  non-construction 
investment  has  reached  its  pre-crisis  peak,  but 
remains  below  the  euro  area  average  (see 
Graph 1.3). The investment rate stood at 18.9 % in 
2019,  above  the  minimum  of  17%  recorded  in 
2013,  but  still  2 pps  below  the  euro  area  average. 
Non-construction  investment  now  stands  at  9.9  % 
of GDP, in line with its pre-crisis peak, but below 
the  euro  area  average  (11.2%  of  GDP).  However, 
construction  investment  has  barely  increased  its 
weight  in  GDP  since  2013.  It  stood  at  9.1%  of 
GDP in 2019, far from its pre-crisis peak at  more 
than 16%, and also below the EU average (10% of 
GDP).  

10 

-5-4-3-2-10123450607080910111213141516171819*20*21*Rate of change y-o-y (%)Capital accumulation contributionTFP contributionTotal labour (hours) contributionPF potential growthReal GDP growth0510152025300001020304050607080910111213141516171819*20*21*% of GDPNon-residential construction investmentResidential constructionNon-construction investment   
   
1. Economic situation and outlook 

Graph 1.4:  Capital intensity and capital productivity 

continued  current  account  surpluses  and  robust 
nominal  GDP  growth  projected  until  2021  will 
facilitate  a  further  improvement  in  the  NIIP  (see 
Section 3).  By  sectors,  the  net  lending  position  of 
the  private  sector  since  2009  (largely  due  to  the 
corporate  sector)  has  been  partly  offset  with  the 
borrowing  position  of  the  general  government 
sector (see Graph 1.5). 

Graph 1.5:  Net lending / borrowing by sector 

(*) years 2019-2021 are a forecast 
(1) Capital intensity: net capital stock at 2010 prices per 
person employed; total economy, relative to EA 
(2) Capital productivity: gross domestic product at 2010 
reference levels per unit of net capital stock ; total 
economy, relative to EA 
(3) Total factor productivity relative to the euro area, 
2010=100 
Source: European Commission 2019 autumn forecast. 

External position 

The  current  account  surplus  is  expected  to 
widen until 2021, both in nominal and cyclically 
adjusted  terms.  The  revised  national  accounts 
also  reveal  that  in  recent  years  Spain’s  current 
account surplus has been about 1% of GDP higher 
than previously estimated. After declining in 2018, 
the current account surplus is expected to increase 
in  2019  and  then  improve  slightly  more  in  2020 
and 2021, owing to a reduction in the goods’ trade 
deficit.  In  cyclically-adjusted  terms,  the  current 
account  surplus  is  also  expected  to  increase  this 
year,  and  rise  further  over  the  forecast  horizon, 
reaching a record high 3.4% of GDP in 2021.  

surpluses  are 
Persistent  current  account 
translating  into  a  reduction  in  Spain's  net 
external  liabilities,  which  nevertheless  remain 
high.  Despite 
the  current  account  surpluses 
registered  since  2013,  negative  valuation  effects 
(partly reflecting improvements in confidence and 
the higher value of Spanish assets) have limited the 
improvements  in  the  net  international  investment 
position (NIIP). Still, the NIIP has fallen by more 
than 17 pps of GDP since its peak, but remained at 
a  sizeable  -79.6%  of  GDP  in  Q3-2019.  The 

(*) years 2019-2021 are a forecast 
Source: European Commission 2019 autumn forecast. 

Private and public debt 

The  stock  of  private  debt  has  continued 
declining,  but  deleveraging  needs  persist. 
Despite  substantial  debt  reduction  among  both 
households and corporates (in consolidated terms), 
private  sector  debt  remains  high,  at  130.6%  of 
GDP in Q3-2019. This is a reduction of more than 
70 pps  since  its  peak  (of  which  about  45 pps  by 
non-financial  corporations  (NFCs)  and  25 pps  by 
households).  Since  2017,  the  decline  has  been 
driven  by  robust  growth  in  nominal  GDP,  which 
has more than offset positive net credit flows. The 
private  debt-to-GDP  ratio  is  expected  to  remain 
above  its  prudential  threshold  and  fundamental 
benchmark,  pointing  to  deleveraging  needs  for 
NFCs and especially  for households (see  Sections 
3 and 4.2).  

The  housing  market  keeps  recovering,  both  in 
terms of activity and of prices, but it is slowing 
down.  Activity  in  the  housing  market,  both  in 
terms  of  transactions  and  new  construction,  has 
picked up strongly in recent years, but remains far 
from  its  pre-crisis  levels,  and  has  started  to  slow 

11 

7075808590951001051100001020304050607080910111213141516171819*20*21*K intensity ES/EAK productivity ES/EATFP ES/EA-15-10-505101504050607080910111213141516171819*20*21*% of GDPCorporationsGeneral governmentHouseholds and NPISHTotal economy   
  
1. Economic situation and outlook 

The unemployment rate is set to continue falling to 
below  13%  in  2021,  still  far  above  the  euro  area 
average. Despite the positive trend since 2014, the 
labour  market  integration  of  young  people  and  of 
the  long-term  unemployed  remains  a  challenge 
(see Section 4.3.1). 

Graph 1.6: 

Employment and GDP - levels compared to 
2008 

Source: Eurostat [namq_10_pe, namq_10_gdp] 

Labour  market  segmentation  and  skills’  gaps 
persists,  hindering  productivity  growth.  At 
[26.1% in Q3-2019], Spain is the EU country with 
the  largest  share  of  employees  on  temporary 
contracts  (compared  to  13.4%  on  EU  average). 
This  hinders  human  capital  accumulation  and 
ultimately  productivity  growth. 
In  addition, 
temporary  workers  face  a  high  rate  of  in-work 
poverty  (21.3% 
than 
permanent  workers,  one  of  the  largest  gaps  in  the 
EU).  Other 
labour  market  factors  hindering 
productivity  growth  are  related  to  skills  gaps  and 
mismatches (see Section 4.3). 

in  2018,  14 pps  more 

Wage  growth  is  expected  to  have  peaked  in 
2019, and to outpace inflation in 2020 and 2021 
as  well.  After  growing  by  1% 
in  2018, 
compensation per employee rose to 2.1% in 2019, 
resulting  in  the  first  increase  in  real  wages  since 
2015.  This  is  due  to  both  the  increase  in  the 
minimum  wage enacted at the beginning of 2019, 
and 
in  bargaining 
agreements. Wage growth is expected to decelerate 
slightly  but  continue  growing  above  inflation  in 
2020  and  2021.  As  productivity  growth  was 

rising  negotiated  wages 

down  in  2019.  Growth  in  house  prices  has  also 
started  to  moderate,  but  it  varies  greatly  across 
regions,  with  larger  increases  in  the  major  cities 
and  the  coastal  areas.  On  aggregate  for  the  whole 
country, the valuation gap is closing. In big cities, 
the  increased  propensity  to  rent  after  the  crisis 
created  upward  pressure  on  rental  prices  (see 
Section 4.2). 

The  high  public  debt  ratio  is  set  to  continue 
decreasing  slowly.  Under  a  ‘no  policy  change’ 
scenario,  the  general  government  debt  ratio  is 
forecast  to  fall  slightly  from  97.6%  in  2018  to 
96.0% of GDP in 2021. The decline is expected to 
be  driven  by  nominal  GDP  growth  and  falling 
interest expenditure. After decreasing by 0.5 pps to 
2.5%  of  GDP  in  2018,  the  general  government 
deficit  is  projected  to  narrow  to  2.3%  of  GDP  in 
2019.  Under  this  ‘no-policy  change’  scenario,  the 
deficit  is  projected  to  decline  further  to  2.2%  of 
GDP  in  2020,  and  to  2.1%  in  2021.  The  primary 
balance  is  likely  to  remain  broadly  unchanged 
around zero, whereas the average cost of debt will 
continue  falling  as  long  as  the  cost  of  issuance 
remains below the average cost of debt.  

Inflation 

inflation 

is  projected  to  remain 
Headline 
subdued but increase gradually as core inflation 
rises.  HICP  inflation  fell  from  1.7%  in  2018  to 
0.8%  in  2019,  mainly  because  of  a  decline  in  oil 
prices.  It  is  then  forecast  to  increase  to  1.3  %  in 
2021, as further declines in oil prices partly offset 
the  gradual  pickup  in  core  inflation.  The  increase 
in core inflation is set to be driven by the increase 
in  wages,  which  have  a  large  weight  on  the 
services  component  of  the  HICP  index.  The 
inflation differential with respect to the euro area is 
expected  to  remain  slightly  negative  in  2020  and 
2021.  

Labour market 

Employment  growth  is  set  to  moderate,  in  line 
with  the  cyclical  slowdown.  Spain  has  recovered 
2.5 million jobs since Q1-2014, i.e., two thirds of 
the  jobs  lost  during  the  crisis  (see  Graph 1.6). 
However,  the  employment  rate  remains  6.0 pps 
below the EU average (at 67.8% in Q3-2019). The 
labour market started to lose traction in the second 
half  of  2019,  and  job  creation  is  expected  to 
continue  declining,  especially  in  2020  and  2021. 

12 

70758085909510010511008Q109Q110Q111Q112Q113Q114Q115Q116Q117Q118Q119Q1index 2008=100EmploymentGDP   
1. Economic situation and outlook 

negative in 2019, unit labour costs peaked at 2.4%. 
They are set to rise more slowly in 2020 and 2021, 
though  still  faster  than  the  euro  area  average  (see 
Graph 1.7).  

from 34.1 in 2017 to 33.2 in 2018. However, both 
indicators  remain  well  above  the  EU  average  (of 
5.2  and  30.9  respectively)  and  their  pre-crisis 
levels (see Section 4.3) 

Graph 1.7:  Analysis of unit labour costs 

Regional disparities 

Significant  regional  socio-economic  disparities 
persist  in  Spain.  The  evolution  of  GDP  per  head 
across  regions  throughout  the  recovery  has  been 
closely linked to labour market developments, and 
in particular the employment rate (see Section 4.3). 
Education  indicators  also  show  wide  regional 
disparities,  particularly  in  the  rate  of  early  school 
leavers  ranging  between  7%  and  24%  in  2018. 
Other  socio-economic 
indicators  also  present 
significant  territorial  disparities  at  subnational 
level, including those related to R&D expenditure, 
poverty and competitiveness (see Graph 1.8). 

Graph 1.8: 

Regional disparities on selected indicators 

(*) years 2019-2021 are a forecast 
Source: European Commission 2019 autumn forecast. 

Poverty, inequality and social inclusion 

Social  indicators  continue  to  improve  on  the 
back  of 
falling  unemployment,  but  child 
poverty  remains  among  the  highest  in  the  EU. 
In 2018 (EU-SILC survey, income year 2017), the 
percentage  of  people  at  risk  of  poverty  or  social 
exclusion  (AROPE)  declined  slightly  to  26.1% 
(3.1 pps below the peak in 2014) but remains well 
above  the  EU  average  of  21.9%.  Though  figures 
are  improving,  children  (0-17)  remain  the  age 
group worst affected; at 29.5%, the rate is 5.5 pps 
above  the  EU  average  and  among  the  highest  in 
the EU. The impact of social transfers in reducing 
child  poverty  is  the  lowest  in  the  EU  (see 
Box 4.3.3). 

Income  inequalities  continue  to  decrease,  but 
remain  among  the  highest  in  the  EU.  In  2018 
(income  year  2017),  the  income  of  the  top  20% 
was 6.0 times that of the bottom 20%, compared to 
6.6  times  in  2017  (income  year  2016).  Flash 
estimates (5)  point  to  a  further  improvement  in 
2019.  The  Gini  coefficient (6)  also  fell  slightly, 

(5)  Experimental  flash  estimates  produced  by  Eurostat  for 

income year 2018. https://bit.ly/34HOcIG  

(6)  The  Gini  coefficient  ranges  between  0  and  100.  Lower 
values  indicate  higher  equality.  To  take  into  account 

(1) GDP in PPS per head (2017), Labour productivity in PPS 
(2017), ESL: early school leaving rate (2018), Employment 
rates (20-64) (2018), Unemployment rate (15-74) (2018), 
AROPE: at-risk-of-poverty rate (2018), R&D: expenditure in 
research and development as a percentage of GDP (2015); 
RCI: regional competitiveness index (2019) 
Source: European Commission. 

]]  

Sustainable Development Goals  

is  political  consensus 

There 
in  Spain  on 
supporting the United Nations 2030 Sustainable 
Development  Goals.  The  establishment  of  Vice-
Presidencies  for  Social  Rights  and  the  Agenda 

differences  in  household  size  and  composition,  the  total 
disposable household income is "equivalised".  

13 

-4-20246804050607080910111213141516171819*20*21*Rate of change y-o-y (%)Inflation (GDP deflator growth)Real Compensation per EmployeeProductivity Contribution (negative sign)Nominal unit labour costULC in EA-3-2-1012345GDP per headProductivityESLEmploymentUnemploymentAROPER&D (% GDP)RCINormal, EU-28 = 0EU-28Non-capital regionsCapital regionMS average  
                                                           
  
                                                                                   
1. Economic situation and outlook 

require 

2030  as  well  as  for  Climate  Change  and  the 
Demographic  Challenge  in  the  new  government 
reflect  this  commitment.  However,  meeting  the 
close 
challenge  will 
sustainability 
cooperation  between 
levels  of 
the  different 
government 
(European  Commission,  2019g). 
Other  important  challenges  in  the  implementation 
the 
of  Agenda  2030 
coordination  with  other  ministries  so  as  to  ensure 
policy coherence, as well as budget alignment and 
the definition of indicators for adequate monitoring 
and accountability. 

in  Spain  will 

include 

care. 

health 

Spain is making progress towards achieving the 
Sustainable  Development  Goals (SDGs). On  the 
basis  of  the  trends  in  the  Eurostat  indicators  over 
the  last  five  years,  the  area  where  progress  has 
been  most  evident  is  SDG 3  “Good  health  and 
well-being”,  where  all  the  underlying  indicators 
showed  an  overall  improved  performance,  despite 
some regional variations in access to certain types 
of 
Furthermore,  moderate 
improvements  are  seen  for  a  broad  range  of  the 
other  SDGs  such  as  SDG 1  “No  poverty”,  SDG 2 
“Zero  hunger”,  SDG 4  “Quality  education”, 
SDG 8  “Decent  work  and  economic  growth”, 
SDG 9  “Industry,  innovation  and  infrastructure”, 
SDG 10 
SDG 11 
“Sustainable  cities  and  communities”,  SDG 13 
“Climate  action”,  SDG 16,  “Peace  justice  and 
strong  institutions”,  and  17  “Partnerships  for 
goals”.  Notwithstanding  the  improvements,  the 
individual 
current 
underlying  indicators  are  significantly  lower  than 
the  EU  average,  such  as  for  the  share  of  early 
school  leavers,  people  at  risk  of  poverty,  research 
and innovation, perception of corruption, recycling 
of municipal waste, land degradation and water. 

levels  for  several  of 

inequalities”, 

“Reduced 

the 

14 

 
1. Economic situation and outlook 

Table 1.1: 

Key economic and financial indicators – Spain 

(1) NIIP excluding direct investment and portfolio equity shares 
(2) domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU 
foreign-controlled branches. 
(3) The tax-to-GDP indicator includes imputed social contributions and hence differs from the tax-to-GDP indicator used in the 
section on taxation 
(4) Defined as the income tax on gross wage earnings plus the employee's social security contributions less universal cash 
benefits, expressed as a percentage of gross wage earnings 
Source: Eurostat and ECB as of 4-2-2020, where available; European Commission for forecast figures (Winter forecast 2020 for 
real GDP and HICP, Autumn forecast 2019 otherwise). 

15 

2004-072008-122013-1620172018201920202021Real GDP (y-o-y)3.6-1.31.72.92.42.01.61.5Potential growth (y-o-y)3.50.90.11.11.21.31.41.5Private consumption (y-o-y)3.9-2.01.13.01.8...Public consumption (y-o-y)5.71.40.01.01.9...Gross fixed capital formation (y-o-y)5.7-8.51.85.95.3...Exports of goods and services (y-o-y)4.61.04.65.62.2...Imports of goods and services (y-o-y) 8.3-5.23.56.63.3...Contribution to GDP growth:Domestic demand (y-o-y)4.9-3.01.03.02.4...Inventories (y-o-y)0.0-0.20.30.00.2...Net exports (y-o-y)-1.31.80.5-0.1-0.3...Contribution to potential GDP growth:Total Labour (hours) (y-o-y)1.5-0.2-0.40.30.40.50.50.5Capital accumulation (y-o-y)1.70.70.20.30.40.40.50.5Total factor productivity (y-o-y)0.20.40.30.40.40.40.40.5Output gap2.5-4.0-5.5-0.11.01.61.71.6Unemployment rate9.219.123.117.215.313.913.312.8GDP deflator (y-o-y)3.80.50.31.41.11.41.41.4Harmonised index of consumer prices (HICP, y-o-y)3.22.30.12.01.70.81.21.3Nominal compensation per employee (y-o-y)3.92.60.40.71.02.42.22.1Labour productivity (real, person employed, y-o-y)-0.21.70.80.20.1-0.1..Unit labour costs (ULC, whole economy, y-o-y)3.40.4-0.40.71.22.71.71.5Real unit labour costs (y-o-y)-0.4-0.1-0.7-0.70.11.30.30.1Real effective exchange rate (ULC, y-o-y)2.4-1.7-1.30.90.7-0.5-0.8-0.4Real effective exchange rate (HICP, y-o-y)1.2-0.5-0.61.51.9-1.6-1.1-0.6Net savings rate of households (net saving as percentage of net disposable income)3.04.53.01.21.5...Private credit flow, consolidated (% of GDP)27.1-0.7-5.00.70.4...Private sector debt, consolidated (% of GDP)166.6198.3162.4139.7133.5...of which household debt, consolidated (% of GDP)73.583.270.961.259.0...of which non-financial corporate debt, consolidated (% of GDP)93.1115.191.578.674.5...Gross non-performing debt (% of total debt instruments and total loans and advances) (2).4.46.23.83.2...Corporations, net lending (+) or net borrowing (-) (% of GDP)-3.95.96.85.94.94.33.83.6Corporations, gross operating surplus (% of GDP)20.423.823.724.524.223.723.423.3Households, net lending (+) or net borrowing (-) (% of GDP)-4.5-0.21.50.00.01.01.51.6Deflated house price index (y-o-y)9.7-8.20.34.55.2...Residential investment (% of GDP)11.36.94.14.85.35.7..Current account balance (% of GDP), balance of payments-7.8-3.92.22.71.92.42.52.6Trade balance (% of GDP), balance of payments-5.0-0.93.53.62.7...Terms of trade of goods and services (y-o-y)0.5-0.90.4-0.8-1.6-0.10.00.0Capital account balance (% of GDP)0.60.40.50.20.5...Net international investment position (% of GDP)-70.5-91.3-90.8-85.5-80.4...NENDI - NIIP excluding non-defaultable instruments (% of GDP) (1)-39.5-71.8-66.5-57.2-53.6...IIP liabilities excluding non-defaultable instruments (% of GDP) (1)121.0155.2157.1156.5157.2...Export performance vs. advanced countries (% change over 5 years)7.8-4.1-2.76.82.5...Export market share, goods and services (y-o-y)-2.7-3.82.30.4-1.10.8-0.8-1.1Net FDI flows (% of GDP)4.00.10.91.0-1.3...General government balance (% of GDP)1.3-9.2-5.6-3.0-2.5-2.3-2.2-2.1Structural budget balance (% of GDP)..-2.0-2.9-2.9-3.1-3.2-3.0General government gross debt (% of GDP)40.761.998.798.697.696.796.696.0Tax-to-GDP ratio (%) (3)36.332.334.534.735.435.736.036.1Tax rate for a single person earning the average wage (%) (4)20.421.122.121.121.3...Tax rate for a single person earning 50% of the average wage (%) (4)10.69.710.910.08.1...forecast 
 
  
 
2.  PROGRESS WITH COUNTRY-SPECIFIC RECOMMENDATIONS 

of 

all 

76% 

recorded 

Since  the  start  of  the  European  Semester  in 
2011, 
country-specific 
recommendations  addressed  to  Spain  have 
recorded at least ‘some progress” (7). 24% of the 
CSRs 
'no  progress' 
'limited'  or 
(Graph 2.1).  The  reforms  implemented  during  the 
economic  crisis  and  in  the  following  years  have 
economic 
contributed 
performance and job creation until now. However, 
reform progress slowed after 2014. There has been 
some back-tracking on the pension reforms and the 
new government has announced a reversal of some 
elements  of  the  2012  labour  market  reform. 
Coordination between the national and the regional 
governments is crucial, but remains a challenge in 
several policy areas covered by the CSRs.  

Spain’s 

strong 

to 

the 

Earlier  recommendations  on 
financial 
sector  have  been  addressed.  Following  macro-
financial  stabilisation,  the  Spanish  banking  sector 
enjoys  high  liquidity  and  adequate  capitalisation. 
Profitability  is  under  pressure  due  to  the  low 
interest  rates,  but  confidence  in  the  Spanish 
banking sector as a whole has been restored.  

is 

still  not 

There  has  been  little  progress  in  the  area  of 
fiscal  governance.  The  new  governance  structure 
for  public  procurement 
fully 
functioning,  almost  two  years  after  the  entry  into 
force  of  the  law  on  public  sector  contracts.  The 
elaboration  of  the  National  Public  Procurement 
Strategy scheduled for 2018 is delayed. There have 
been  no  other  steps  to  strengthen  the  fiscal 
framework. Seven reviews of public expenditure in 
specific policy areas have been completed and the 
results  of  four  on-going  reviews  are  expected  in 
the  first  half  of  2020.  Finally,  if  the  departures 
from the 2013 pension reform are made permanent 
without adequate compensatory measures, pension 
expenditure will increase significantly and worsen 
inter-generational  equity  in  the  medium  to  long 
term. 

(7)  For  the  assessment  of  other  reforms  implemented  in  the 
past, see in particular section 4.1, 4.2, 4.3, 4.4, and 4.5. 

Graph 2.1:  Overall multiannual implementation of 2011-

2019 CSRs by February 2020 

(1) The multiannual assessment looks at the implementation 
progress since a CSR was first adopted until February 2019. 
(2) The assessment of CSRs related to fiscal policy excludes 
compliance with the Stability and Growth Pact. 
(3) Assessment categories in 2011-2012 differed from those in 
the following years. 
Source: European Commission. 

There was some improvement in the delivery of 
labour  market  policies,  but  their  effectiveness 
remains  modest 
labour  market 
and 
segmentation  persists.  The  share  of  temporary 
contracts  in  total  employment  remains  high  at 
above  26%  in  Q3-2019.  In  the  public  sector,  the 
use of temporary contracts has increased further in 
2019, despite the pledge to reduce it. Measures to 
reduce 
temporary  contracts  have  focused  on 
fighting  abuse.  Efforts  to  strengthen  the  public 
employment  services  continue  in  some  regions. 
The  implementation  of  the  new  Action  Plan  for 
Youth  Unemployment  and  the  ReincorporaT  Plan 
for  the  long-term  unemployed  is  on  track,  but 
hiring  subsidies  still  absorb  about  40%  of  the 
budget for active labour market policies and do not 
seem to be very effective. 

to  reduce 

Initiatives  are  on-going 
skills 
mismatches and early school leaving. Medium to 
high-level  technical  skills,  and  especially  ICT 
specialists, are in shortage. The new Strategic Plan 
for Vocational Education and training (VET) may 
play a role in reducing skills mismatches and early 
school  leaving,  once  fully  implemented.  The 
the  design  of 
business 

sector’s 

role 

in 

16 

No Progress1%Limited Progress23%Some Progress40%Substantial Progress24%Full Implementation12% 
 
                                                           
  
2. Progress with country-specific recommendations 

There  has  been  limited  progress  in  the  area  of 
better  regulation.  Despite  some  actions 
to 
improve the implementation of the Law on Market 
Unity, a stronger commitment by regions and local 
authorities  could  help  to  overcome  excessive 
market  fragmentation  and  foster  better  regulation 
in Spain. 

Overall,  policy  advances  have  been  very 
modest,  leaving  Spain’s  remaining  structural 
weaknesses  unaddressed.  A  more  decisive 
implementation  of 
reforms  and  new  policy 
initiatives  in  several  areas  remain  key  to  increase 
productivity,  potential  growth,  social  inclusion, 
and the green transformation. 

qualifications  is  being  reinforced,  and  work  is 
underway on a Digital Skills National Strategy.  

There  has  been  limited  progress  in  increasing 
the support for families and the effectiveness of 
social assistance. The 2019 increase in the amount 
of the means-tested child allowance can only have 
a  very  limited  impact  on  poverty  reduction. 
National 
schemes 
remain  fragmented  and  the  coverage  of  regional 
income guarantee schemes remains very limited in 
many regions, with the number of beneficiaries not 
even  reaching  20%  of  the  potential  beneficiaries 
on average in the country. 

unemployment 

assistance 

of 

to 

rail 

ongoing 

complete 

There  has  been  limited  progress  on  investment 
innovation,  resource  and  energy 
to  foster 
efficiency  and 
freight 
infrastructure  and  electricity  interconnections. 
The  draft  National  Climate  and  Energy  Plan  is 
ambitious in scope, but it relies to a large extent on 
mobilising  private  investments,  which  have  not 
materialised yet. There has been some progress on 
the 
electricity 
development 
interconnections  with  France  and  with  Portugal. 
There  were  certain  steps 
to  support 
sustainable mobility, but overall there  was limited 
progress 
efficiency. 
Investments  in  rail  infrastructure  for  freight  have 
not increased in 2019. Spending on R&D remains 
low  compared  with  other  Member  States. 
Coordination  of  research  and  innovation  policies 
across government levels remains a  challenge  and 
the  evaluation  of  research  programmes  and 
policies  is  not  systematic.  The  assessment  of  this 
CSR does not take into account the contribution of 
the EU 2021-2027 cohesion policy funds. (8) 

fostering 

resource 

taken 

in 

The  European  Commission  can  provide  tailor-
made  expertise  via  the  Structural  Reform 
Support  Programme 
to  help  design  and 
implement  growth-enhancing  reforms.  Since 
2018,  Spain  has  received  support  for  some  20 
projects.  In  2019,  several  projects  were  delivered 
on  the  ground.  The  Commission,  for  example, 
supported  the  authorities  in  the  review  of  the 
the  reimbursement  of 
public  expenditure  on 
prescription-dispensed  medicines  and 
the 
promotion  of  e-Justice.  The  Commission  also 
assisted 
the  Spanish  Ministry  for  Ecological 
Transition  in  the  preparation  of  strategies  for 
coastal  protection  of  the  provinces  of  Cadiz, 
Malaga  and  Almeria  in  Andalusia  in  order  to 
address the effects of climate change. Work started 
in  2019  on  new  projects  (namely,  to  improve  the 
implementation of dual VET in Spain, to help the 
Spanish  Public  Employment  Service  implement 
the  Action  Plans  for  Youth  Employment  and  for 
Long-term  Unemployment,  as  well  as  on  the 
insolvency  and  pre-insolvency 
reform  of 
frameworks). 

the 

in 

(8) 

 The regulatory framework underpinning the programming 
of  the  2021-2027  EU  cohesion  policy  funds  has  not  yet 
been  adopted  by  the  co-legislators,  pending  inter  alia  an 
agreement on the multiannual financial framework (MFF). 

17 

                                                           
 
2. Progress with country-specific recommendations 

Box 2.1: EU Funds and programmes to address structural challenges and to foster growth 
and competitiveness in Spain 

Spain  is  one  of  the  countries  benefiting  most  from  EU  support.  The  financial  allocation  from  the  EU 
Cohesion  policy  funds (1)  for  Spain  amounts  to  €42.5 billion  in  the  current  Multiannual  Financial 
Framework, equivalent to around 0.5% of its GDP. By the end of 2019, 31.7 billion (around 75% of the total 
amount planned) were allocated to specific projects, while only €12.9 billion were reported as spent by the 
selected  projects (2),  showing  a  level  of  implementation  well  below  the  EU  average,  requiring  prompt 
measures to accelerate the implementation of the programmes. 

While  bringing  about  a  more  harmonious  development  through  reducing  economic,  social  and 
territorial  disparities,  EU  Cohesion  policy  funding  also  supports  to  a  great  extent  structural 
challenges  in  Spain.  The  Cohesion  Policy  programmes  for  Spain  have  allocated  €10 billion  for  smart 
growth, €8.5 billion for sustainable growth and sustainable transport and €11 billion for inclusive growth. In 
2019, following a performance review (3) €1.7 billion have been made available for Spain within performing 
priorities. 

EU  Cohesion  policy  funding  is  contributing  to  the  transformation  of  the  Spanish  economy,  by 
promoting  growth  and  employment  via  investments,  among  others,  in  research,  technological 
development  and  innovation,  competitiveness  of  enterprises,  sustainable  transport,  employment  and 
labour  mobility.  By  2019,  investments  driven  by  the  European  Regional  Development  Fund  (ERDF) 
increased  accessibility  by  building  or  upgrading  more  than  200  km  of  roads;  supported  research,  as  over 
11,000  researchers  work  in  improved  research  infrastructures;  promoted  energy  efficiency  realising  more 
than 40 MW of additional capacity to produce renewable energy; achieved 1,400,000 additional households 
with access to broadband of at least 30 Mbps, the upgrading of schools for 200,000 pupils, as well as the 
reduction of greenhouse gas emissions by 250,000 tons of CO2 t-eq. The European Social Fund (ESF), as 
well as the Youth Employment Initiative (YEI), of which Spain is the biggest beneficiary, supported notably 
the  rollout  of  the  2014  education  reform  and  the  set-up  of  youth  policies  durably  anchored  in  public 
employment services, based on strong partnerships. Over 4 million actions, including workshops, trainings 
and  outreach  campaigns,  so  far  led  to  1.8  million  qualifications  and  884  970  jobs.  200,000  young  people 
(50%)  were  still  working  or  engaged  in  training  or  education  after  completing  a  Youth  Guarantee 
programme.  

Agricultural  and  fisheries  funds  and  other  EU  programmes  also  contribute  to  addressing  the 
investment  needs.  The  European  Agricultural  Fund  for  Rural  Development  (EARDF)  and  the  European 
Maritime  and  Fisheries  Fund  (EMFF)  provides  support  worth,  respectively,  €12.3 billion  and  €1.6 billion. 
Spain  benefits  also  from  other  EU  programmes,  such  as  the  Connecting  Europe  Facility,  which  allocated 
€1 billion  to  projects  on  strategic  transport  networks,  Horizon  2020  allocated  EU  funding  of  €4.2 billion 
(including 1800 SMEs), and COSME unlocked €4.1 billion of loans to 98 913 SMEs.  

EU  funding  contributes  to  the  mobilisation  of  important  private  investment.  By  the  end  of  2018 
European Structural and Investment funds (ESI Funds)-supported programmes alone (4) mobilise additional 
capital by committing about €2.3 billion in the form of loans, guarantees and equity (5), which isamount to 
7% of all decided allocations of the European Structural and Investment funds (ESIF). 

EU  funds  invest  substantial  amounts  on  actions  in  line  with  the  Sustainable  Development  Goals 
(SDGs). In Spain the European Structural and Investment Funds support 13 out the 17 SDGs and up to 96% 
of the expenditure is contributing to progress in achieving these goals.  

(1)  ERDF, ESF, YEI, including national co-financing. 
(2)  https://cohesiondata.ec.europa.eu/countries/ES  
(3)  The performance review is regulated by Art. 22 of the Regulation (EU) No 1303/2013. 
(4)  ERDF, ESF, EARDF and EMFF. 
(5)  Member States’ reporting on financial instruments based on Article 46 Regulation 1303/2013, cut-off date 31/12/2018. 

18 

 
 
 
 
 
 
 
 
 
 
2. Progress with country-specific recommendations 

Table 2.1: 

Overall assessment of progress with 2019 CSRs * 

Source: European Commission. 
*  The assessment of CSR3 does not take into account the contribution of the EU 2021-2027 cohesion policy funds. The 
regulatory framework underpinning the programming of the 2021-2027 EU cohesion policy funds has not yet been adopted 
by the co-legislators pending inter alia an agreement on the multiannual financial framework (MFF). 

19 

Spain - 2019 CSRs Overall assessment of progress: Limited CSR 1: Ensure that the nominal growth rate of net primary government expenditure does not exceed 0.9% in 2020, corresponding to an annual structural adjustment of 0.65% of GDP. Take measures to strengthen the fiscal and public procurement frameworks at all levels of government. Preserve the sustainability of the pension system. Use windfall gains to accelerate the reduction of the general government debt ratio. (MIP relevant)   Limited progress   No progress in strengthening the fiscal framework  No progress on preserving the sustainability of the pension system  Limited progress in strengthening the public procurement framework  The compliance assessment with the Stability and Growth Pact will be included in Spring 2020 when final data for 2019 will be available  CSR 2: Ensure that employment and social services have the capacity to provide effective support. Foster transitions towards open-ended contracts, including by simplifying the system of hiring incentives. Improve support for families, reduce fragmentation of national unemployment assistance and address coverage gaps in regional minimum income schemes. Reduce early school leaving and improve educational outcomes, taking into account regional disparities. Increase cooperation between education and businesses with a view to improving the provision of labour market relevant skills and qualifications, in particular for information and communication technologies. (MIP relevant)  Limited progress  Some progress in reinforcing the capacity of employment and social services  Limited progress in promoting hiring on open-ended contracts and simplifying the system  Limited progress in addressing fragmentation of national unemployment assistance and coverage gaps in income guarantee schemes, and in improving family support  Limited progress in addressing early school leaving and regional disparities in educational outcomes  Some progress in increasing cooperation between education and business.  CSR 3: Focus investment-related economic policy on fostering innovation, resource and energy efficiency, upgrading rail freight infrastructure and extending electricity interconnections with the rest of the Union, taking into account regional disparities. Enhance the effectiveness of policies supporting research and innovation. (MIP relevant)  Limited progress   Limited progress on investment in research and innovation  Limited progress on resource efficiency  Some progress on energy efficiency  Some progress on electricity interconnectors  Limited progress on the evaluation of research and innovation policies  CSR 4: Further the implementation of the Law on Market Unity by ensuring that, at all levels of government, rules governing access to and exercise of economic activities, in particular for services, are in line with the principles of that Law and by improving cooperation between administrations. (MIP relevant)   Limited progress   Limited progress on implementing the Law on Market Unity    
 
 
 
 
  
 
3.  SUMMARY OF THE MAIN FINDINGS FROM THE MIP IN-

DEPTH REVIEW 

3.1. 

INTRODUCTION  

related 

imbalances 

In  spring  2019,  Spain  was  identified  as  having 
macroeconomic 
(European 
Commission, 2019k). Large stocks of external and 
internal  debt,  both  public  and  private,  continue  to 
constitute  vulnerabilities  in  a  context  of  still  high 
unemployment,  and  have  cross-border  relevance. 
In  addition,  low  potential  growth  amplifies  the 
Spain’s  macroeconomic 
risks 
imbalances,  and  hampers  their  unwinding.  The 
2020  Alert  Mechanism  Report  concluded  that  a 
new  in-depth  review  should  be  undertaken  for 
Spain  to  assess  the  unwinding  of  the  imbalances 
(European  Commission,  2019b).  This  chapter 
summarises the findings of the analyses carried out 
as  part  of 
imbalances 
the  macro-economic 
procedure (MIP) in-depth review that is contained 
in various sections in this report (9). 

to 

3.2. 

IMBALANCES AND THEIR GRAVITY 

Spain’s  net  international  investment  position 
(NIIP) remains very negative. Although the stock 
of  net  external  liabilities  (79.6%  of  GDP  in  Q3-
2019)  is  gradually  declining,  it  remains  large  and 
exceeds 
fundamental-based 
benchmarks. However, the composition of external 
liabilities somewhat mitigates vulnerabilities.  

prudential 

and 

(9)  Analyses relevant for the in-depth review can be found in 
the  following  sections:  Public  finances  (Section 4.1.1); 
Financial sector and private sector debt (Sections 4.2.1 and 
4.2.3);  Labour  market  (Section 4.3.1);  and  Investment 
(Section 4.4.1). These sections are marked with a *. 

Table 3.1: 

Outward spill-over heat map for Spain 

Private  sector  deleveraging  needs  remain 
sizeable, despite a significant reduction of debt. 
Private sector debt, in consolidated terms, came to 
130.6% of GDP in Q3-2019 (with household debt 
accounting  for  57.4%  of  GDP  and  non-financial 
corporation  debt  for  73.2%  of  GDP).  This  is 
slightly  below  the  MIP  scoreboard  threshold  of 
the  prudential  and 
133%,  but  well  above 
fundamental-based 
both 
for 
households and corporations.  

benchmarks 

The  general  government  debt  ratio  is  expected 
to have decreased slightly further in 2019, but it 
remains  very  high.  The  Commission’s  2019 
autumn  forecast  projects  a  decrease  of  1.6 pps  by 
2021,  to  96.0%  of  GDP.  Despite  being  on  a 
downward trend, the  stock of public debt remains 
too  high,  posing  significant  risks  for  fiscal 
sustainability in the medium and long term.  

Although  unemployment  has  fallen  rapidly,  it 
remains  very  high.  Unemployment  for  15-74 
years old stood at 13.8% in Q4-2019, following a 
reduction  of  12 pps  since  its  peak  in  2013. 
However,  this  is  the  EU’s  second  highest  rate. 
Long-term  and,  especially,  youth  unemployment 
have  also  fallen  steeply  during  this  period,  but 
more  than  30%  of  the  active  population  under  25 
was still  without a job in Q3-2019. Moreover, the 
share  of  temporary  contracts  (26.1%  in  Q3-2019) 
has not decreased in the last three years, which has 
growth, 
on 
a 
negative 
productivity, 
Low 
social 
productivity and potential growth, in turn, hinders 
the correction of imbalances. 

impact 
and 

cohesion. 

potential 

The  Spanish  economy  could  be  a  source  of 
significant  spill-over  effects  to  the  rest  of  the 
EU. This stems from its relatively large size and its 
level  of  integration  with  other  Member  States, 

Note: cross-border figures for Spain, expressed as a% of the GDP of the partner country. The darkest shade of red corresponds 
to percentile 95 and the darkest shade of green to percentile 5. The percentiles were calculated for each variable based on 
the full available sample of bilateral exposures among EU countries. The blank spaces represent missing data. Data refer to: 
Imports - 2017, Imports (in value added) - 2015, Financial liabilities - 2017, Financial assets - 2017, Liabilities (to banks) – Q2-
2019, Bank Claims – Q2-2019. 
Source: IMF, OECD, TiVa, BIS and European Commission. 

20 

EU partner: ATBEBGHRCYCZDEDKEEELESFIFRHUIEITLTLULVMTNLPLPTROSESISKUKImports0.72.61.40.40.12.31.410.70.60.61.92.41.91.41.15.20.60.42.71.38.40.90.71.42.40.8Imports (in value added)0.50.90.80.50.21.10.80.60.50.30.51.01.31.50.80.71.80.40.80.80.83.60.70.50.71.10.7Financial liabilities6.210.60.90.31.80.28.33.91.74.9 2.714.91.524.48.10.7303.12.414.232.60.422.60.12.93.02.77.1Financial assets1.33.72.70.31.30.92.11.60.66.6 1.47.11.625.410.30.1256.00.27.818.54.137.71.00.70.22.24.5Liabilities (to banks)1.11.11.70.50.13.80.83.14.68.10.10.8Bank claims1.41.40.10.10.90.11.71.40.10.41.83.60.14.73.70.124.00.08.92.19.845.91.31.10.10.215.4 
                                                           
 
  
 
3. Summary of the main findings from the MIP in-depth review 

especially  those  with  which  Spain  has  significant 
trade  links,  such  as  Portugal,  and  financial  and/or 
banking linkages (see Table 3.1). Box 3.1 includes 
a  simulation  that  illustrates  how  a  fully  financed 
large  public  investment  programme  could  boost 
economic  growth  in  Spain,  with  potential  spill-
over effects on other Member States. 

account  balance  is  expected  to  widen  in  2019  to 
3.0%, and to increase further this year and in 2021, 
when it is expected to reach a record high of 3.4% 
of  GDP  (see  Graph 3.1).  This  also  exceeds  the 
current  account  norm  explained  by  fundamentals, 
estimated  to  be  a  surplus  of  about  1%  of  GDP  in 
2018 (10).  

3.3. 

EVOLUTION, PROSPECTS, AND POLICY 
RESPONSES 

External sustainability 

Graph 3.1:  Current account and net international 

investment position 

to  79.6%  of  GDP 

Persistent current account surpluses are slowly 
translating into a narrowing of Spain’s external 
net  debtor  position.  High  nominal  GDP  growth 
and  continued  external  surpluses  have  driven  a 
slow  but  steady  narrowing  of  Spain's  NIIP  (see 
Graph 3.2) 
in  Q3-2019. 
However,  revised  financial  accounts  reveal  a 
slower  reduction  of  Spain´s  negative  NIIP  than 
previously estimated, on account of more negative 
valuation effects in recent years, and especially in 
2017 and 2018. Looking ahead, continued current 
account  surpluses  and  continued  nominal  GDP 
growth projected until 2021 are expected to result 
in further improvements in the NIIP. 

Graph 3.2:  Analysis of the rate of change of net 

international investment position 

(*) years 2019-2021 are a forecast 
(a) Current account required to stabilise the net 
international investment position at - 61% of GDP(prudential 
benchmark) by 2027 (lhs): -0.6% of GDP 
(b) Benchmark for the net international investment position 
explained by fundamentals: -23% of GDP in 2019 (rhs) 
(c) Prudential net international investment position 
benchmark: -61% of GDP in 2019 (rhs) 
Source: Eurostat and own calculations. 

Spain’s  current  account  surplus  is  above  the 
level  explained  by  fundamentals.  The  current 
account  surplus  is  the  result  of  a  trade  surplus  in 
services,  which  more than offsets the trade  deficit 
in  goods  (see  Section 4.4.1).  The  trade  deficit  in 
goods, the main reason for which is a large deficit 
in energy products, has remained contained despite 
the closure of the output gap, contrary to previous 
expansions.  In  addition,  export  performance  has 
evolved  positively  despite  global  trade  tensions. 
the  cyclically  adjusted  current 
Accordingly, 

Source: Eurostat. 

(10)  The  current  account 

'norm'  benchmark  explained  by 
fundamentals  is  derived  from  regressions  capturing  the 
main  determinants  of  the  saving-investment  balance  (e.g. 
demographics,  resources),  as  well  as  policy  factors  and 
global 
also  European 
Commission, 2017d) 

conditions. 

financial 

(see 

21 

(a)(b)(c)-100-80-60-40-2002040-10-8-6-4-202401020304050607080910111213141516171819*20*21*% of GDP% of GDPCurrent account (lhs)Cyclically adjusted current account(lhs)Net international investment position (rhs)-15-10-505101510Q211Q212Q213Q214Q215Q216Q217Q218Q219Q2Change in pp. of GDP (y-o-y)Valuation changesNet transaction effect (rest FA bal.)Investment income effectNominal growth effectChange in NIIP (y-o-y)  
  
 
                                                           
3. Summary of the main findings from the MIP in-depth review 

Box 3.1: Public investment and potential spill-overs 

The  European  Commission’s  QUEST  model (1)  was  applied  to  simulate  the  impact  of  a  public 
investment  package  totalling  €130 billion  over  10  years.  The  assumed  additional  public  investment  is 
equivalent  to  1%  of  GDP  at  its  2019  level,  every  year  over  a  decade.  This  simulation  follows  the  2019 
country-specific  recommendations  on  investment-related  economic  policy.  Consequently,  the  public 
investment package is assumed to include growth and productivity-enhancing expenditures on research and 
innovation,  skills,  the  green  transformation  in  the  areas  of  transport,  energy,  carbon  emissions,  water 
management,  recycling,  and  environmental  damages  from  extreme  weather  events.  For  simplicity,  the 
simulation assumes that neutralising fiscal measures in the form of increased indirect taxes are implemented. 
The  output  elasticity  with  respect  to  the  public  capital  stock  is  assumed  to  be  0.12,  which  is  a  mid-range 
estimate (Arslanalp et al., 2010). Monetary policy is assumed to retain its accommodative stance at the zero 
lower bound for the first two years and gradually normalise afterwards. 

A sustained increase in public investment would have positive domestic and  cross-border spill-overs. 
The demand effect (higher export demand for foreign goods and services) leads to positive spill-overs, but 
investments also result in capital deepening and higher efficiency, which improves competitiveness towards 
trading partners. Whether the overall spill-over effect is positive or negative depends on the relative strength 
of the two effects. As seen in Table 3.1.a, under the stipulated assumptions, increasing the public investment 
rate  in  Spain  boosts  output  and productivity  (output  per  hour)  as  well  as  the  trade  balance  and  the  public 
debt, thereby reducing current  macroeconomic imbalances. It also shows that in spite of a relative loss of 
competitiveness  of  the  rest  of  the  euro  area  compared  to  Spain,  the  demand  effect  from  a  Spanish  public 
investment programme could still generate a small, but positive spill-over effect to the rest of the euro area. 

In  this  simulation  exercise,  the  realisation  of  sizable  positive  spill-overs  hinges  upon  an  accommodative 
monetary policy (2). Assuming a prolongation of the accommodative stance beyond 2 years could result in 
even stronger effects on the GDP of the rest of the euro area. This gain is associated with the export demand 
effects  from  a  stronger  depreciation  of  the  euro,  and  with  a  strengthening  of  the  real  interest  rate decline. 
Conversely, a monetary contraction would neutralise the spill-overs onto the rest of the euro area or make 
them negative. 

Table 3.1a:Spill-over effects of a 10 year public investment programme in Spain 

Note: Figures are percentage changes in levels compared to the no-change scenario 
Source: European Commission services model simulation 

This simulation complements earlier QUEST simulations modelling a demand stimulus or structural 
reforms. Earlier simulations include an increase in public investment and a reduction in personal income tax 
(European  Commission,  2017a), increases  in  expenditure  on  R&D  and  education  (European  Commission, 
2018a),  and  implementation  of  structural  reforms  to  close  performance  gaps  (European  Commission, 
2019a).  

(1)  Detailed  information  on  the  QUEST  model  and  applications  is  available  at:  https://ec.europa.eu/info/business-

economy-euro/economic-and-fiscal-policy-coordination/economic-research/macroeconomic-models_en. 

(2)  In the current monetary policy environment with nominal interest rates at the effective lower bound, higher euro area-
wide  inflation  following  the  investment  programme  reduces  the  real  interest  rate.  The  lower  real  rate  generates 
additional positive demand effects in the euro area. See also Christiano et al. (2011). 

22 

Year2020202120222023202420252026202720282029Real GDP0.210.110.170.290.420.540.650.760.850.95Output per hour-0.010.070.190.310.420.530.640.740.851.00Trade balance-to-GDP ratio0.080.170.320.450.530.560.560.540.510.46Government debt over GDP-0.67-0.52-0.62-0.75-0.94-1.18-1.46-1.77-2.12-2.53Rest of euro areaReal GDP0.080.080.060.050.050.050.050.040.040.04 
  
 
 
 
3. Summary of the main findings from the MIP in-depth review 

Table 3.2: 

Current account balance and net international investment position sensitivity analysis 

(1) The table above shows the average current account required to reach a certain NIIP by 2029, based on the different 
stated assumptions for nominal GDP growth, assuming no NIIP valuation effects on average, and a stable capital account 
balance at its median level over 2018-20 (0.2% of GDP). See also European Commission, 2015, 'Refining the methodology for 
NIIP-based current account benchmarks', LIME Working Group 17 Jun 2015. 
Source: Own calculations. 

The  composition  of  Spain’s  external  liabilities 
in terms of instruments and  maturity  mitigates 
some of the vulnerabilities. The net international 
investment  position  excluding  non-defaultable 
instruments  (NENDI),  which  are  the  most  risky 
type  of  external  liabilities  (11),  stood  at  -54%  in 
2018,  below  the  prudential  threshold  (-60%).  The 
reduction  of  the  NENDI  since  2011  (20 pps  of 
GDP),  has  been  faster  than  that  of  the  NIIP  (a 
decline of 9 pps). This reflects an improvement in 
the  net  foreign  direct  investment  (FDI)  position 
due  to  a  large  foreign  investment  inflows,  and 
somewhat  reduces  vulnerabilities.  Moreover,  a 
non-negligible part of external debt is central bank 
liabilities  stemming  from  monetary  operations  of 
the Eurosystem (see Graph 3.3), which carry fewer 
refinancing risks than that of the private sector. In 
addition,  most  of  the  external  debt  has  maturities 
of  one  year  or  more  (about  76%  of  general 
government  and  private  sector  external  debt, 
loans),  and  average 
excluding 
maturity  has  been  increasing  in  recent  years, 
further reducing risks.  

intercompany 

large  external 
Reducing  decisively  Spain´s 
liabilities  would  require  maintaining 
large 
current account surpluses for sustained periods 
of time.  Spain’s NIIP is  still  far  from a level that 
could  be  considered  prudential  (-61%  of  GDP  in 
2019) or in line with fundamentals (-23% of GDP) 
(see Graph 3.1) (12).  Although  at  present 
the 

(11)  The instruments that make up the NENDI (mostly debt) are 
the most risky part of the NIIP as it excludes equity. Equity 
does  not  carry  the  same  risks  as  debt  for  external 
sustainability, as its remuneration (e.g. dividend payments) 
can be adjusted during economic downturns, unlike debt. 
(12)  The  country-specific  prudential  threshold  for  the  net 
is  derived  from  a 
international 
univariate  signalling  approach  that  identifies  at  which  net 
international investment position level an external crisis is 
likely  to  begin.  The  net  international  investment  position 
the  net 
level  explained  by  fundamentals  represents 

investment  position 

current  account  surplus  exceeds  the  level  implied 
by fundamentals (see footnote 12), further progress 
in reducing the NIIP could prove more challenging 
under less benign growth scenarios (see Table 3.2). 
Measures 
raise  non-cost  competitiveness 
through  investment  in  research  and  innovation,  as 
well  as  improving  labour  skills  have  been  modest 
so far (see Sections 4.3 and 4.4). 

to 

Graph 3.3:  Gross external debt by sector-type of financial 

assets 

(1) LT: long-term, ST: short-term, FDI: foreign direct investment 
Source: Bank of Spain 

Private indebtedness and deleveraging 

Private sector deleveraging has advanced, but is 
now  driven  mainly  by  robust  nominal  GDP 
growth.  In  Q3-2019  consolidated  private  sector 
debt stood at 130.6% of GDP, 73.6 pps lower than 

international  investment  position  that  would  result  if  a 
country  had  run 
line  with 
fundamentals since 1995. See Turrini and Zeugner (2018).  

its  current  account 

in 

23 

020406080100120140160180200020304050607080910111213141516171819% of GDPBanco de EspañaPublic sector STPublic sector LTPrivate sector STPrivate sector LTFDITotal external debtLow nominal GDP growthBaseline scenario High nominal GDP growth(2.1% avg. 2019-28)(3.1% avg. 2019-28)(4.1% avg. 2019-28)NIIP Stabilisation-2.0-2.9-3.6NIIP at -61% of GDP-0.2-0.9-1.6NIIP at -23% of GDP3.93.42.9                                                           
  
 
                                                                                   
 
  
 
3. Summary of the main findings from the MIP in-depth review 

for the country as a whole (see Section 4.2.1), but 
there is considerable heterogeneity across regions, 
partly reflecting a still large stock of unsold houses 
in some areas and a buoyant rental housing market 
in  others.  The  recovery  of  house  prices  does  not 
seem  to  imply  potentially  harmful  dynamics,  but 
price  developments 
in  some  regions  deserve 
attention, raising concerns about affordability (see 
Section 4.2 
in 
residential  construction  has  been  increasing  since 
the  last  quarter  of  2015,  but  remains  below  pre-
crisis  levels  (5%  of  GDP  in  2018,  compared  to 
about 12% of GDP in 2006).  

and  Box 4.2.1). 

Investment 

Public debt 

Public  sector  debt  remains  very  high,  and  its 
pace  of  reduction  is  expected  to  slow  down. 
After falling by 3.1 pps of GDP between 2014 and 
2018, public debt is projected to decrease  slightly 
further,  by  1.6 pps,  by  2021.  The  decline  is 
expected to be driven by nominal GDP growth and 
falling  interest  expenditure,  while  the  primary 
balance  is  likely  to  remain  broadly  unchanged 
around zero. After a 0.5 pps. decrease, to 2.5% of 
GDP  in  2018,  the  reduction  in  the  general 
government  deficit  is  expected  to  slow  down, 
narrowing to 2.3% of GDP in 2019. In the absence 
of  a  2020  budget  law,  the  deficit  is  projected  to 
decline  further  to  2.2%  of  GDP  in  2020,  and, 
assuming  that  there  is  no  change  in  policies,  to 
2.1% in 2021. The average cost of debt is expected 
to  continue  falling  as  long  as  the  cost  of  issuance 
remains  below  the  average  cost  of  outstanding 
debt. While there appears to be  no immediate risk 
of fiscal stress, risks to fiscal sustainability remain 
significant  in  the  medium  to  long  term  (see 
the 
Section 4.1.1).  Considered 
announced  departures  from  the  2013  pension 
reform  risk  increasing  the  long-term  cost  of 
ageing.  Unless  offsetting  measures  are  taken, 
sustainability  risks  would  significantly  increase. 
Discussions  on  these  issues  are  expected  to  be 
resumed  within 
(the 
parliamentary  committee  dedicated  to  pension 
issues). 

‘Toledo  Pact’ 

isolation, 

the 

in 

Limited progress was  made in improving fiscal 
governance.  The  implementation  of  plans  to 
strengthen 
for  public  sector 
framework 
contracts and public procurement is pending.  

the 

by 

issuing 

securities, 

its  peak  in  2009.  Of  this  reduction,  the  largest 
decline is attributable to corporate debt (46 pps of 
GDP),  but  household  deleveraging  (27.6 pps  of 
GDP)  has  also  been  significant.  On  the  corporate 
side,  the  reduction  in  the  total  stock  of  debt  has 
halted  since  2018,  as  new  credit  has  continued  to 
flow  and  larger  companies  have  continued  to 
supporting 
borrow 
investment.  The  total  stock  of  debt  has  also 
remained unchanged for households since 2018, as 
there  have  been  growth  in  new  credit  to  finance 
for  house 
durable  consumer 
the 
in 
purchases,  coupled  with  a  reduction 
repayment  of  mortgages.  The 
latter  should 
however  be  seen  in  relation  to  the  reduction  in 
total housing debt. Still, despite the stabilisation of 
the  nominal  stock  of  debt,  the  debt  to-GDP  ratio 
for  both  households  and  corporations  has 
continued  to  decline,  driven  by  robust  nominal 
GDP  growth.  Overall,  the  private  debt  ratio 
decreased  by  6 pps  in  2018  (4 pps  for  NFC  and 
2 pps for households). The pace of deleveraging is 
expected  to  slow  down  in  2019,  when  the  debt 
ratio  is  projected  to  decline  by  4 pps  (3 pps  for 
NFC and 1 pp. for households). 

spending  and 

for 

needs 

remain 

Deleveraging 
both 
corporations  and  households.  The  financial 
position  of  Spanish  households  has  strengthened 
thanks to improvements in the labour market, and 
their  financial  burden  has  been  reduced  by  the 
prevailing  low  interest  rates.  However,  growth  in 
in  consumer  credit  may  make  households, 
especially the over-indebted ones, more vulnerable 
to  adverse  shocks (Bank  of  Spain,  2019d). 
Although  the  debt-to-GDP  ratio  is  expected  to  be 
below  the  MIP  threshold  (133%)  in  2019,  it  will 
levels  and 
still  be  well  above  prudential 
fundamental-based 
both 
for 
households and NFCs, indicating that deleveraging 
needs persist for both segments (see Section 4.2.3). 
In particular, NFCs debt is expected to reach 72% 
of GDP in 2019, against a prudential threshold of 
58% and a fundamental-based benchmark of 60%. 
Household  debt  is  projected  to  fall  to  58%  this 
year, also above prudential and fundamental-based 
levels of 41% and 43%, respectively.  

benchmarks 

The  housing  market  keeps  recovering,  but 
activity slowed down in 2019. House prices, after 
rising  for  the  last  six  years,  are  starting  to 
decelerate. Still, they increased by about 5% in the 
year  up  to  Q2-2019.  The  valuation  gap  is  closing 

24 

3. Summary of the main findings from the MIP in-depth review 

In  January  2020, 

(e.g.,  domestic  workers,  agriculture)  is  likely  to 
have  been  affected. 
the 
government  further  raised  the  minimum  wage  by 
5.6% (up to €950 in 14 instalments), in agreement 
with social partners. This is estimated to bring the 
minimum  wage  to  approximately  60%  of  the 
median  gross  monthly  earnings  for  a  full  time 
worker in 2020. In 2018, only three Member States 
and all with much lower unemployment rates, had 
a minimum wage above this threshold. 

3.4.  OVERALL ASSESSMENT 

has 

further, 

The reduction of macroeconomic imbalances in 
but 
Spain 
progressed 
sector  debt 
vulnerabilities  remain.  Private 
reduction has continued to advance driven by high 
nominal  GDP  growth,  but  deleveraging  needs 
remain. The pace of debt reduction is expected to 
slow  down  as  new  credit  flows  increase.  Public 
sector  debt  has  been  slightly  reduced  since  its 
peak, a process that is expected to continue despite 
the  projected  general  government  deficits.  The 
current account surplus is expected to increase this 
year,  supported  by  structural  improvements  in 
trade  performance,  and  is  now  above  prudential 
and  fundamental  based  levels.  Persistent  external 
surpluses are slowly translating into a reduction of 
external  liabilities,  but  these  remain  very  high.  In 
particular, the level of external debt,  although has 
been reduced, remains high. Unemployment is set 
to  continue  falling,  despite  a  deceleration  in  job 
creation,  but  remains  very  high.  Reducing  long-
term  and  youth  unemployment,  along  with 
lowering  the  share  of  employees  in  temporary 
contracts, is critical to raise the growth potential of 
low 
the  Spanish  economy.  In  addition, 
potential  growth  amplifies  the  risks  related  to 
Spain’s  macroeconomic  imbalances,  and  hampers 
their unwinding.  

the 

Overall,  policy  action  to  reduce  the  stock  of 
imbalances  or  their  potential  implications  has 
been  limited  across  most  policy  areas  (see 
Table 3.3). General elections in 2019 and delays in 
forming  a  new  government  hampered 
the 
implementation of far-reaching reforms. Measures 
to  reduce 
labour  market  segmentation  have 
focused  on  fighting  the  abuse  of  temporary 
contracts.  Limited  progress  was  made  with  fiscal 
governance, notably regarding the implementation 
of  plans  to  strengthen  the  framework  for  public 

Unemployment 

in 

Unemployment is set to continue falling, despite 
the  projected  slowdown 
job  creation. 
Employment  growth  is  expected  to  slow  in  2020 
and  2021,  in  line  with  the  cyclical  slowdown. 
However, the unemployment rate is set to continue 
falling,  to  below  13%  in  2021,  which  is  still  well 
the  EU  average.  There  has  been  no 
above 
reduction  in  labour  market  segmentation,  despite 
an increasing share of permanent contracts among 
new 
labour  market 
long-term  unemployment,  and 
segmentation, 
population  ageing  remain  challenges  for  higher 
productivity 
(see 
Section 4.3).  In  addition,  the  activity  rate  has 
started  to  decline  as  young  people  stay  longer 
under education. 

jobs.  A  high 

level  of 

potential 

growth 

and 

Wage  growth  is  expected  to  have  peaked  in 
2019, and to remain above inflation in 2020 and 
2021. After growing by 1% in 2018, accelerated to 
2.1% in 2019, resulting in the first increase in real 
wage  since  2015. This  is  due  to  both  the  increase 
in the minimum wage enacted at the beginning of 
2019,  and  rising  negotiated  wages  in  bargaining 
agreements. Although wage growth is expected to 
decelerate  slightly,  wages  are  forecast  to  continue 
growing  at  a  rate  above  that  of  inflation  in  2020 
and 2021. After peaking in 2019, unit labour costs 
should  rise  more  slowly  in  2020  and  2021  as 
productivity growth is set to turn positive, but they 
should still grow faster than the euro area average. 
Consequently,  Spain  is  expected  to  register  small 
cost-competitiveness losses vis-à-vis the euro area 
in  2019  and  2020,  which  should  become  broadly 
neutral  in  2021.  However,  cost-competitiveness 
gains accumulated in recent years are not expected 
to  be  reverted,  and  export  market  shares  are 
expected to evolve favourably. 

The  minimum  wage  will  further  increase  in 
2020, though  the  impact  on  employment  of  the 
2019 hike has not yet been quantified. When the 
increase  in the  minimum  wage entered into  force, 
in  January  2019,  employment  was  still  growing 
robustly.  Employment  growth  has  slowed  down 
since 
the  basis  of  available 
information, it is difficult to assess at this stage the 
part of the slowdown that can be  attributed to the 
minimum  wage  increase.  However,  data  from 
Social 
that 
employment  for  some  groups  in  specific  sectors 

then,  but  on 

affiliations 

Security 

indicate 

25 

3. Summary of the main findings from the MIP in-depth review 

sector  contracts  and  public  procurement.  The 
departures  from  the  2013  pension  reform  will 
increase  the  long-term  cost  of  ageing,  unless  they 
are  offset  by  other  measures.  Reforms  aimed  at 
reducing skills mismatches, fostering research and 
innovation 
business 
improving 
and 
environment have been delayed. 

the 

26 

3. Summary of the main findings from the MIP in-depth review 

Table 3.3: 

MIP matrix 

(Continued on the next page) 

27 

 Gravity of the challenge Evolution and prospects Policy response Imbalances (unsustainable trends, vulnerabilities and associated risks) External position Spain has a highly negative but declining net international investment position, amounting to -79.6% of GDP in Q3-2019, mainly composed of debt instruments. This is above the level that could be considered prudential or in line with fundamentals. By institutional sector, the external debt of mainly the non-financial private sector, but also the public sector (mostly long-term securities), has declined. The current account surplus was 1.9% in 2018, and is expected to increase to above 2%  in 2019, 2020 and 2021. Since the economic and financial crisis, there has been a structural improvement in Spain's trade performance, as confirmed by the increase in the number of regular exporters, and as well as a reduction in the elasticity of imports to final demand, which plays an important role in preserving Spain's external surplus the next years. This is corroborated by the cyclically-adjusted current account balance, which has been in surplus since 2014.  The negative NIIP has been improving since its trough in 2014. It was further reduced in Q3-2019 by 5.5 pps y-o-y, to -79.6% of GDP, also helped by high nominal growth. Continued current account surpluses and high nominal GDP growth projected until 2021 are expected to facilitate further improvements of the NIIP.  Restrained wage growth has largely contributed to restoring cost competitiveness.  After years of moderation, nominal wage growth has resumed, and is expected to reach 2.4% in 2019 due to the impact of the increase of the minimum wage. It should moderate but still grow at a rate above inflation in 2020 and 2021. Productivity growth, which was negative in 2018 and 2019, should turn positive in 2020 and 2021. As a consequence, unit labour costs, after peaking in 2019, should grow more moderately, but still above the euro area average in 2020 and 2021. Still, cost-competitiveness gains accumulated in recent years are not expected to be reverted, and export market shares are expected to evolve favourably. Measures to raise non-cost competitiveness (through investment in research and innovation, as well as improving labour skills) have been modest so far (see Sections 4.3 and 4.4). Public debt Spain has a high level of public debt estimated at at 96.7% of GDP in 2019. While Spain does not appear to face fiscal sustainability risks in the short run, fiscal sustainability risks in the medium term are estimated to be high, primarily due to the initial level of government debt and budgetary position.   (see Section 4.1.1). Despite strong nominal GDP growth in recent years, the debt ratio has been declining relatively slowly (from a peak of 100.7% in 2014 to an estimated 96.7% in 2019), as a result of still high headline deficits.  The Commission 2019 autumn forecast foresees the deficit to narrow only slightly in 2019, 2020 and 2021 (to 2.3%, 2.2% and 2.1% of GDP, respectively) despite relatively strong nominal GDP growth, resulting in a slight deterioration in the structural balance in both 2019 and 2020. The debt ratio is forecast to decrease only modestly to 96.6% of GDP in 2020 and 96.0% in 2021,. Spain exited the Excessive Deficit Procedure on the 14 June, 2019, and is now subject to the preventive arm of the Stability and Growth Pact. There has been no progress in addressing the  relatively large structural deficit, which is forecast to deteriorate slightly  in both 2019 and 2020.  There has been little progress in the areas of fiscal governance, notably regarding the implementation of plans to strengthen the framework for public sector contracts and public procurement. The departures from the 2013 pension reform will increase the long-term cost of ageing, unless they are offset by other measures Private debt The total stock of private non-financial sector debt stood at 130.6% of GDP (in consolidated terms) in Q3-2019. Of this amount, 57.4% of GDP corresponds to household debt, while corporate debt now stands at 73.2% of GDP in consolidated terms (95% non-consolidated). Although the debt-to-GDP ratio is expected to be below the MIP threshold (133%) in 2019, it will still be well above prudential levels and fundamental-based benchmarks for both households and NFCs, indicating that deleveraging needs persist for both segments.  The deleveraging process is taking place at the same time as new credit towards households and companies as well as issuance of debt securities by NFCs are increasing. Real GDP growth has The debt stock of the private sector has been reduced by about 73.5 pps of GDP since its eak in 2010. Most of the reduction is attributable to non-financial corporations (about 46.5 pps of GDP), but progress in households' deleveraging (by about 27 pps) has also been also remarkable.  In 2019, the pace of debt reduction slowed down for NFCs, while the total stock of debt  of households has stabilised since Q1-2018. There has been a significant growth in new credit for durable consumer spending, as well as the slowdown in the reduction in the outstanding volume of mortgage loans, which explains the halt of deleveraging on household debt. The historically low savings rate has recovered in 2019 and is projected to further increase slightly in 2020 and 2021, which should help the deleveraging process to resume. Banks have restructured their activity and cleaned up their balance sheets, and the non-The reforms of the insolvency framework in 2014/2015 have facilitated debt restructuring and made insolvencies less onerous.  
 
  
 
3. Summary of the main findings from the MIP in-depth review 

Table (continued) 

(*) first column summarises ‘gravity’ issues, aiming to put the imbalances in order of magnitude. The second column reports 
findings concerning the ‘evolution and prospects’ of these imbalances. The third column reports recent and planned 
measures. Findings are reported for each source of imbalance and adjustment issue. The final three paragraphs summarise 
the overall issues, in terms of their gravity, developments and prospects and the policy response to them. 
Source: European Commission. 

28 

2  thus become the main driver of private sector deleveraging. performing loans ratio for business in Spain has continued to decrease y-o-y by 1 pps to 5.3% in Q2-2019. At consolidated level, the NPL ration for Spanish banks decreased to 3.5% in June 2019, which is slightly above the EU average of 3%. Adjustment issues Unemployment  The unemployment rate stood at 13.8% in Q4-2019. The share of unemployed in long-term unemployment has declined below 40% and youth unemployment stands at more than 30%. Both rates remain among the highest in the EU (see Section 3.3). Persistently high unemployment hampers the adjustment process.  Unemployment has been declining rapidly, but it remains very high, especially for youth and the long-term unemployed. The unemployment rate is expected to fall to 12.8% in 2021.  High levels of labour market segmentation (permanent vs. temporary employment) persist.   The minimum wage increased by 22.3% in 2019. As a result, labour costs have increased moderately in 2019. The overall impact on job creation cannot be quantified yet, but employment for some groups in specific sectors may have been affected. An additional increase of 5.6% in 2020 has been announced. This is estimated to bring the minimum wage to approximately 60% of the median gross monthly earnings for a full time worker in 2020. In 2018, only three Member States, with lower unemployment rates, had a minimum wage above this threshold. Measures to tackle labour market segmentations show limited success. Only the Plan for Decent Work 2018-2020 to fight against abuse of temporary contracts through more targeted labour inspections seems to be having some impact. More comprehensive reforms (e.g., hiring incentives, simplification of the types of contracts) are put on hold. The implementation of the new VET Strategy may contribute to reducing skill gaps and mismatches.  Conclusions from IDR analysis  Spain is characterised by a combination of still large, but declining, stock of external and internal debt, both public and private. This leaves the country exposed to adverse shocks or shifts in market confidence, which could translate into a tightening of credit conditions on the international markets, which would have harmful implications for the real economy, especially given the still high level of unemployment.  The current account balance is expected to stay in surplus at above 2% of GDP, and will continue to support a decline in net external liabilities. Progress continues to be made on NFCs debt reduction, while a stagnation in households deleveraging was observed since Q1-2018. Public debt has decreased slightly, with deficits forecast to narrow in the future. Unemployment remains very high, despite a substantial reduction.  General elections in 2019 and delays in forming a new government hampered the implementation of far-reaching reforms. Policy progress regarding the implementation of recommendations has been limited in fields such as the fiscal framework, removing unnecessary regulatory burden on firms, reforming regulated professions, reducing skill gaps and mismatches and addressing the segmentation of the labour market.   
 
 
 
  
 
4.  REFORM PRIORITIES 

4.1.  PUBLIC FINANCES AND TAXATION 

4.1.1.  DEBT SUSTAINABILITY AND FISCAL RISKS* 

still 

interest 

The  general  government  debt  ratio  is  only 
slowing  decreasing  and  remains  high.  After 
peaking  at  100.7%  of  GDP  in  2014,  it  had  fallen 
by about 3 percentage points to 97.6% of GDP by 
the  end  of  2018.  The  Commission  2019  autumn 
forecast projects a further slight decrease to 96.0% 
of GDP by 2021. The decline is entirely driven by 
a 
rate 
favourable 
differential,  which 
is  partly  offset  by  debt-
increasing  effects  stemming  from  the  primary 
balance and stock-flow adjustments. As the private 
sector  debt  ratio  has  declined  faster  than  the 
government  debt  ratio,  general  government  debt 
now  makes  up  a  much  larger  share  of  the  total 
indebtedness  of  the  economy.  At  around  44%  in 
the  first  half  of  2019,  the  share  has  more  than 
doubled  since  2010,  the  year  in  which  private 
sector debt peaked. 

rate-growth 

the  Spanish  Treasury 

The  lower  interest  rates  in  recent  years  have 
allowed 
to  extend 
maturities.  The  average  life  of  outstanding  debt 
increased  significantly  from  a  low  of  6.2  years  in 
2013  to  around  7.5  years  in  2018.  In  2019,  the 
pace  slowed  down,  with  average  life  edging  up 
only  slightly  to  7.6  years  in  November.  After 
falling steeply from a peak of around 4% in 2011, 
the  cost  at  issuance  remained  stable  at  around 
0.6%  in  2015-2018,  before  decreasing  further  to 
around  0.3%  in  November  2019.  The  low  cost  at 
issuance has continued to exert downward pressure 
on  the  cost  of  outstanding  debt,  which  stood  at 
slightly  below  2.4%  in  November  2019,  down 
from  around  4.0%  in  2011.  The  rolling-over  of 
maturing  debt  and  the  coverage  of  new  financing 
needs  at  low  rates  are  likely  to  result  in  further 
decreases  in  the  cost  of  outstanding  debt  in  the 
near future. After peaking at 3.5% of GDP in 2013, 
interest  expenditure  gradually  decreased  to  2.4% 
of GDP in 2018. 

Spain  does  not  appear  to  face  immediate  risks 
of  ʻfiscal  stressʼ,  but  sustainability  risks  are 
high  in  the  medium  term  and  medium  in  the 
long  term (13).  The  value  of  the  early-detection 

(13)  For  details  on  the  European  Commission's  assessment  of 
fiscal  sustainability  risks  in  the  short,  medium  and  long 

government 

their  critical 

threshold  are 

threshold.  However,  some 

indicator of fiscal stress, the S0 indicator, is below 
fiscal 
its  critical 
variables  point  to  possible  short-term  challenges, 
especially if financial markets’ perceptions were to 
change  rapidly.  Among the  variables  with a value 
the  gross 
above 
financing needs, the cyclically-adjusted deficit and 
net 
debt.  Financial  markets’ 
perceptions  of  Spain’s  sovereign  risk  remained 
fairly stable in 2019, with most of the major rating 
agencies  maintaining  their  rating  and  S&P  even 
upgrading  it  by  one  notch  in  September  2019 
(Moody’s:  Baa1,  S&P:  Au,  Fitch:  A-,  all  with  a 
stable  outlook).  The  10-year  sovereign  yield 
spread  against  the  German  bund  has  narrowed 
somewhat  compared  to  the  situation  in  2018. 
According 
the  Commission  2019  autumn 
forecast,  Spain  is  forecast  to  have  a  structural 
government deficit of at least 3% in both 2020 and 
2021,  reflecting  a  relatively  low  level  of  taxation 
in  relation  to  expenditure.  This  is  still  some  way 
from  the  medium-term  objective  of  having  a  zero 
structural balance. 

to 

Spain faces high fiscal sustainability risks in the 
medium  term.  This  conclusion  is  based  on  both 
the  sustainability  gap  indicator  (S1)  and  a  debt 
sustainability  analysis.  The  former  indicates  that 
Spain's  structural  primary  balance  would  need  to 
improve by 3.8% of GDP in cumulative terms over 
the five-year period to 2026 relative to the baseline 
‘no-fiscal  policy  change’  scenario  to  bring  the 
debt-to-GDP ratio to the reference value of 60% by 
2034.  This  would  require  an  ambitious  structural 
primary balance by European standards (14). About 
three  quarters  of  the  very  significant  S1  value  are 
attributable  to  the  distance  of  the  debt  ratio  from 
the 60% reference value and, to a somewhat lesser 
initial  budgetary 
extent, 
position,  but  only  to  a  limited  extent  to  the 
projected  age-related  public  spending.  However, 
these  numbers  are  based  on  the  same  policy 
assumptions  as  those  underlying  the  2018  Ageing 

the  unfavourable 

to 

term,  see  European  Commission  (2020b).  In  this  year's 
Country Report, long-term sustainability risks are assessed 
by 
the  debt 
sustainability  assessment.  See  also  Annex  B  for  an 
overview. 

in  conjunction  with 

indicator 

the  S2 

(14)  Only  17%  of  the  structural  primary  balances  recorded  for 
the  EU  countries  over  1980-2019  were  greater  than  this 
value. 

29 

 
                                                           
                                                                                   
4.1. Public finances and taxation 

In  the  long  term,  Spain  faces  a  medium  fiscal 
sustainability  risk.  This  conclusion  stems  from 
combining  the  sustainability  gap  indicator  (S2) 
with  a  debt  sustainability  analysis  perspective 
described above. The former shows a gap of 1.8% 
of  GDP  that  needs  to  be  closed  to  stabilise  debt 
over  the  long  term.  The  gap  is  mainly  due  to  the 
unfavourable  initial  budgetary  position,  though 
also,  to  a  limited  extent,  to  the  projected  ageing 
costs. As was the case for the S1 indicator, the S2 
indicator  is  also  based  on  assumptions  regarding 
pension expenditure that may prove too low, if the 
announced  reversals  of  some  of  the  pension 
reforms  materialise.  Under  the  more  adverse 
Ageing  Working  Group  risk  scenario  (whereby 
healthcare and long-term care costs  would exceed 
those  expected  from  purely  demographic  factors 
due 
as 
technological changes and catching-up effects), the 
S2 indicator would double, to 4.0% of GDP. 

to  non-demographic  drivers 

such 

4.1.2.  FISCAL FRAMEWORK 

Limited  steps  have  been  taken  to  improve 
public  procurement  and  the  fiscal  framework. 
The  law  on  public  sector  contracts  entered  into 
force in March 2018. It was designed to establish a 
more  consistent  public  procurement  framework, 
but  the  governance  bodies  for  which  the  law 
provides,  are  not  yet  fully  set  up  or  completely 
operational,  and  the  adoption  of  the  nation-wide 
public procurement strategy has been delayed. The 
effectiveness of the new law will depend crucially 
on  the  resources  allocated  to  its  implementation 
and  the  degree  of  ownership  at  all  levels  of 
government  (see  Section 4.4.2).  On  4  February 
2020,  the  Council  of  Ministers  adopted  a  Royal 
Decree  Law  on  contracts  of  entities  operating  in 
the  sectors  of  water,  energy,  transport  and  postal 
services, which – once validated by the Parliament 
–  aims  at  finally  completing  the  transposition  of 
2014  Public  Procurement  Directives.  There  have 
been  no  other  steps  to  strengthen  the  fiscal 
framework, such as making use of the mechanisms 
to  prevent  and  correct  deviations  from  the  fiscal 
targets  more  automatic  and  strengthening  the 
contribution to fiscal consolidation of the domestic 
spending  rule  (see  European  Commission  2018a, 
p.28-29, and European Commission 2018b).  

that 

Report (European Commission, 2018d). The recent 
policy  debate  on  pensions  indicates  that  the 
mechanism  by  which  pensions  are  revalued  may 
undergo  changes  in  the  near  future.  In  particular, 
the  Commission  services  estimate 
the 
relinking of pensions to inflation announced by the 
new coalition government in  its programme  could 
lead to an increase in pension expenditure by 2050 
of around 4% of GDP. This estimation is close  to 
projections  made  by  the  Bank  of  Spain,  the  IMF 
and the think tank FEDEA, but above the estimate 
of  AIReF  (2%  of  GDP)  (see  Box 4.1.1  of  
new 
European  Commission, 
government  has  also  announced  its  intention  to 
eliminate the sustainability mechanism included in 
the  2013  reform  aimed  at  adjusting  the  initial 
pension  level  to  changes  in  life  expectancy. 
According 
the 
Commission services, this would add at least 0.7% 
of  GDP  to  long-term  pension  expenditure.(15) 
Eliminating both elements of the 2013 reform risks 
benefitting  today’s  pensioners  at  the  expense  of 
future  generations,  unless  offsetting  measures  are 
implemented.  Even  when  implementing  fully  the 
2013  reform,  Spanish  pensioners  would  in  the 
long-run  still  be  expected  to  enjoy  replacement 
rates above the EU average. 

to  preliminary  estimates  by 

2019a).  The 

A  debt  sustainability  analysis  shows  that  the 
Spanish general government debt is expected to 
fall  slightly  to  95.7%  of  GDP  by  2030  (last 
projection  year).  This  projection,  which  assumes 
normal  economic  conditions  and  a  constant 
structural  primary  balance 
last 
Commission  forecast  year  (2021),  is  driven  by  a 
gradual  worsening  of  the  primary  deficit  being 
only  partly  offset  by  a  favourable  and  decreasing 
interest rate-growth rate differential in 2021-2024, 
and by a constant primary deficit being more than 
offset  by  favourable  snowball  effects  thereafter. 
The  analysis  also  shows  that  the  level  of  the  debt 
ratio is highly sensitive to shocks (see Box 4.1.1). 

after 

the 

(15)  This projection is based on the following assumptions: i) it 
is based on the data included in the 2018 Ageing Report; ii) 
it  refers  to  old-age  and  early  pensions  only;  iii)  pension 
indexation with IPR as per current legislation; iv) average 
life expectancy across cohorts of 25 years at the exit from 
the  labour  market,  meaning  that  pensioners  would  enjoy 
higher  benefits  from  the  elimination  of  the  Sustainability 
mechanism  during  an  average  of  25  years;  v)  no 
behavioural  changes  in  terms  of  quicker  shifts  from 
working life to pension due to the decision to eliminate the 
Sustainability mechanism.  

30 

                                                           
4.1. Public finances and taxation 

To  improve  the  efficiency  of  public  spending, 
key  areas  are  undergoing  thorough  reviews. 
for  Fiscal 
Spain’s 
seven 
Responsibility 
expenditure reviews in 2019 and four new reviews 
are  underway.  They  have  the  potential  to  lead  to 

Independent  Authority 
(AIReF) 

completed 

public 

spending 

improvements  in  the  efficiency  and  effectiveness 
of 
Box 4.1.2). 
Implementation  of  the  recommendations  based  on 
the  completed  reviews  has  started,  but  it  will  be 
mainly  up  to  the  new  government  to  bring  the 
results of the reviews to fruition. 

(see 

31 

4.1. Public finances and taxation 

Box 4.1.1: General government debt 

The government debt trajectory has been simulated under different scenarios. Under the baseline  scenario, 
general  government  debt  is  forecast  to  decrease  slightly  until  2021,  then  rise  again  to  96.9%  of  GDP  by 
2024, before falling again by the end of the projection period in 2030, by which time it will amount to about 
95.7%  of  GDP.  The  baseline,  derived  from  the  Commission  2019  autumn  forecast,  is  consistent  with  the 
forecast implicit interest rate and the shares of short-term and long-term public debt. It makes a number of 
technical assumptions. First, over the post-forecast period, the structural primary balance (before the cost of 
ageing) is set constant at the value projected for 2021, at -1.0% of GDP, on the assumption that no further 
structural adjustment is made. The cyclical component of the primary balance is calculated using (country-
specific) budget balance sensitivities over the period until output gap closure is assumed (2024). Second, the 
nominal interest rates on new and rolled-over debt are assumed to converge linearly to market-based forward 
rates  (in  particular,  the  long-and  short-term  interest  rates  are  assumed  to  converge  to  1.7%  and  0.4%, 
respectively) by the end of the 10-year projection period. (1) Third, the GDP deflator is assumed to change 
linearly until it reaches 1.9% in 2024 and to remain constant thereafter. Fourth, the stock-flow adjustment is 
set  to  zero  after  2021.  Finally,  medium-term  real  GDP  growth  projections  are  based  on  the  T+10 
methodology agreed with the Economic Policy Committee. This implies that medium-term real GDP growth 
is assumed to average 1.0% both in 2019-2024 and in 2025-2030.  

Graph 4.1.1:  Debt as% of GDP - ES 

Source: European Commission. 

More favourable assumptions on real growth would lead the debt ratio to follow a lower path to reach 90.5% 
of GDP in 2030. By contrast, under more unfavourable assumptions on GDP growth and interest rates, the 
debt ratio would increase to 106.3% of GDP by 2030.  

(1)  This constitutes a change with respect to the previous interest rate methodology (European Commission, 2019i). 

4.1.3.  TAXATION 

Spain  has  a  low  tax-to-GDP  ratio  compared 
with  other  EU  Member  States.  In  2018,  its  tax 
revenues  amounted  to  34.7%  of  GDP,  compared 
with  EU  and  euro  area  averages  of  39.2%  and 
40.6%,  respectively.  The  share  of  consumption  

taxes remains relatively low, at 9.4% of GDP, also 
reflected  in  a  relatively  low  implicit  tax  rate  on 
consumption  of  13.8%,  below  the  EU/euro  area 
averages of 16.9% and 16.8%. At 16.8% of GDP, 
the  share  of  taxes  on  labour  also  remained  below 
the EU average of 19.6% of GDP, with an implicit 
tax rate of 34.2% in 2018.  

32 

6570758085909510010511011520172018201920202021202220232024202520262027202820292030BaselineEnhanced lower GDP growth scenarioEnhanced higher GDP growth scenarioAdverse combined scenario   
 
 
 
4.1. Public finances and taxation 

Box 4.1.2: Spending reviews 

the  call 

The use of  spending reviews has risen across Member States since the  financial crisis,  given the need  for 
the 
fiscal  consolidation  and 
Council recommended  that  Spain  undertake  a  comprehensive  expenditure  review  in  order  to  identify 
possible areas for improving spending efficiency (Council of the European Union, 2017). In response, the 
government commissioned AIReF, Spain’s independent fiscal institution, to carry out a number of targeted 
spending  reviews,  mostly  within  the  central  government  sector  (with  the  cooperation  of  the  sub-national 
government level), over the following three years, to identify potential savings or efficiency gains. 

the  quality  of  public  spending.  In  2017, 

improve 

to 

The  2018  reviews  comprise  seven  evaluations  focusing  on  specific  subsidy  programmes,  in  the  following 
areas: prescription drugs (1), active labour market policies, university education scholarships, promotion of 
talent  and  employability  in  R&D  and  innovation  (pre-  and  post-doctoral  aid  programmes),  the  re-
industrialisation and industrial competitiveness programme, the Spanish national postal service, and, finally, 
an overall evaluation of the strategy and procedures for granting subsidies. AIReF’s methodology has been 
to assess the efficiency, effectiveness, and the adequacy and suitability of the instruments used and of the 
overall framework. 

The  review  of  healthcare  spending  in  medication  dispensed  through  prescriptions,  excluding  hospital 
spending,  covered  about  €10 billion  of  total  public  expenditure.  This  represented  about  14%  of  public 
healthcare expenditure or 0.9% of GDP in 2017. Following a thorough review, 18 measures were proposed 
to  improve  governance;  procedures  to  do  with  the  pricing,  selection  and  purchase  of  medicines;  and 
efficiency  and  equity  (see  also  Section 4.3.4).  Not  all  potential  savings  are  easy  to  quantify,  but  if  the 
recommendations were implemented in the next few  years, AIReF estimates this could yield savings of at 
least €2 billion (AIReF, 2019a)  

The  main  purpose  of  the  other  six  spending  reviews  was  to  identify  inefficient  policies,  procedures  or 
requirements,  without  having  specific  saving  targets.  First,  the  review  of  active  labour  market  policies, 
covering  about  €6.5 billion  of  public  expenditure  in  2017,  highlighted  27  proposals  for  improvement. 
Serious  deficiencies  and  shortcomings  have  been  identified,  calling  into  question  the  quality  of  public 
spending (or best value for money) in this area. This indicates a need for a far-reaching discussion of how 
national employment system works. In particular, the evaluation of the PREPARA programme showed that 
it was not effective (see also Section 4.3.1). Training courses provided for unemployed people have not been 
sufficiently evaluated, and there is a lack of information and data in general for better monitoring of results 
(AIReF, 2019b).  

Second,  the  university  scholarship  system  accounted  for  €812 million  of  public  expenditure  in  the  2016-
2017  academic  year,  representing  about  25%  of  the  budget  of  the  Ministry  of  Education  and  Vocational 
Training (since most funds earmarked for education are disbursed at regional level). This scholarship system 
is a cornerstone of education policy, designed to guarantee equal opportunities. AIReF issued 13 proposals, 
notably to bring forward the calendar and improve procedures so that scholarships are granted in good time 
and the amounts made available are allocated in proportion to individual students’ needs (AIReF, 2019c).  

Third, AIReF issued 19 recommendations for improving the State Programme for the Promotion of Talent 
and  its  Employability  in  Research,  Development  and  Innovation.  This  programme  benefited  from 
€305 million in 2017, about 5% of the R&D+I budget. Although the programme is a relatively small budget 
item, the funds earmarked for it have fallen sharply, although serious challenges remain in terms of boosting 
Spain’s competitiveness and productivity (see Section 4.4.1). In particular, AIReF recommended a strategic 
reorientation  of  the Programme,  focusing  on  excellence,  reviewing  the  coverage  and  generosity  of  grants, 
fostering  public-private  collaboration  in  grants,  and optimising  the  processes  making  up  the Programme’s 
grants system (AIReF, 2019d). 

Fourth, AIReF proposed that the Reindustrialisation and Industrial Competitiveness programme should be 
redefined with regard to the programme’s strategic framework, the specific objectives to be met, its scope, 
the type of instruments and its management model. Close to €4.9 billion was granted in loans between 2008 
and 2016, and the outstanding balance was €3.3 billion by the end of 2017. Overall, the analysis found that 

33 

4.1. Public finances and taxation 

results are negligible compared with the administrative  costs and overall amount of loans granted through 
the programme (AIReF, 2019e).  

Fifth, the evaluation (including international comparisons) of the postal service operator and the provision of 
the  universal  postal  service  highlighted  deficiencies  regarding  the  compensation  mechanism  and  the 
functioning of the operator. Eight measures were proposed to improve the operation of a service accounting 
for €1.45 billion of public expenditure between 2011 and 2020 (AIReF, 2019f).  

Sixth,  the  cross-cutting  review  of  strategy  and  procedures  followed  when  granting  public  subsidies 
highlighted  that  the  regulatory  framework  is  outdated,  the  strategic  planning  is  inconsistent  and  the  inter-
administrative  coordination  mechanisms  (involving  the  use  of  sectoral  conferences)  are  rather  ineffective. 
AIReF  suggested,  among  other  things,  developing  a  new  system  of  strategic  planning,  monitoring  and 
assessment of public policies and revising the General Subsidy Law and Regulation in terms of scope and 
content.  It  also  suggested  improving  sectoral  conferences  by  making  them  more  participatory  and 
specialised,  instead  of  limiting  them  to  the  distribution  of  funds  from  central  to  regional  government,  as 
observed in some instances (AIReF, 2019). 

The  2019  reviews  comprise  four  evaluations  focusing  on  specific  expenditure  items:  expenditure  on 
hospitals, investment in public transport infrastructure (2), hiring incentives, and tax benefits. The review of 
spending on tax benefits is wide-ranging, representing 2/3 of tax benefits or €23.5 billion granted in 2018. 
The four reviews are expected to yield first results in 2020.  

Overall, the first phase of the spending reviews has had a clear impact in the public debate on transparency 
and  accountability.  It  has  also  promoted  an  evaluation  culture.  Work  has  started  on  implementing  the 
recommendations  stemming  from  the  reviews,  but  it  has  been  limited  by  the  caretaker  nature  of  the 
government  in  2019.  In  its  Draft  Budgetary  Plan  for  2020,  the  government  set  out  its  policy  aims  of 
implementing  the  results  of  three  spending  reviews  (i.e.  prescription  drugs,  framework  for  subsidies,  and 
hiring  incentives).The  Draft  Budgetary  Plan  therefore  included  savings  on  social  transfers  (€50 million  in 
2019 and €200 million in 2020) and on subsidies (to limit their growth to 1% year-on-year as from 2020 in 
nominal terms), and incorporated higher revenues from social contributions (€500 million in 2020).  

These  spending  reviews  were  a  high-quality  one-off  initiative,  which  could  prove  valuable  if  thoroughly 
implemented by the authorities responsible and taken into account when drawing up future budgets. The last 
phase (2020 reviews) has not started yet.  

(1)  With support and financing from the EU Structural Reform Support Programme. 
(2)  With support and financing from the EU Structural Reform Support Programme. 

a 

and 

government 

deficit of more than 3% of GDP in 2020-2021, the 
largest  in  the  euro  area.  Due  to  the  difficulties  of 
forming 
a 
parliamentary  majority  for  a  2020  budget  law, 
parliament was dissolved in September and general 
elections  took  place  in  November  2019.  A  new 
government has been formed in January 2020, but 
the  2018  budget  law  has  been  further  extended 
until a new budget law is adopted.  

securing 

The  total  tax-revenue-to-GDP  ratio  has  risen 
above the level that prevailed in the years prior 
to  the  boom  and  bust  episode  of  a  decade  ago. 
After  peaking  at  36.5%  of  GDP  in  2007  and 
bottoming out at 29.7% of GDP in 2009, total tax 
recovered  and,  as 
revenues  have  gradually 
indicated,  reached,  34.7%  of  GDP 
in  2018 
(European  Commission,  2020d).  While  personal 
income  tax  revenues  are  clearly  above  their  pre-
boom  average,  corporate  income  taxes  still  fall 
short of that level.  

The  level  of  taxation  remains  relatively  low  in 
relation  to  expenditure.  As  noted,  according  to 
the  Commission  2019  autumn  forecast,  Spain  is 
forecast to  have an average structural government 

34 

 
 
4.1. Public finances and taxation 

The  draft  National  Energy  and  Climate  Plan 
submitted  to  the  European  Commission  in 
February  2019  tasks  the  Ministry  of  Finance 
with coordinating a study on how to reform the 
tax  system  in  order  to  facilitate  a  low-carbon 
economy.  Environmental 
taxes  are  generally 
considered  less  detrimental  to  growth  than  other 
taxes,  such  as  those  on  labour.  They  can  provide 
an  incentive  to  limit  environmentally  damaging 
activities by integrating the full cost of the latter in 
the price. However, care should be taken to ensure 
that  the  design  of  the  tax  system  maintains  its 
revenue-raising  capacity  in  the  long-run.  The 
distributional  effects  of  environmental 
taxes 
depend  on  how  the  additional  fiscal  revenue  is 
used 
low-income  households 
coherent 
(Zachmann, 
environmental  taxation  structure  in  Spain  could 
help 
challenges 
described in Section 4.5.  

to  compensate 
2018). 

environmental 

A  more 

address 

the 

Spain  relies  to  a  relatively  low  extent  on 
recurrent  property  taxes.  While  revenues  from 
property  taxation  in  Spain  are  slightly  above  the 
EU average (2.6% compared with 2.5% of GDP in 
2018),  the  recurrent  element  is  below  the  EU 
average  (1.2%  of  GDP  compared  with  1.5%  in 
2018),  while  transaction  taxes  exceed  the  EU 
average  (1.5%  compared  with  1.0%  of  GDP  in 
2018).  Recurrent  property  taxes  are  considered  to 
be among those least detrimental to growth and are 
preferable  to  transaction  taxes,  as  they  allow  a 
more  efficient  allocation  of  assets  and  higher 
labour mobility. 

The  R&D  tax  credit,  although  generous,  is 
producing  relatively  limited  results  and  the 
debt bias remains high. Despite the high implicit 
R&D  tax  subsidy  rate,  well  above  30%  (OECD, 
2018),  the  business  R&D  intensity  rate  was  only 
0.7% of GDP in 2018, ranking in the bottom third 
in the EU. Moreover, large  firms  tend to be  more 
responsive  to  it  than  small  ones.  Another  issue  is 
that  the  tax  credit  introduces  a  relative  advantage 
for  debt  financing  (compared  to  equity).  While 
figures  show  a  reduction  in  this  debt  bias,  it 
remains  relatively  high  (in  fact,  it  is  the  second 
highest  in  the  EU).  A  further  reduction  could 
encourage more equity investment. 

The  new  coalition  government  programme  has 
announced  increases  in  expenditure  on  health, 
education  and  housing,  amongst  others.  The 
programme  also  announces  measures  to  increase 
revenues,  such  as  a  higher  effective  corporate  tax 
rate  (although  the  tax  rate  for  SMEs  is  set  to  be 
lowered from 25% to 23% for firms with less than 
€1  million  turnover)  and  higher  top  rates  in 
personal 
the 
introduction  of  new  taxes  (on  certain  digital 
activities and on  financial transactions). However, 
the  impact  of  the  announced  measures  still  has  to 
be  assessed.  Meanwhile,  there  remains  scope  to 
increase 
like 
from 
consumption  taxes,  recurrent  property  taxes  and 
environment-related  taxes,  with  relatively  limited 
impact on economic growth. 

taxation,  as  well  as 

revenue 

income 

taxes 

other 

Spain  collects  relatively  little  value  added  tax 
(VAT) revenues, despite a very low compliance 
gap  and  a  standard  VAT  rate  close  to  the  EU 
average.  This  is  due  to  extensive  use  of  reduced 
and  super  reduced  rates,  resulting  in  a  large  VAT 
rate  gap.  In  2017,  it  stood  at  13%,  above  the  EU 
average  of  10%  (European  Commission,  2018e). 
While  the  reduced  rates  in  Spain  have  some 
progressive  effect  on  average  –  almost  entirely 
because  of  lower  rates  on  food  –  lower  rates  on 
many items are actually regressive. This is true, for 
instance,  of  the  reduced  rate  for  restaurants  and 
hotels.  In  contrast,  the  VAT  compliance  gap 
continued  to  narrow.  This  gap  –  calculated  as  the 
difference  between  the  theoretical  VAT  liability 
and  the  revenue  actually  received  as  a  percentage 
of the former – came to 2% in 2017 (down from a 
peak of 12% in 2013). This is significantly below 
the EU average of 11%.  

Environmental taxes in Spain are still below the 
EU  average,  despite  increases  in  recent  years. 
They  came  to  about  1.8%  of  GDP  in  2018, 
compared  with  an  EU  average  of  about  2.4%  of 
GDP. They are also relatively low when measured 
as  a  share  of  tax  revenues.  In  particular,  energy 
taxes (including transport fuel taxes)  yielded little 
revenue  and  amounted  to  about  1.5%  of  GDP  in 
2018,  compared  with  an  EU  average  of  about 
1.9%.  In  2018,  transport  taxes  accounted  for 
12.7% of total revenues from environmental taxes, 
compared with an EU average of about 19.7%. For 
example,  excise  taxes  on  diesel  and  petrol  are 
relatively low in Spain (see also Section 4.5).  

35 

4.1. Public finances and taxation 

This  points 
to  possible  shortages  of  human 
resources in future, with an adverse impact on tax 
collection.  Procedures  to  hire  1300  civil  servants 
tax 
in  2019  (tax 
were 
technicians,  tax  agents,  custom  police  agents  and 
auxiliary officials). 

inspectors, 

launched 

The  ageing  of  the  tax  authority’s  workforce  is 
an  area  of  concern.  OECD  data  on  the  human 
resources of the Spanish tax  administration shows 
a  high  level  of  ageing  staff;  in  2017  only  around 
17%  of  the  workforce  was  younger  than  45.  This 
figure  needs  to  be  read  in  conjunction  with  2017 
data showing that Spain has the lowest number of 
tax  agents  per  head  of  population  of  all  EU 
2017). 
countries 

the  OECD 

(OECD, 

in 

36 

 
4.2.  FINANCIAL SECTOR 

sector 

reform 

raised.  Financial 

Macro-financial stabilisation has continued, yet 
emerging  risks  need  to  be  closely  monitored. 
Amid continued robust economic activity, Spanish 
yields have decreased and its sovereign rating has 
been 
and 
stabilisation policies have been maintained. Banks 
enjoy  overall  relatively  good  profitability,  strong 
liquidity  and  adequate  capitalisation,  and  they 
continued  to  reduce  their  non-performing  loans 
(NPL).  Access  to  finance  is  considered  the  least 
important  obstacle  by  firms,  including  SMEs. 
sector  debt  has  continued 
Finally,  private 
is 
declining.  However, 
weakening,  and  banks’  profitability 
remains 
affected by the very low interest rate environment. 
The banking sector’s NPL ratio is still higher than 
the  EU  average,  and  moderation  in  real  estate 
market  activity  could  slow  down  sales  of  non-
performing  real  estate  assets  by  banks.  Venture 
capital  remains  underdeveloped.  The  pace  of 
reduction  of  private  sector  debt  slowed  down  and 
deleveraging needs persist.  

economic 

growth 

4.2.1.  FINANCIAL SECTOR * 

The  Spanish  banking  sector  enjoys  strong 
liquidity  and  adequate  capitalisation,  but 
profitability  remains  under  pressure.  In  recent 
years,  the  improving  economic  climate,  declining 
credit risk, better operational efficiency along with 
the  significant  improvement  in  asset  portfolio 
quality  contributed  to  the  strengthening  of  the 
sector’s profitability. At the end of 2018, the return 
on  equity  stood  at  7.3%.  While  this  is  among  the 
highest ratios in the EU, it remains below its pre-
crisis  level.  In  addition,  in  the  first  half  of  2019, 
Spanish  banks’  consolidated  profit  was  down  by 
11.5%  year  on  year.  Their  return  on  equity 
decreased by 1 pp. to 6.6% and the return on assets 
fell by 8 basis points to 0.49%, according to Bank 
of  Spain  data.  According  to  European  Central 
Bank (ECB) data, the common equity tier 1 (CET 
1)  ratio  of  Spanish  banks  increased  by  40  basis 
points  year-on-year,  to  12.2%  at  the  end  of  June 
2019, higher than the required levels for all credit 
institutions  but  still  below 
the  EU  average 
(15.0%).  The  EBA  (2019)  estimated  that  once 
Basel III 
capital 
requirements might somewhat rise for the Spanish 
banks. 

implemented, 

fully 

is 

Spanish  banks  continued  to  reduce  their  non-
performing  loans  (NPLs)  during  2018  and  the 
first half of 2019. The share of NPLs in total loans 
(as reported by Bank of Spain  based on domestic 
activity) went down by 1 pp. to 5.3% in June 2019 
year-on-year,  in  a  context  of  slightly  decreasing 
volumes  of  credit.  When  the  foreign  activity  of 
Spanish  banks  is  taken  into  account,  ECB  data 
show  that  the  NPL  ratio  for  Spanish  banks 
decreased to 3.4% in June 2019, still slightly above 
the EU average of 2.9% (see Table 4.2.1).  

the  asset  management 
Asset  recovery  by 
company  SAREB (16)  is  progressing,  but  at  a 
slow  pace.  After  43%  of  SAREB’s  expected 
lifetime  (from  its  inception  in  2013  until  2027, 
when  it  is  supposed  to  be  liquidated),  34%  of 
assets have  been  sold and 30% of senior debt has 
been  repaid.  Sales  have  recently  slowed  down, 
partly  due  to  the  moderating  real  estate  market 
activity  but  also  the  new  strategy  of  SAREB, 
aimed at recovering real estate collaterals with in-
house capacity rather than  selling NPLs. The new 
strategy  may  eventually  deliver  higher  recovery 
values,  but  its  implementation  will  have  to  be 
closely monitored as it might entail high operating 
costs and could pose risks to the materialisation of 
the planned recoveries within SAREB’s lifespan. 

(NFCs) 

corporations 

The outstanding volume of credit to the private 
sector  is  still  decreasing.  In  September  2019,  it 
was 1.6% lower than a year before. The reduction 
was driven by the decline in the stock of credit to 
non-financial 
(-2.5% 
year-on-year  in  September  2019)  (Graph 4.2.1), 
reflecting 
the  clean-up  of  NPLs,  but  also 
decelerating new  lending, especially to SMEs. By 
contrast, the stock of domestic credit to households 
remained  flat;  while  mortgage  loans  continued  to 
decline (by 1.4% year-on-year in September 2019), 
consumer 
(8.3% 
year-on-year in September 2019). According to the 
Bank  Lending  Survey  (Bank  of  Spain,  2020),  in 
the  fourth  quarter  of  2019,  credit  standards  for 
approving  loans  tightened  for  enterprises,  as  well 
as  for  households  for  house  purchases  and 

increased 

further 

credit 

(16)  SAREB (Sociedad de gestión de Activos procedentes de la 
Reestructuración  Bancaria) 
is  an  asset  management 
company  that  was  created  to  divest  the  assets  transferred 
from the old savings banks and help the economy recover. 
54% of its share capital is owned by private shareholders, 
but  the  main  shareholder  (46%)  is  the  public  Fund  for 
Orderly Bank Restructuring (FROB). 

37 

 
                                                           
4.2. Financial sector 

Table 4.2.1: 

Financial soundness indicators, all banks in Spain 

(1) Annualised data. 
(2) Domestic banking groups and standalone banks, foreign (EU and non-EU) controlled subsidiaries and foreign (EU and non-
EU) controlled branches 
Source: ECB - CBD2 - Consolidated banking data; own calculations. 

consumer  credit.  Net  demand  for 
loans 
enterprises  and  housing 
declined during the fourth quarter. 

to 
loans 
to  households 

Graph 4.2.1:  Loans to the private sector 

activity  with  broadly  positive  profitability  levels, 
according to Bank of Spain data. Credit granted by 
SLIs  has  increased  steadily,  and  their  profitability 
is  higher  than  that  of  deposit-taking  institutions' 
business  in  Spain.  The  main  insurance  companies 
have  also  increased  their  assets,  whereas  their 
return  on  investment  has  remained  relatively 
stable. In 2019, the pension funds’ assets as well as 
investment  funds'  assets  increased  as  a  result  of 
positive returns. 

4.2.2.  THE HOUSING MARKET 

from 

recover 

to 
followed 

The  Spanish  housing  market  continues  to 
recover,  though  activity  slowed  down  in  2019. 
While  the  housing  market  and  construction  sector 
have  continued 
the  sharp 
the  crisis,  several 
that 
adjustment 
indicators of housing activity, such as the  number 
of  housing 
transactions  and  new  mortgages, 
slowed  down  in  2019.  This  is  probably  due,  to 
some extent, to changes in the mortgage legislation 
enacted in the first months of the year. The supply 
of  new  housing  has  been  increasing  over  the  last 
three years (by about 9% year-on-year on average 
between 2015 and 2018), but started to slowdown 
in mid-2018. 

in  Spain 

Average  house  prices 
stopped 
accelerating  in  2019,  but  there  were  large 
differences  across  regions.  Unsubsidised  house 
prices increased by 4.7% year-on-year in the third 
quarter  of  2019.  Prices  of  new  dwellings  went  up 
by  6.6%  and  those  of  used  dwellings  by  4.4%, 
indicating  a  deceleration  in  both  cases  relative  to 
their  previous  accelerating  path.  Despite  this 
increase,  house  prices  remain  below  the  pre-crisis 

Source: Bank of Spain, own calculations 

Resolution plans have been drafted or approved 
for all Spanish banks, including significant, less 
significant and small institutions. The Minimum 
Requirement for own funds and Eligible Liabilities 
(MREL) 
the  Directive 
2014/59/EU  on  Bank  Recovery  and  Resolution 
may  pose  some  challenge  for  some  smaller 
Spanish banks.  

targets  set  based  on 

The non-banking financial sector has shown an 
expansionary profile in recent years. In the low-
interest  rate  setting  prevailing  in  recent  years,  the 
performance of the specialised lending institutions 
(SLI), insurance companies, investment funds and 
pension  funds  has  generally  shown  an  increased 

38 

-30-20-1001020304007080910111213141516171819% y-o-yTotal non-MFI private sectorNon-financial corporatesHouseholds & NPISH20142015201620172018q12018q22018q32018q42019q12019q2Non-performing loans8.16.35.74.44.44.14.03.73.63.4o/w foreign entities10.48.15.03.23.12.82.92.92.92.8o/w NFC & HH sectors10.18.17.36.1-5.65.45.04.94.7o/w NFC sector16.412.810.97.97.46.86.55.95.75.3o/w HH sector5.34.54.54.44.44.34.24.03.93.8Coverage ratio46.446.845.042.745.244.744.143.743.743.9Return on equity(1)6.76.65.07.09.68.98.98.28.37.6Return on assets(1)0.50.50.40.50.70.70.70.60.60.6Total capital ratio13.614.514.715.415.115.115.215.415.215.4CET 1 ratio11.812.712.812.612.011.812.012.212.112.2Tier 1 ratio11.812.713.013.213.213.213.413.513.413.5Loan to deposit ratio90.391.792.589.389.889.990.190.691.192.3  
 
   
 
peaks,  in  both  nominal  and  real  terms  (by  around 
18%  and  30%,  respectively).  According  to  some 
price valuation indicators (17), house prices are still 
undervalued in Spain, but other indicators suggest 
the  gap  has  closed  (see  Graph 4.2.2).  House  price 
developments  vary  greatly  across  regions,  with 
larger increases in the major cities and the coastal 
areas,  which  have  made  housing  less  affordable, 
especially  in  the  rental  market  and  for  younger 
households (see Box 4.2.1). 

Graph 4.2.2:  Overvaluation gaps based on price/income, 

price/rent and fundamental model-based 
benchmarks 

4.2. Financial sector 

perceive  “finding  customers”  and  “availability  of 
skilled staff or experienced managers” as the more 
prominent  concerns,  while  access  to  finance  is 
perceived  by  Spanish  firms  as  one  of  the  least 
important  concerns.  As  in  all  other  EA  countries, 
Spanish SMEs continue to be more concerned than 
large companies. In the former group, this concern 
increased  over  the  six  months  covered  by  the 
survey,  while  the  request  of  a  guarantee  to  SMEs 
remains  fairly  common:  among  those  ones  that 
obtained bank financing in 2018, near half of them 
(48%)  were  requested  a  guarantee  (CESGAR, 
2019).  

remain 

Bank-related  products 
the  most 
relevant source of financing for firms, especially 
SMEs.  According  to  the  latest  SAFE  survey,  the 
three most important sources of financing are bank 
loans  (relevant  for  55%  of  SMEs,  45%  at  EU 
level),  credit  lines  (47%)  and  trade  credit  (45%). 
Only 4% of surveyed SMEs said they used equity. 
Spanish  firms,  and  especially  SMEs,  continue  to 
rely  more  on  loan  financing  than  on  equity 
compared  with  the  EU  average  (see  Graph 4.2.3). 
Unlike the other three largest euro area economies, 
Spanish SMEs indicated increasing needs for bank 
loans and credit lines.  

(1) Philiponnet and Turrini (2017) 
Source: Own calculations 

Graph 4.2.3:  Sources of financing of the Spanish economy, 

2018 

4.2.3.  ACCESS TO FINANCE 

Access  to  finance  is  not  the  most  important 
concern for firms. The latest Survey on Access to 
Finance  of  Enterprises  in  the  euro  area  (SAFE) 
conducted  by  the  ECB,  covering  the  period  April 
to September 2019, shows that Spanish  firms  still 

(17)  The analysis of price valuations is based on an average of 
three  metrics:  (i)  affordability  gap  (price-to-income 
deviation  with  respect  to  its  long-term  average);  (ii) 
dividend  gap  (price-to-rent  deviation  from  its  long-term 
average);  and  (iii)  estimates  of  deviations  of  house  prices 
from  equilibrium  values  justified  by  housing  demand  and 
supply  fundamentals.  See  Philiponnet  and  Turrini,  2017. 
Apart from these indicators, the European Commission has 
recently  used  housing  price  in  levels  to  compute  the 
number of years of income per-capita required to buy a 100 
m2  dwelling.  This  price-to-income  ratio  in  levels  reached 
9.9  years  in  Spain  on  average  between  2014  and  2017, 
slightly below 10 years, the threshold that reflects a higher 
probability of overvaluation in the housing market. 

Source: Ameco, ECB, Invest Europe. 

39 

-30-20-10010203040509901030507091113151719% deviation of current priceModel-based valuations gapPrice to income vs. hist. avg.Price to rent vs. hist. avg.Overall valuation gap0.000.010.020.030.040.050.060102030405060Listed sharesDebt securitiesMFI loansGross operating surplus:corporationsVenture capital (rhs)% of GDP% of GDPESEU    
                                                           
 
   
4.2. Financial sector 

hampers  their  capacity  to  pay  suppliers.  Though 
this is a high figure, it is below the average in the 
euro area. Late payments are also reported to affect 
investment or new recruitment, repayment of loans 
and  production  or  operations.  Spain  has  made 
considerable  progress 
in 
payment,  but  the  average  time  taken  to  pay 
in  public 
invoices  remains  substantial,  both 
administrations  and  in  private  entities.  In  2018, 
payment time exceeded 80 days in the business-to-
business  sector,  substantially  above  the  legal 
payment  term  of  60  days.  In  public  entities,  the 
figure was 53.5, against a legal term of 30 days. 

in  reducing  delays 

There has been progress in advancing on green 
finance.  During  December  2019, 
the  Public 
Treasury  announced  its  financing  strategy  for 
2020, with the objective of launching a first green 
bond  issuance  as  part  of  a  long-term  funding 
program.  The  Treasury  will  follow  market  best 
practices 
the  Green  Bond 
Framework to be applied, based on the experience 
of  other  sovereign  issuers  and  the  harmonisation 
work undertaken at the European level. A National 
Action Plan on Sustainable Finance will be drawn 
up. 

the  design  of 

in 

in 

fixed 

investment 

investments,  while 

Financing 
intangibles  with 
external  funds  remains  a  challenge.  Intangible 
assets are not easily collateralised and have limited 
usefulness  to  secure  external  financing.  This  is 
most apparent for debt funding and for intangible-
rich  firms  (OECD,  2019b).  During  the  financial 
crisis  and  the  recovery,  intangible-intensive  firms 
used almost exclusively own funds to finance their 
intangible 
assets 
continued  to  be  funded  with  borrowed  funds, 
though  to  a  lesser  extent  than  in  previous  years 
(Bank  of  Spain,  2018).  There  are  also  some 
institutional  features  that  seem  to  have  an  impact 
on  firm  capital  structure  and  investment  in  most 
countries.  Bank 
and 
capital 
institutional features generally encourage creditors 
to  offer  better  lending  conditions  and  access  to 
finance  in  the  case  of  mortgage  loans.  This  may 
bias  firm  capital  structure  towards  this  type  of 
financing,  as  well  as  asset  composition  towards 
real  estate  and  commercial  properties,  against 
more productive assets, including intangible ones.  

requirements 

Spain  has  adopted  new  measures  to  improve 
access  to  non-bank  financing  for  SMEs.  Some 
measures  supporting  growth  of  small  firms  have 
been  introduced  (such  us  supporting  social  and 
sustainable  funds 
through  Fond-ICO  PYME; 
CDTI´s  Cervera  and  Misiones  Programmes)  or 
continued  (such  as  increasing  Fond-ICO  Global 
funds, 
Innvierte,  or 
replenishing  ENISA´s  lines  of  action).  However, 
the  overall  volume  of  general  government 
financing  provided  to  non-financial  corporations, 
especially SMEs (by way of loans and guarantees) 
has  been  reduced  in  recent  years,  in  a  context  of 
greater availability of liquid funds and easier credit 
conditions from private-sector banks. 

capital  of 

increasing 

Graph 4.2.4:  Government support to SMEs 

Despite progress in recent years, venture capital 
remains  underdeveloped  in  Spain.  ICT  and 
digital  projects  account  for  more  than  three 
quarters  of  new  venture  capital 
investments 
(European  Commission,  2017a),  and  venture 
capital funding is significantly skewed towards the 
start-up  and  later  phases,  whereas  it  is  relatively 
scant for the seed phase (Flachenecker et al.,2020). 
The  Spanish  market  for  venture  capital  financing 
of  SMEs,  and  especially  very  small  firms,  is 
unattractive for investors (see also Section 4.4.1).  

Payment  practices  in  Spain  weigh  on  SMEs’ 
liquidity.  According  to  the  latest  SAFE  survey 
results, 40% of Spanish SMEs experienced regular 
or  occasional  difficulties  as  a  result  of  late 
payments from private and/or public entities. This 

Source: OECD, Financing SMEs and entrepreneurs 2019: an 
OECD scoreboard. 

40 

024681012140708091011121314151617bn €Government loan guarantees, SMEsGovernment guaranteed loans, SMEs    
4.2.4.  PRIVATE SECTOR DELEVERAGING * 

The  stock  of  private  debt  has  continued  to 
decline, but deleveraging needs persist. The total 
stock  of  debt  in  the  non-financial  private  sector 
amounted  to  152.4%  of  GDP  in  non-consolidated 
terms at the end of Q3-2019 (57.4% of GDP held 
by  households  and  95.0%  of  GDP  held  by  non-
financial  corporations  (NFCs)  (see  Graph 4.2.5). 
This  is  74 pps  lower  than  its  peak  in  the  second 
quarter  of  2010.  In  consolidated  terms,  private 
sector debt is estimated to have fallen by  4 pps to 
130%  of  GDP  in  2019. This  is  slightly  below  the 
macroeconomic 
(MIP) 
scoreboard threshold of 133%, but still  very  high, 
and  it  is  still  substantially  above  prudential  levels 
benchmarks (18), 
and 
suggesting that deleveraging needs persist for both 
households and NFCs. 

imbalances  procedure 

fundamental-based 

Graph 4.2.5:  Debt breakdown by sector 

End of period. Debt = F3 + F4.  
Private sector = NFC + HH + NPISH. 
Source: BDE, own calculations. 

(18)  Fundamentals-based  benchmarks 

are  derived 

from 
regressions  capturing  the  main  determinants  of  credit 
growth and taking into account a given initial stock of debt. 
Prudential  thresholds  represent  the  debt  threshold  beyond 
which the probability of a banking crisis is relatively high. 
Methodologies  are  described  in  European  Commission 
(2017)  and  updates  to  the  methodology  have  been 
subsequently proposed in European Commission (2018). In 
2019, Spanish private debt exceeded the benchmark based 
on fundamentals by about 25% of GDP and the prudential 
threshold by about 30%. 

4.2. Financial sector 

In  the  case  of  households,  the  pace  of  debt 
reduction has stabilised. Household consolidated 
debt  declined  only  slightly,  by  2.2  pps  year-on-
year in Q3-2019, to 57.4% of GDP, mainly driven 
by  nominal  GDP  growth  (Graph 4.2.6).  The 
household debt ratio remains above prudential and 
fundamental-based benchmarks.  

Growth  in  new  credit  to  households  is  mainly 
driven by consumer loans. The pace of decline in 
the stock of mortgage loans decreased in 2018 and 
2019.  Still,  while  the  mortgage  lending  stock  was 
23 pps of GDP above the euro area average at the 
peak  in  2010,  this  gap  has  narrowed  to  3  pps  in 
2019.  At  the  same  time,  the  stock  of  consumer 
credit has increased by about 2 pps of GDP since 
the trough in 2014, reaching 7.5% of GDP in 2019. 
This  is  the  result  of  a  fast  pace  of  growth  in  new 
credit  over  recent  years,  at  double-digit  rates.  In 
June  2019,  the  stock  of  consumer  credit  grew  by 
11.6% year-on-year, even though the pace of new 
lending  for consumer credit slowed over the  year. 
Even  though  consumer  lending  has  contributed  to 
the  economic 
recent  years  by 
supporting  domestic  demand,  its  rapid  increase 
may  make  households,  especially 
the  over-
indebted  ones,  more  vulnerable  to  adverse  shocks 
and to changes in economic conditions. 

recovery 

in 

Graph 4.2.6:  Households: Breakdown of y-o-y changes in 

debt-to-GDP ratio 

Source: Eurostat. 

The  financial  burden  of  Spanish  households 
continued  to  fall  in  2019,  while  liquid  assets 
in  households’ 
have 
financial  portfolio.  With  low  interest  rates  and 
variable  rate  loans  still  prevailing  in  the  Spanish 

increased  their  share 

41 

050100150200250300350400% of GDPMonetary financial institutionsGeneral governmentHouseholds and NPISHNon-financial corporationsPrivate sector-6-4-2024608Q309Q310Q311Q312Q313Q314Q315Q316Q317Q318Q3y-o-y changeCredit flowReal growthInflationOther changesD/GDP, change  
 
                                                           
  
4.2. Financial sector 

Graph 4.2.7:  Non-financial corporations: breakdown of y-o-
y changes in debt-to-GDP ratio 

Source: Eurostat. 

to  decrease.  The 

The  financial  burden  of  the  corporate  sector 
financial 
has  continued 
burden (21) borne by the corporate sector to service 
its  debt  fell  in  2018.  It  was  expected  to  fall 
moderately  in  2019,  since  the  average  cost  of  the 
stock  of  bank  credit  slightly  declined  in  the  first 
half of 2019 and interest rates remained low in the 
second half of the year. 

Graph 4.2.8:  Gap to the fundamental-based and prudential 

benchmarks for household and NFC debt 

time, 

the  same 

income.  At 

mortgage  market,  the  financial  burden (19)  borne 
by  households  to  service  their  debt  has  continued 
to  fall  in  2019,  also  helped  by  growing  gross 
the 
disposable 
continued  decline  of  the  share  of  new  mortgages 
with  variable  rates  reduced  households'  exposure 
to 
interest  rates  changes.  Job  creation  and 
increasing  gross  disposable  income  allowed  the 
share of non-performing loans in household debt to 
continue declining to 4.7% in the second quarter of 
2019,  compared  to  4.9%  at  the  end  of  2018.  The 
composition  of  households’  financial  position 
liquid  assets,  such  as 
shifted 
deposits,  which  increased by  about 5.5%  year-on-
year  in  the  first  nine  months  of  2019,  while 
holdings of equity and securities fell. 

towards  more 

Debt reduction in the corporate sector is taking 
place  simultaneously  with  new  borrowing  via 
securities  issuance.  Since  the  peak  in  2009,  the 
NFC  debt,  in  consolidated  terms,  decreased  from 
119%  of  GDP  to  73.2%  in  Q3-2019 (20).  After 
having  declined  by  4-5  pps  of  GDP  per  year  in 
2015-2018, the pace of adjustment in debt-to-GDP 
ratio  slowed  down  to  2.4  pps  in  2019.  As  for 
households, corporate indebtedness remains above 
the prudential and fundamentals-based benchmark 
(see  Graph 4.2.7).  The  stock  of  debt  in  nominal 
terms  increased,  as  a  result  of  an  increase  in  the 
issuance of bonds, while the stock of bank lending 
to  NFC  declined  (by  2.7%  between  September 
2018 and September 2019). In 2019, deleveraging 
was  thus  driven  mainly  by  GDP  growth,  but  new 
lending  to  corporations  also  decreased,  led  by  the 
strong  reduction  in  credit  lines  and  other  new 
lending 
loans 
under 1 million),  whereas  new 
loans  to  large 
corporates (proxied by loans above 1 million) grew 
by  0.9%  (y-o-y  rate  on  12-month  average).  By 
sector, credit to the services sector made a positive 
contribution to the growth of NFC bank lending in 
Q2-2019  for  the  first  time  since  2016,  and  net 
credit  to  industry  was  also  positive,  whereas  real 
estate activities continued to be a drag on corporate 
bank lending. 

(proxied 

SMEs 

by 

to 

(19)  The  interest  burden  is  the  ratio  of  interest  payments  to 

gross disposable income. 

(20)  Financial derivatives are not included in these figures. 

(1) Gap based on the consolidated debt ratio by sector. A 
positive value means that deleveraging needs persist 
Source: European Commission. 

(21)  The interest burden of the corporate sector is measured as 
the ratio of interest payments to gross operating surplus. 

42 

-20-15-10-505101508Q409Q410Q411Q412Q413Q414Q415Q416Q417Q418Q4y-o-y changeCredit flowReal growthInflationOther changesD/GDP, change-30-20-10010203040506070969800020406081012141618percentage points of GDPNFC gap to fundamentals-based benchmark, consolidated NFC debt, ppsNFC gap to prudential benchmark, consolidated NFC debt, ppsHouseholds debt gap to fundamentals-based benchmark, ppsHouseholds debt gap to prudential benchmark, pps                                                           
  
  
                                                           
4.2. Financial sector 

Spain  has  made  significant  policy  progress  on 
insolvency,  but  close  monitoring  is  needed  to 
ensure that recent reforms achieve the intended 
results.  Royal  Decree  Laws  4/2014  and  25/2015 
eased  procedures  for  SMEs  before  and  after 
bankruptcy.  Spain  was  ranked  18th  in  the  2019 
“Doing  Business”  Report  by  the  World  Bank  for 
insolvency  procedures.  Visible  progress  has  been 
made  for  measures  such  as 
length  of 
insolvency procedures (471 days in 2015, 440 days 
in  2017,  and  404  days  in  2018 according  to 

the 

national  data (22)),  but  time  is  needed  for  the 
reforms  to  produce  their  full  impact,  considering 
that  the  median  duration  of  ordinary  insolvency 
procedures  is  still  high  at  806  days  (down  from 
899 days in 2017). The Commission is supporting 
the  authorities 
the 
effectiveness  of  the  recent  reforms  through  the 
Structural  Reform  Support  Programme.  Further 
regulatory improvements are expected (such as the 
implementation  of  the  Directive  (EU)  2019/1023 
on restructuring and insolvency). 

the  assessment  of 

in 

(22)  "Anuario  Concursal"  of  the  Spanish  Official  Body  of 

Registrars 2015, 2017 and 2018. 

43 

                                                           
4.2. Financial sector 

Box 4.2.1: Housing affordability in the recovery 

After the sharp correction during the crisis, house prices increased again, driven  by the recovery in 
housing demand amid strong job creation and low interest rates.  Since the trough in 2013 up to 2018, 
cumulative house price growth in Spain was 23% (4.3% per year), higher than the growth of nominal GDP 
per  head,  at  17%.  The  deterioration  in  the  price-to-income  ratio  –  which  can  be  considered  a  measure  of 
housing  affordability  -  at  national  level  masks,  nevertheless,  sharp  differences  across  regions.  In  most  of 
them,  GDP  growth  per  head  during  the  recovery  has  been  higher  than  the  increase  in  house  prices,  thus 
putting households in better conditions to buy a house (Graph 4.2.9.a). However, house prices went up much 
faster than GDP per head in some turistic areas such as Balear and Canary Islands, and in regions or cities 
with dynamic labour markets and high population density, like in Madrid and Catalonia.   

Graph 4.2.9.a:  GDP per head and house price growth 

Graph 4.2.9.b:  Change in share of households 
living in rented accommodation 

Source: INE, European Commission. 

The growing demand for accommodation in some areas has also affected the rental market. According 
to the house rent component of the Harmonised Consumer Price Index, during the recovery rents in Spain 
increased more slowly than in most other EU Member States. However, in the areas and cities mentioned 
above, where the housing market is more dynamic, new unsubsidised rents have increased faster, and more 
sharply  than  sale  prices,  despite  some  moderation  in  2018.  As  shown  by  data  on  supply  prices  from  web 
portals, in the period 2013 – May 2019, rental prices increased by 45% in Madrid and 50% in Barcelona, 
while in other big costal cities they also grew by more than 40% (Bank of Spain, 2019c). In general, these 
are  cities  where  there  is  also  high  demand  for  tourist  accomodation,  including  in  peer-to-peer  vacation 
rentals  in  the  historical  city  centers.  Growth  of  rental  prices  was  lower  in  less  populated  cities  or  inland 
Spain, though the increase was, in general, still higher than the growth of sale prices (Bank of Spain, 2019b). 
As a consequence, while sale prices have not reached their pre-crisis level in Madrid and Barcelona, rental 
prices have exceeded it.  

Since the  crisis, Spanish households  have increased their  propensity to  rent.  The  share of households 
living  in  a  rented  accommodation  at  market  price  increased  by  nearly  4  pps  between  2008  and  2018  (see 
Graph 4.2.9.b), up to about 15%, ranging from 5.7% to 24.3% across regions. This increasing trend is also 
observed in other EU countries, where the share of tenants in the population (at 22% on average in the EU) 
is higher than in Spain. However, reflecting the pattern of house price and rent increases described above, 
the  region  of  Madrid  and  Catalonia  saw  much  higher  increases  in  the  share  of  people  living  in  rented 
accommodation. By age groups, the increase is especially noticeable for young people: among households 
whose head is 16-29 years old (1), the share of tenants at market price was about 45% in 2018, while it was 

44 

01020304050SpainAndalucíaAragónAsturiasBalearsCanariasCantabriaCastilla y LeónCastilla - La ManchaCataluñaComunitat ValencianaExtremaduraGaliciaMadridMurciaNavarraPaís VascoRiojaCumulated growth, 2013-2018, %House priceGDP per head-50510Change, 2008-2018, ppsShare of households living in unsubsidized rented houses 
 
 
4.2. Financial sector 

only one third in 2008 (INE, 2019). The share of people living in rented accomodation at market price also 
increased  among  households  with  children,  especially  those  with  low  income  (below  60%  of  median 
income). The scar left by the burst of the housing bubble during the crisis is likely to be a key driving factor 
of the increased demand for rented accommodation, whereas the other drivers will differ across population 
groups. As to the role of policies, the abolition of the tax deduction for interest paid on mortgages for first-
time house buyers in 2013 may have had the effect of encouraging demand for rentals.  

their income 

Graph 4.2.10:  Population with housing costs over 40% of 

Spanish people living in rented accommodation experience housing cost overburden more often than 
on average in the EU. According to the EU-SILC 
survey,  the  share  of  population  overburdened  by 
housing  costs  –  those  paying  more  than  40%  of 
their  equivalised  disposable  income  on  housing  – 
who  are  living  in  owner-occupied  accommodation 
with  an  outstanding  mortgage  or  loan  has  declined 
since  2008  (see  Graph 4.2.10),  especially  in  the 
period 2015-2018, thanks to the decrease in interest 
rates  and  the  increase  in  disposable  incomes.  At 
3.5%  in  2018,  this  share  stands  just  below  the  EU 
average.  By  contrast,  for  tenants  renting  at  market 
price,  this  share  has  barely  diminished  in  Spain, 
except  in  2018,  and  at  38.1%  in  2018,  it  is  well 
above the EU average (27.4%). 

try 

to  address 

Ensuring  the  availability  of  affordable  and 
quality housing is a fundamental need and forms 
part  of  the  UN  Sustainable  Development  Goals. 
this 
Several  policy  measures 
challenge across Europe, ranging from the supply of 
social housing, to housing subsidies and regulatory 
measures,  including  rent  controls.  The  choice  of  policy  instruments  should  be  taken  on  the  basis  of  the 
specific context in which they are applied and their implementation challenges and after careful evaluation 
of  their  expected  impact  and  possible  unwanted  consequences  –  also  based  on  past  experience  or 
international evidence. For example, while recent experiences with rent controls have improved affordability 
for  tenants  in  the  short  term  in  the  areas  where  they  are  applied,  they  have  also  increased  prices  in  other 
areas. In addition, rent controls can reduce the supply of rental housing in the medium and long term and 
have undesired spill-over effects on housing market demand and prices (see Bank of Spain, 2020).  

Source: Eurostat (EU – SILC), European Commission. 

(1)  Including households with young people sharing a dwelling.  

45 

051015202530354045500809101112131415161718Population share, %Owner with mortgage (ES)Tenant at market price (ES)Owner with mortgage (EU)Tenant at market price (EU)  
 
 
4.3.  LABOUR MARKET, EDUCATION AND SOCIAL POLICIES 

4.3.1.  EMPLOYMENT * 

Labour market developments 

to 

both 

67.2% 

indicators 

in  Q3-2018) 

Unemployment  has  continued  to  fall,  but 
remains  very  high  and  many  employees  work 
on temporary contracts. The high job content of 
Spain’s  growth  during  the  recovery  has  put  the 
economy  on  a  sustained  growth  path.  The 
seasonally  adjusted  employment  rate  of  people 
aged  20-64  has  risen  further  to  67.8%  (Q3-2019) 
(compared 
and 
unemployment  (15-74)  has  fallen  to  13.8%  (Q4-
2019)  (compared  to  14.5%  in  Q4-2018)  (see 
Graph 4.3.1).  Yet, 
still 
underperform  with respect to the  EU average  (see 
(see 
Box 4.3.1),  especially 
Section 4.4.3). 
youth 
Long-term 
unemployment  have  also  seen  steep  declines,  but 
long-term  unemployment still affected 1.2  million 
the  active 
people 
population.  30.5%  of  the  active  population  aged 
below 25 was without a job in Q3-2019 (compared 
to  14.4%  in  the  EU).  The  share  of  young  people 
“Neither  in  employment,  nor  in  education  or 
training”  (NEETs)  has  also  fallen  significantly,  to 
12.4%  in  2018,  but  remains  among  the  highest  in 
the EU. Finally, job quality remains a  concern, as 
Spain  records  the  highest  share  of  employees  on 
temporary  contracts  and  the  third  highest  rate  of 
in-work poverty in the EU (see Section 4.3.3).  

in  Q3-2019,  or  5.2%  of 

regions 
and 

in  some 

The  Spanish  labour  market  still  largely  relies 
on  temporary  contracts,  many  of  them  of  very 
short duration. Temporary employment has been 
underpinning  job  creation  and  destruction  for 
several  decades  (Bank  of  Spain,  2019a).  In  2018, 
26.9%  of  employees  (age  15-64)  worked  on  a 
temporary  contract,  almost  twice  the  EU  average. 
A slight decrease in recent quarters (26.1% in Q3-
2019)  is  driven  by  the  declining  weight  of  fixed-
in  net  employment  growth. 
term  contracts 
Temporary contracts are widespread also in sectors 
with  less  marked  seasonality  (e.g.  education, 
health,  manufacturing) 
in  high-skilled 
occupations. 30% of all temporary contracts signed 
in  2019  were  shorter  than  one  week,  against  17% 
in 2007 (23). Very short contracts have increased in 

and 

many  sectors,  including  in  manufacturing.  The 
share  of  temporary  employees  moving  on  to  a 
permanent  contract  after  one  year  improved  in 
2018,  reaching  17.4%  against  14.6%  in  2017,  but 
remains 8.6 pps below the EU average. 

Graph 4.3.1:  Key labour market indicators 

(1) NEET: young people neither in employment, nor in 
education or training. 
Source: Eurostat -LFS (lfsi_emp_a, une_rt_a, edat_lfse_20, 
une_ltu_a). 

The  share  of  public  employees  on  temporary 
contracts  continues  to  increase  despite  the 
commitment  to  reduce  it.  In  Q4-2019,  27.8%  of 
public sector employees had a temporary contract, 
1.5 pps  more  than  in  Q4-2018  and  about  8 pps 
more than in 2014 (INE data). The current share is 
very  far  from  the  8%  target  set  for  the  end  of  the 
2020  recruitment  competitions  (see  European 
Commission, 
recruitment 
competitions  authorised  during  the  last  two  years, 
at  both  central  and  regional  level,  are  not  yet 
sufficient to reduce  fixed-term employment in  the 
public sector. 181,700 nationwide permanent posts 
were  authorised  in  2017-2019  by  both  the  central 
and regional administrations. Priority was given to 
the  health  and  education  sectors  managed  by  the 
regions  (see  Sections  4.3.2  and  4.3.4).  Exams  for 
67,200  of  those  posts  had  been  organised  by 
November 2019, with 24,500 posts already filled. 

2019a). 

The 

(23)  Measures to discourage the use of very short contracts are 
not proving effective. In January 2019 the premium in the 

social  security  charge  for  common  contingencies  of 
contracts lasting 5 days or less rose from 36% to 40%. 

46 

626466687072747678800102030405060010203040506070809101112131415161718%%Activity rate 20-64 (rhs)Unemployment rate 15-74 (lhs)Long-term unemployment rate 15-74 (lhs)Youth unemployment rate 15-24 (lhs)NEET rate 15-24 (lhs) 
                                                           
      
                                                                                   
4.3. Labour market, education and social policies 

Box 4.3.1: Monitoring performance in light of the European Pillar of Social Rights 

The European Pillar of Social Rights is a compass  for a renewed  process of upward convergence towards 
better working and living conditions in the European Union. It sets out twenty essential principles and rights 
in  the  areas  of  equal  opportunities  and  access  to  the  labour  market;  fair  working  conditions;  and  social 
protection and inclusion. In these domains, the UN Sustainable Development Goals (SDGs) largely overlap 
with the principles of the European Pillar of Social Rights and they partly complement them, helping ensure 
that economic and social policies go hand in hand with Europe’s 2050 climate-neutrality objective.  

largely  below 

labour  market 

The  Social  Scoreboard  supporting  the  European 
Pillar  of  Social  Rights  points  to  a  number  of 
employment  and  social  challenges  in  Spain.  Strong 
economic  growth  has  contributed  to  a  faster  than 
average  drop  in  overall  and  long-term  unemployment 
rates  in  recent  years.  However,  the  employment  rate 
the  EU  average.  Given 
remains 
stagnant 
significant 
incomes and the limited redistributive capacity of social 
transfers, income inequality is high, though decreasing. 
The  share  of  people  at  risk  of  poverty  or  social 
exclusion 
significant,  especially  among 
children, and a high incidence of in-work poverty points 
to challenges related to job quality. On the positive side, 
Spain performs better than the EU average in providing 
access  to  healthcare  and  childcare  services.  However, 
disparities  in  access  and  quality  persist  across  the 
country.  

segmentation, 

remains 

High school drop-out rates hamper the integration of 
young  people  in  the  labour  market  and  society  in 
general.  Although  the  early  school-leaving  rate  has 
fallen in recent years, it remains the highest in the EU, 
with large regional disparities. As a result, the share of 
young-people  neither  in  employment,  nor  in  education 
or  training  (NEET)  remains  high,  despite  good  labour 
market developments overall. Moreover, low education 
levels  significantly  increase  the  risk  of  future  poverty 
and social exclusion.  

Spanish legislation reflects efforts to promote gender equality. Spain is ranked among the most advanced 
countries in terms of equal legal rights for men and women (World Bank, 2019a). Measures adopted at the 
beginning  of  2019  promote  equal  rights  in  the  workplace.  All  employers  are  required  to  keep  mandatory 
records of the average wages of men and women, while companies with more than 50 employees (against 
250 before) have to negotiate equality plans with workers’ representatives. Parental leave of 16 weeks  for 
each parent will replace the maternity and paternity leaves by 2021. In the meantime, the parent other than 
biological mothers will be entitled to eight weeks’ leave in 2019 (it was five in 2018) and 12 weeks in 2020, 
to reach 16 in 2021.  

Institutional  factors  and  established  practices 
may  explain  the  widespread  use  of  temporary 
contracts.  The  weight  of  seasonal  activities  in 
employment only explains around 10% of the gap 
to  the  EU  average  in  the  use  of  temporary 
contracts  (see  European  Commission,  2018a).  In 
addition, the wide array of justifications for using a 

the 

related  hiring 
temporary  contract  and 
incentives provide multiple opportunities for short-
term  hiring.  There  have  been  proposals  to  reduce 
the  types  of  contract  to  just  three  (open-ended, 
temporary  and  apprenticeship  contracts),  but  the 
caretaker  nature  of  the  government  has  prevented 
action.  The  difference  in  severance  pay  between 

47 

 
4.3. Labour market, education and social policies 

open-ended  contract)  and  a  relatively  high  risk  of 
downward mobility (Eurofound, 2019b). A gradual 
introduction  of  an  individual  and  transferable 
social  security  account  was  under  study (26),  with 
the aim of addressing the negative impact of career 
breaks and frequent job changes on social security 
entitlements. 

of 

abuse 

temporary 

temporary  contracts 

Labour  inspectorates  stepped  up  the  fight 
against 
contracts. 
Inspections  within  the  framework  of  the  2018-
2020 Plan  for  Decent  Work  led  to  the  conversion 
into 
of  around  273,000 
permanent  contracts  between  August  2018  and 
October 2019, 97% more than in the previous 15-
month  period.  Labour  inspections  also  led  to  an 
extension in working time for around 66,000 part-
time  contracts  from  August  2018  to  October 
2019 (27)  (111%  more  than  in  the  previous  15-
month period) and detected around 34,800 cases of 
times  more). 
bogus 
However, 
these 
increased controls on the overall use of temporary 
contracts  is  not  yet  visible.  The  incidence  of 
undeclared  work  seems  comparatively  high  in 
Spain,  as  41%  of  respondents  to  Eurobarometer 
personally  know  people  in  that  situation,  8 pps 
above the EU average (Eurobarometer, 2020). 

the  disincentive 

self-employment 

impact  of 

(six 

The  minimum  wage  will  further  increase  in 
2020, though  the  impact  on  employment  of  the 
2019 hike has not yet been quantified. When the 
22.3% increase in the minimum wage entered into 
force  in  January  2019,  employment  was  still 
reported  to  be  growing  robustly,  including  for 
youth and the low skilled, as well as in the regions 
where  the  minimum  wage  covers  more  workers. 
Employment  growth began slowing down in  mid-
2019,  but  there  is  still  not  enough  evidence  to 
assess  which  part  of  that  slowdown  is  due  to  the 
minimum  wage  increase.  Social  security  data 
suggest some impact on specific groups, regions or 
sectors (BBVA Research, 2020), but more data are 
still  needed  to  carry  out  an  in-depth  evaluation. 

(26)  The so-called ‘Austrian backpack’ employment fund is an 
individual  (across  jobs)  transferable  fund  financed  with  a 
payroll  tax.  The  worker  can  use  the  fund  if  he  or  she 
becomes unemployed or retires.  

(27)  A new regulation obliging employers to record employee’s 
daily  working  hours  is  reinforcing  the  activity  of  labour 
inspectorates in this field. The main purpose is to monitor 
compliance  with  the  rules  on  overtime.  18%  of  the 
companies  investigated  between  May  and  October  2019 
committed infringements in this area. 

open-ended and temporary contracts (24) could also 
encourage employers to hire workers on temporary 
contracts  (Jimeno,  J.F.,  et  al.,  2015).  While 
employers’  perception  of  the  long  duration  and 
uncertain  outcome  of  court  proceedings  is  often 
quoted  as  a  factor  explaining  their  preference  to 
hire  on 
temporary  contracts,  data  on  court 
proceedings  in  dismissal  cases  involving  open-
ended  contracts  shows  that  they  tend  to  be 
noticeably shorter than in other EU countries (196 
days in 2018, against an EU average of 314 days, 
CEPEJ).  Established  recruitment  practices  may 
contribute  to  widespread  temporary  recruitment. 
Employers  often  outsource  non-core  functions 
through  multiservice  companies (25) and make  use 
of temporary work agencies to fill their vacancies. 
Both  of  these  tend  to  use  short-term  contracts, 
often  of  very  short  duration.  Working  conditions 
and  the  functioning  of  collective  bargaining  in 
multiservice  companies  have  been  repeatedly 
brought  to  court  (Observatorio  de  la  Negociación 
Colectiva, 2018; UGT, 2019). 

Involuntary  part-time  work  and  the  incidence 
of  bogus  self-employment  among  platform 
workers  are  other  areas  of  concern.  Although 
the share of part time workers in total employment 
is  below  the  EU  average,  more  than  half  (55.8%) 
of them would prefer to work longer hours (24.8% 
in EU). The platform economy is creating new job 
opportunities,  but 
the  working  conditions  of 
platform  workers  need  careful  monitoring.  The 
employment  status  of  some  of  them  (i.e.  whether 
they  should  be  considered  as  employees  or  self-
employed) is under discussion before the courts. 

Labour  market  segmentation  weighs  on  social 
cohesion. Temporary workers in Spain face  much 
higher  risks  of  in-work  poverty  than  those  on 
permanent contracts, and to a larger extent than in 
other  EU  countries  (see  Section 4.3.3).  Evidence 
also  shows  that,  when  compared  to  other  EU 
countries,  Spanish  workers  at  the  bottom  of  the 
labour  market  structure  (i.e.,  unemployed  or 
temporary  workers)  have 
limited  options  for 
upward  mobility  (e.g.,  from  a  fixed-term  to  an 

(24)  The severance pay for open-ended contracts varies between 
20  (fair  dismissals)  and  33  (unfair  dismissals)  days  of 
salary per year worked. Temporary workers receive a fixed 
payment equivalent to 12 days of salary per year worked. 
(25)  Multiservice  companies  offer  staff  services  to  client 
companies across a wide variety of sectors (e.g., cleaning, 
security, transport, etc.). 

48 

                                                           
                                                           
4.3. Labour market, education and social policies 

2016) (29)  should  be  helping  reduce  the  gender 
pension gap. 

The employment rate of people with disabilities 
remains  low.  In  2017,  the  employment  rate  of 
persons  with  disabilities  decreased  to  40.1%,  and 
the  gap  with  that  of  persons  without  disabilities 
the  EU 
widened  to  27.5 pps  (3.3 pps  above 
average), despite the fact that nearly half the total 
amount  of  hiring  incentives  is  targeted  at  persons 
with  disabilities.  In  November  2019,  the  wage 
subsidy  in  special  employment  centres  for  people 
the 
with  disabilities  was  raised 
minimum wage (up from 50%).  

to  55%  of 

The  Spanish 
is  attracting 
labour  market 
workers  from  abroad  again.  After  four  years  of 
negative  flows,  net  migration  turned  positive  in 
2016  and  reached  332,000  people 
in  2018 
(Eurostat).  In  2018,  the  employment  rate  (20-64) 
of non-EU born increased to 63.4%, 9.2 pps more 
than  in  2014.  The  gap  with  native-born  people 
decreased to 4.1 pps, among the lowest in the EU. 
In  2018,  2.5 million  Spaniards 
lived  abroad, 
1.1 million  more  than  in  2009.  The  ‘Return  to 
Spain  Plan’  launched  in  March  2019  aims  at 
encouraging  those  Spaniards  to  return  to  Spain, 
although it has limited resources so far.  

Digital transformation could have stronger than 
average potential impact in Spain. According to 
OECD  (2019d),  22%  of  jobs  in  Spain  are  at  high 
risk  of  automation  (OECD  average,  14%)  and 
another  30%  are  at  risk  of  significant  change 
(OECD  average,  32%).  Robot  density  in  the 
manufacturing  industry  is  comparatively  high  but 
remained  static  in  2012-2016  (IFR,  2017).  At  the 
same  time,  the  digital  transformation  is  creating 
new job opportunities. The collaborative economy 
is  also  developing  (see  Section  4.4.1).  Estimates 
indicate that 2.6% of the adult population (16-74) 
in  Spain  provided  labour  services  through  online 
platforms  as  their  main  job  activity  in  2018 
(González  Vázquez  et  al.,  2019).  Digital 
transformation  may  have  implications  for  labour 
markets  and  social  protection  systems,  including 
rising inequality, job displacement and rising skill 
Initial 
(European  Commission,  2019c). 
gaps 

Negotiated  wages  signed  in  2019  increased  by 
2.3%  on  average,  in  line  with  the  2018-2020 
collective inter-professional agreement. In January 
2020, the government  further raised the  minimum 
wage by 5.6% (up to €950 in 14 instalments) as a 
result of an agreement with social partners. This is 
estimated 
to 
approximately  60%  of  the  median  gross  monthly 
earnings  for  a  full  time  worker  in  2020.  In  2018, 
only  three  Member  States,  with  much  lower 
unemployment  rates,  had  a  minimum  wage  above 
this  threshold.  The  Government  plans  further 
increases  of  the  minimum  wage,  up  to  an  amount 
equivalent to 60% of mean wage by 2023.  

the  minimum  wage 

to  bring 

partly 

The  activity  rate  (age  20-64)  has  been  edging 
down  in  Spain  since  2016,  diverging  from  the 
trend in the rest of Europe. In 2018, the activity 
rate  in  Spain  was  in  line  with  the  EU  average. 
However,  while  in  other  EU  countries  activity 
rates  among  prime  age  adults  (25-49)  continue  to 
increase, 
female 
participation,  they  have  stagnated  in  Spain  since 
2013  and  slightly  declined  after  2016,  for  both 
men  and  women.  Only  the  activity  rate  of  older 
workers  (50-64)  continues  to  increase,  but  at  a 
slower  pace  than  in  the  EU.  Recent  pension 
reforms  are  slowly  contributing  to  push  the 
average  effective  retirement  age  upwards  (64.4 
years in 2019, compared to 63.7 in 2009).  

thanks 

rising 

to 

The  Spanish  labour  market  still  has  sizeable 
gender  gaps.  In  2018,  the  employment  rate  of 
women (61.0%) was 12.1 pps below that of men, a 
gap  slightly  above  the  EU  average  (11.6 pps). 
Similarly,  the  female  unemployment  rate  was 
3.3 pps  higher  than  the  male  one  (compared  to 
0.5 pps  gap  in  the  EU).  At  the  same  time,  the 
unadjusted gender pay gap in Spain was 15.1% in 
2018, 0.9 pps below the EU average. Women have 
lower  retirement  pensions  than  men  (-35%  in 
2019),  although  the  gap  is  smaller  for  new 
pensioners  (-21%)  who  tend  to  have  better  work 
histories (28). Measures such as the increase in the 
minimum 
level  of  contributory  pensions,  the 
recognition  of  pension  rights  for  career  breaks 
linked  to  maternity  (as  from  2012)  and  the 
complement  for  two  or  more  children  (as  from 

(28)  Figures  taken  from  the  Spanish  Social  Security  Statistics, 
September 2019. In 2016, it was 3.4 pps lower than the EU 
average (Pension adequacy report 2018). 

(29)  In its judgment of 12 December 2019 in case C-450/18, the 
this  measure 
European  Court  of  Justice  ruled 
constitutes  direct  discrimination  on  grounds  of  sex  and  is 
prohibited by EU law. 

that 

49 

                                                           
                                                           
4.3. Labour market, education and social policies 

education and adult learning play a crucial role in 
facilitating smooth transitions (see Box 4.3.2). 

especially  to  attract  job  offers  for  these  groups  of 
people and facilitate the matching. 

Labour market policies 

remains 

low,  and  has 

showed (30).  Compared 

Spending  on  active  labour  market  policies 
(ALMP) 
limited 
spending  on  ALMP 
effectiveness.  Average 
measures  per  unemployed  person  was  56%  lower 
in  2017  than  before  the  crisis  (2007).  Hiring 
incentives  account  for  around  40%  of 
total 
spending  on  ALMP  (AIReF,  2019b),  under 
limited 
multiple  forms.  Past  evidence  shows 
effects  of  these  subsidies  for  promoting  quality 
employment, as the evaluation of the ‘Contract for 
support  to  entrepreneurs’,  which  was  abolished  in 
to 
December  2018, 
previous  plans,  the  two  new  plans  for  the  youth 
and the long-term unemployed (see below) include 
quantitative  goals  and  put  greater  focus  on 
monitoring  and  evaluation (31).  However,  hiring 
subsidies  still  absorb  a  large  share  of  the  budget 
allocated to the plans. Both plans may benefit from 
the  EU  Mutual  Assistance  Programme  and  the 
upcoming  development  of  the  profiling  tool.  The 
forthcoming  spending  review  of  hiring  incentives 
due by mid-2020 may provide helpful inputs for a 
comprehensive  reform  of 
the  system.  AIReF 
(2019a)  also  highlighted  gaps  in  the  information 
system  on  ALMP,  an  inadequate  coordination 
between  the  central  government  and  the  regions, 
and  variations  in  performance  and  efficiency 
across regions. 

Efforts  to  improve  public  employment  services 
continue.  The  effectiveness  of  active 
labour 
market policies largely relies on the capacity of the 
regional  public  employment  services  (PES).  In 
2018,  the  share  of  job  finders  who  found  their 
present  job  with  PES  involvement  remained  at 
3.0%,  among  the  lowest  in  the  EU.  Up  to  3,000 
new  caseworkers  are  being  recruited  by  the 
regional  PES  to  assist  the  implementation  of  the 
plans for the young and the long-term unemployed, 

(30)  This type of subsidised permanent contract was introduced 
in  2012  and  abolished  six  years  later,  in  the  light  of 
evidence that the contracts used to be terminated as soon as 
the social security’s rebates came to an end. 

(31)  With the support of the Commission through the SRSP, the 
World  Bank  is  providing  technical  assistance  to  develop 
indicators  and  methodology  to  monitor  each  of  the 
measures contained in the plans.  

2019-2021  Action  Plan 

Policies  to  improve  young  people’s  integration 
into the labour market are making progress. A 
new 
for  Youth 
Employment was launched in December 2018. It is 
designed to sustain the positive trends in the labour 
market  integration  of  young  people,  with  a  focus 
on  digital  skills  and  adaptation  to  technological 
change.  30%  of  young  people  classed  as  "not  in 
education,  employment,  or  training"  (‘NEET’) 
in 
were  registered 
2018 (32),  but  those  who  are  inactive,  low  skilled 
and  most  vulnerable  are  less  likely  to  register. 
17.9%  of  those  leaving  the  Youth  Guarantee  in 
2018 took up an offer within the four-month target, 
a  substantial  improvement  compared  to  2017 
(8.6%).  

the  Youth  Guarantee 

in 

A  new  plan  increases  support  to  the  long-term 
unemployed,  but  may  discourage  activation  of 
older  unemployed  people.  The  2019-2021 
ReincorporaT  plan  provides  additional  resources 
to  the  PES  to  make  them  more  accessible  to  the 
long-term  unemployed  and  improve  identification 
of  their  needs.  In  March  2019,  the  age  threshold 
for  eligibility  for  the  unemployment  assistance 
scheme  targeted  on older unemployed people  was 
reduced  from  55  to  52  years,  its  duration  was 
extended  until  the  recipient’s  legal  retirement  age 
and  more  generous  conditions  were  granted (33). 
These  new  features  may  create  disincentives  for 
the  people  concerned  to  go  back  to  work.  At  the 
same  time,  the  activation  components  of  previous 
non-contributory  unemployment  benefits  also 
lacked effectiveness (34). 

the 

Low  contributions  hamper  social  security 
for 
coverage 
self-employed,  despite 
improved 
levels  of  formal  protection.  The 
registered  self-employed 
average  number  of 
people rose by 0.6% in 2019, compared to 1.1% in 
2018.  The  number  of  self-employed  has  been 
increasing  since  2014,  but  more  slowly  than  the 

(32)  The 2018 figure is a long way below the 56% recorded in 

2017, owing to changes in the data processing. 

(33)  The  social  security  contribution  to  the  pension  scheme 
increased  by  53%,  while  the  means-testing  is  now 
individual rather than applied to households 
Independent  Fiscal  Authority 

the 
PREPARA  programme  (concluded  in  2018)  did  not  make 
its recipients any more likely to find a job (AIReF, 2019a). 

(34)  The 

found 

that 

50 

                                                           
                                                           
4.3. Labour market, education and social policies 

streamlining types of contracts. A review of some 
types  of  contract  resolution  is  also  envisaged.  It 
will  be  important  that  any  new  measure  only  be 
taken  after  a  careful  evaluation  of  its  potential 
impact  and  that  the  achievements  of  the  past 
reforms be preserved.  

4.3.2.  EDUCATION AND SKILLS 

Despite  improvements,  Spain  still  lags  behind 
on  several  key  education  and  skills  indicators. 
Early  school  leaving  rates  (ESL)  and  grade 
repetition  rates  remain  very  high,  particularly  in 
some  regions,  which  results  in  a  high  number  of 
low-skilled  people  entering  the  labour  market. 
School-to-work transition remains difficult, as job 
opportunities are limited and often of low quality. 
While  Spain  has  a  high  share  of  workers  and 
jobseekers with low educational attainment, it also 
records  a  higher-than-average  share  with  tertiary 
education.  However,  many 
tertiary  graduates 
appear  to  be  employed  in  occupations  that  do  not 
require  tertiary  diplomas,  and  a  relatively  low 
share  of  them  specialise  in  STEM  careers.  Low 
enrolment  rates  in  upper  secondary  vocational 
education and training (VET), low participation of 
the low skilled in adult learning and limited digital 
skills are further weaknesses. 

Participation  in  early  childhood  education  and 
care is high. The participation rate for those below 
3  years-old  has  increased  substantially  in  the  last 
ten  years  (50.5%  in  2018,  against  38%  in  2008) 
and  is  above  the  EU  average  (35.1%  in  2018). 
Between  3  years  old  and  the  starting  age  of 
compulsory  education,  almost  all  children  are 
schooling (97.1% in 2017), above the EU average 
too  (93.3%).  Participation  varies  significantly  at 
regional  level  in  the  early  age  groups,  ranging 
from  90%  to  100%  for  3-year-olds  (with  one 
exception) and from 15% to 55% for children up to 
2  years  (Ministry  of  Education  and  Vocational 
Training, 2019b). In 2019, the central government 
put  forward  an  8-year  plan,  in  consultation  with 
the  regions,  to  extend  early  childhood  education 
and  care  to  all  children  under  the  official  school 
age  of  6.  Some  regions  plan  to  use  subsidies  for 
private  schools  (La  Rioja),  others  to  give  direct 
grants to families (Andalusia) and others to invest 
in public schools and remove tuition fees.  

the 

social 

number  of  employees.  In  an  effort  to  increase  the 
level  of  protection  for  the  self-employed  to  that 
enjoyed  by  employees, 
security 
contribution rate  for the self-employed  was raised 
by  1.25%  in  January  2019.  This  allowed  for  the 
coverage  for  the  self-employed  to  be  extended  to 
all  contingencies,  as  well  as  cessation  of  activity. 
However,  most  self-employed  people  still  opt  for 
the  lowest  contribution  rates (35),  which  does  not 
allow  them  to  build  entitlement  to  adequate 
pensions and unemployment benefits and weakens 
the  financial  sustainability  of  the  scheme.  At  the 
end  of  2019,  the  average  retirement  pension  of  a 
self-employed person  was 41% lower than that of 
an employee under the general system.  

Labour market institutions guarantee adequate 
social  dialogue.  The  tripartite  roundtables  (see 
European Commission, 2019a) discussing possible 
reforms  to  address  segmentation  (e.g.  types  of 
contracts,  collective  bargaining,  outsourcing,  etc.) 
have  been  on  hold  since  March  2019.  The  2018-
2020 
inter-professional  agreement  provides  a 
framework  for  collective  bargaining  at  sectoral 
level.  Firm-level  agreements  cover  around  6%  of 
employees.  

The new government has announced changes to 
labour  market  regulation.  The  labour  market 
reforms  adopted  in  2012-2013  in  response  to  the 
crisis  are  acknowledged 
to  have  played  an 
important role in promoting the job-rich economic 
recovery  that  started  in  2014  (IMF,  2020).  The 
new  governing  coalition  has  pledged  changes  to 
labour  market  regulation  with  the  stated  aims  to 
restore  workers'  bargaining  power  and  overcome 
labour  market  segmentation.  Changes 
the 
collective  bargaining  system  would  include  the 
abolition  of  the  one-year  limit  to  the  automatic 
extension  of  expired  agreements  (‘ultra-activity’) 
and  the  reinstatement  of  the  priority  of  sectoral 
collective  bargaining  over  firm-level  agreements. 
Other,  still  unspecified  measures  would  aim  to 
promote permanent contracts as the prevalent form 
of contract, including by strengthening the fight of 
abuse  of  temporary  and  part-time  contracts  and 

to 

(35)  85.6% of self-employed people opt to pay contributions for 
the  minimum  base,  while  only  4.8%  opt  for  more  than 
twice this amount (ATA, 2019). Plans have been discussed 
to align contributions with income. 

51 

                                                           
4.3. Labour market, education and social policies 

Box 4.3.2: How vocational education and training can contribute to address skills needs 

Spain has one of the lowest scores in the European Skills Index (Cedefop, 2018), with negative impact 
on  productivity  and  the  innovation  capacity  of  the  economy.  Spain’s  low  score  reflects  multiple 
challenges  such  as  high  shares  of  low-skilled  and  early  school  leavers  in  the  population;  pupils’ 
underachievement  in  reading,  maths  and  science;  low  participation  in  vocational  education  and  training 
(VET);  difficult  transitions  to  work;  skills  under-utilisation  (in  particular  caused  by  high  long  term 
unemployment  and  underemployment  of  part-time  workers)  and  skills  mismatches (1).  Low  skills  and 
qualification  mismatches  are  major  drivers  of  Spain's  labour  productivity  gap  to  the  EU  average  (see 
Section 4.4).  

Skills  shortages  in  Spain  are  concentrated  on  medium  to  high-level  technical  occupations.  Cedefop 
(2016)  identified  the  main  occupations  in  which  employers  currently  face  difficulties  finding  a  suitable 
candidate:  ICT  specialists;  medium  to  high-level  professionals  in  engineering,  management,  sales  and 
shipping;  as  well  as  medical  doctors  and  other  health  related  professionals.  In  the  future,  technicians  and 
associate  professionals  and  service  and  sales  workers  are  the  groups  where  shortages  are  expected  to 
increase  most (2). VET systems have a role to play to meet the increasing demand for technical skills that 
relevant  to  improving  the  capacity  of  Spanish  firms  to  innovate  and  absorb  innovation.  According  to 
Cedefop  (2019),  the  demand  for  highly-  qualified  workers  (47%  of  total  job  openings  in  2016-2030)  and 
medium-qualified workers (37%) is expected to exceed their supply by 2030, while low-qualified workers 
will be in surplus. A system to track skills is under development in Spain, in cooperation with the business 
sector. The Observatory of the National Institute of Qualifications, an agency dependent on the Ministry of 
Education and Vocational Training, provides information that is the basis for the two professional training 
subsystems (education and employment). In addition, the Occupations Observatory, managed by the Labour 
Ministry,  monitors  current  and  future  skills  needs  in  the  economy,  by  region,  province,  and  sectors.  The 
Public  Employment  Service  is  producing  a  methodology  to  detect  training  needs  in  cooperation  with  the 
regions,  social  partners  and  national  reference  centres (3).  Some  regions  have  begun  to  use  labour  market 
intelligence (e.g., big data) to shape their formal education provision (Souto-Otero, 2019). These efforts  are 
feeding into a comprehensive update of the national catalogue of professional qualification (4). 

Employment  rates  of  VET  graduates,  which  are  higher  than  rates  for  those  holding  a  general 
education  diploma,  are  improving.  In  2018,  the  employment  penalty (5)  of  low-skilled  graduates  (lower 
secondary  school  -  ISCED  2)  was  lower  than  on  average  in  the  EU  (see  Graph 4.3.2.a),  suggesting  that 
Spain’s  economy  still  provides  low  skilled  jobs  to  a  greater  extent  than  other  countries.  At  higher  levels, 
there may be shortages of some specific skills but overall the employment premium of tertiary graduates is 
higher than on average in the EU (see Graph 4.3.2.b). At upper secondary level, the employment premium of 
VET  graduates  is  higher  than  on  average  in  the  EU.  Employment  rates  of  VET  upper-secondary  students 
who  graduated  more  than  3  years  ago  reached  77.7%  in  2018  (against  73.8%  in  2015)  and  were  7.1 pps 
higher  than  for  those  graduating  from  general  education.  While  similar  data  are  not  available  for  tertiary 
VET students (ISCED level 5), Adecco (2018) identified that 42.4% of job offers (6) target people with VET 
degrees  (17.8%  on  intermediate  level  and  24.4%  on  tertiary  level),  4 pps  more  than  job  offers  targeting 
university graduates. According to the same source, the increase in job offers for graduates in VET in 2019 
compared to 2018 increased by 8 points. 

Participation in VET programmes remains low at upper-secondary level, but is high at tertiary level. 
Participation  in  basic  (upper-secondary)  VET  programmes  reached  7.9%  of  students  aged  15-16  (MEFP, 
2018) in their fourth year of existence (2017-18). The success rate of this programme targeted at students at 
risk  of  leaving  education  remains  low  (only  around  50%  of  enrolled  students  obtain  a  diploma),  but  is 
improving  and  contributes  to  reducing  early  school  leaving.  Enrolment  in  intermediate  (upper-secondary) 
VET  programmes  increased  by  more  than  70%  in  10  years,  but  remains  comparatively  low  (35.3%  of 
students in upper secondary education in 2017, 12.5 pps below the EU average). By contrast, enrolment in 
tertiary  VET  programmes  is  high  (21%  of  post-secondary  students,  against  13%  in  average  in  the  EU). 
Higher VET are short-cycle tertiary programmes that lead to an advanced technician qualification and offer 
a  pathway  towards  bachelor  programmes.  These  programmes  also  attract  bachelor  graduates  and  young 
adults (27% of tertiary VET students are older than 25). 

52 

4.3. Labour market, education and social policies 

Graph 4.3.2.a:  Employment rates of graduates (20-34) 

Graph 4.3.2.b:  Pupils enrolled in dual VET (as% of total 

3+ years after graduation, and gap to 
average per level of education, 2018 

pupils in upper-secondary VET, 2017) 

Source: Eurostat [edat_lfse_24] 

Source: Eurostat [educ_uoe_enrs04] 

Despite  some  improvements,  VET  is  provided  mostly  outside  the  work  environment.  According  to 
Eurostat, in 2017 only 2.7% of upper-secondary VET in Spain were enrolled in dual programmes, in which 
at  least  33%  of  teaching  hours  are  work-based  (against  the  compulsory  20%  in  the  remaining  VET 
programmes). This enrolment rate is one of the lowest in the EU and well below the EU average (26.6%, see 
Graph 4.3.2.b). A high share of micro-enterprises, combined with a high administrative burden, are seen as 
factors hindering the implementation of work-based VET programmes.  

VET  is  not  a  sufficiently  valued  education  pathway,  despite  positive  outcomes  in  terms  of 
employability. Youth unemployment reduces from 32.0% (on average) to 7.3% when young people have a 
degree  in  Vocational  Training.  The  Cedefop  opinion  survey  on  VET  conducted  in  Spain  (Fundae, 
2018) among  2,215  respondents  aged  15-65  provides  insight  into  the  low  attractiveness  of  VET.  68%  of 
respondents think that VET is mainly meant for low performing students; 63% believe that it is easier to get 
a qualification in VET than in general programmes; and only 54% think that VET leads to well paid jobs 
(compared  to  an  EU  average  of  61%).  The  negative  perception  of  VET  has  a  bearing  on  Spain’s  skill 
polarisation, with relatively large pools of low- and high-educated people and a small share of people with 
upper secondary education. Lack of information on the opportunities offered by VET programmes in terms 
of employment and pathways to further education, may also contribute to low participation. 

A  new  strategy  aims  to  modernise  the  VET  system  in  Spain  to  boost  participation,  increase 
educational attainment and address technical skills gaps. The 2019-2022 Strategic Plan for VET adopted 
in November 2019 aims at making VET more responsive to the needs of the productive system and boost 
participation in VET programmes. The Plan commits to expanding the range of courses and the number of 
places  (particularly  in  digitisation  and  sustainability),  strengthening  the  system  of  distance  learning  and 
boosting  cooperation  with  businesses,  which  is  essential  to  increase  the  relevance  and  quality  of  VET 
programmes.    A  system  to  track  VET  graduates’  transition  into  work  similar  to  the  one  existing  for 
university graduates is being implemented. 

The skills pool needs to be adapted to the digital and green transition of the economy: 

  Digital  skills  and  robotisation.  The  promotion  of  digital  skills  training  is  needed  in  all  sectors,  in  a 
context of limited basic ICT skills (57% of individuals aged 16-74) and low share of ICT specialists in 
the  workforce  (3.2%  of  total  employment,  but  only  1.0%  of  female  employment).  There  will  be  an 
increased  demand  for  higher-skilled  workers  in  the  manufacturing  sector,  including  both  those  with  a 
more traditional engineering profile and others with newer skills sets – notably designers, industrial data 
scientists, big data statisticians and mathematicians and data security analysts (Eurofound, 2019b). The 
government plans to create 40 new degrees (at VET and university level) in the field of ICT. The 2019-
2022 VET Strategy also proposes including a module on ‘applied digitisation in the productive sector’ in 
all  VET  programmes  at  all  levels  (basic,  intermediate  and  high).  It  also  aims  to  design  new  VET 
programmes or modify existing ones to ensure that the needs of the new digital sectors are covered in 
collaboration with the most important digital sector associations in Spain. 

53 

-100-50050100-25-15-551525EU28ESLow skilled(ISCED 0-2)Middle skilled -general (ISCED 3-4)Middle skilled - VET(ISCED 3-4)High skilled(ISCED 5-8 )Total (rhs)0%10%20%30%40%50%60%70%80%90%100%Dual VET % of total upper secondary VETEU average Dual VET % 
 
 
 
 
4.3. Labour market, education and social policies 

  Transition towards a greener economy. Spain is one of the EU countries that could benefit the most 
from  employment  gains  arising  from  climate  action.  Skills  requirements  and  education  levels  are 
increasing  faster  in  the  green  economy  than  in  the  economy  overall  (European  Commission,  2019b). 
Low-carbon transition is expected to mitigate job polarisation by creating middle-skilled, middle-paying 
jobs in Spain, especially in the construction sector (Eurofound, 2019a).  

(1)  Spain’s poor ranking on skills mismatch is both due to a high share of tertiary graduates working in occupations below 
their  skills  level  (over-qualification),  and  to  a  high  share  of  employees  whose  educational  attainment  does  not 
correspond to the one required for the occupation they are employed in (qualification mismatch). 

(2)  Cedefop (2019) also identifies the occupations expected to show the most substantial increase in employment: legal, 

social, cultural and related associate professionals, customer service clerks and health associate professionals.  

(3)  The  national  reference  centres  are  public  flagship  centres  for  VET  (including  continuing  vocational  training) in  one 

specific professional field. 13 out of the existing 37 centres nationwide were approved in 2019. 

(4)  The  changes  in  the  structure  of  the  Government,  in  January  2020,  have  integrated,  under  the  supervision  of  the 
Ministry of Education and Vocational Training, all training offers based on the National Qualifications Catalogue. 
(5)  Employment  penalty/premium  is  defined  as  the  gap  in  employment  rate  of  graduates  of  a  given  level  of  education 

compared to all graduates, three or more years after graduation. 

(6)  Job offers published on Spain’s major job portal (Infoempleo – approximately 1.2 million vacancies in 2018). 

Spain  still  has  the  highest  rate  of  early  leavers 
from education and training in the EU. The rate 
reached 17.9% in 2018, well above the EU average 
(10.6%).  Only  two  regions  (the  Basque  Country 
and  Cantabria)  recorded  a  rate  below  the  EU 
average. The share of early school leavers has been 
declining  over  the  past  decade,  but  at  a  slowing 
pace in the last three years, as it even rose in 7 out 
of  19  regions  in  2018.  These  rates  are  especially 
high for students with disabilities and non-EU born 
(European  Commission,  2019a  and  2009l).  €80 
million  were allocated annually in 2018 and 2019 
to a territorial cooperation programme designed to 
reduce and prevent  failure at  school and dropping 
out,  by  supporting  schools  and  students 
in 
vulnerable socio-economic situations. 

The  lack  of  medium  to  high  skilled  technicians 
may  hamper  Spain’s  innovation  capacity  and 
transition  to  a  digital  and  green  economy.  In 
level  of  skills 
2018,  Spain  showed  a  high 
polarisation (see Graph 4.3.3). Among people aged 
25-64, 40% had only low education, almost twice 
the  EU  average  (22%).  Meanwhile,  the  share  of 
highly  educated  people  reached  37%,  which  was 
also above the EU average (32%). By contrast, the 
share  of  medium-educated  people  is  one  of  the 
lowest  in  the  EU  (23%  in  Spain,  against  46%  in 
the EU). This gap also reflects the traditionally low 
enrolment 
intermediate  VET  programmes, 
despite improvements in recent years, and hampers 
the  capacity  of  the  Spanish  education  system  to 
meet  the  growing  demand  for  technical  skills, 
including those needed for the transition to a green 
and digital economy (see Box 4.3.2). In 2019, the 
share of people with an insufficient level of digital 

in 

skills (low or not at all) was slightly above the EU 
average  (43%  in  Spain,  against  42%  in  the  EU) 
(European  Commission,  2019j  and  2020c).  Spain 
also lags behind in language skills. In 2016, 45.8% 
of adults  self-reported that they  could not  speak a 
foreign  language,  much  above  the  EU  average 
(35.4%) (Eurostat). The promotion of multi-lingual 
schools  at  primary  and  secondary  level  aims  to 
boost  language  skills,  but  their  development  and 
the  level  of  command  required  from  teachers 
varies across regions. 

in 

than 

The  levels  of  basic  skills  measured  by  the  2018 
PISA survey have worsened slightly. The scores 
of  15-year  old  Spanish  pupils  in  science  and 
mathematics  were 
the  2015 
lower 
survey (36)  (OECD,  2019f).  The  mean  score  in 
sciences fell by 10 points to 483 (EU average 489), 
while  the  mean  score  in  mathematics  fell  by  5 
points  to  481  (EU  average  493).  The  share  of 
underachieving  students  also  increased,  but  it  is 
close to the EU average (European Union, 2019m). 
Regional  differences  decreased,  though  mainly 
reflecting  a  deterioration  in  the  best  performing 
regions,  but  remained  marked  –  at  as  much  as  40 
points,  equivalent  to  one  year  of  schooling. 
Although  the  rate  of  grade  repetition  is  falling,  it 
remains  high,  with  30.6%  of  15-year-old  students 
having  repeated  at  least  one  grade  in  2018  (State 
School Council, 2019), with differences at regional 
level  being  as  high  as  over  20  pps. These  official 
records on grade repetition are broadly in line with 
the  2018  PISA  survey,  which  reveals  a  large  gap 

(36)  Results  in  reading  are  not available  for  Spain.  See  OECD 

note at https://bit.ly/2tdJhlj 

54 

 
                                                           
4.3. Labour market, education and social policies 

Job  instability  is  one  of  the  main  challenges 
faced by teachers in Spain. In 2018/2019, 28.7% 
of  teachers  worked  on  a  temporary  contract,  with 
large  regional  differences  (from  42%  in  La  Rioja 
and  the  Basque  Country  to  14%  in  Galicia).  The 
teaching workforce is also ageing rapidly, as 34% 
of schoolteachers and 44% of university professors 
are  over  50.  Regions  are  organising  competitions 
as part of the plan to reduce the share of temporary 
contracts in the public sector  to 8% by the end of 
the 2020 recruitment competitions, but the pace at 
which permanent jobs have been made available so 
far (38) is not high enough to reach the 2020 target. 
Although  the  recruitment  procedure  for  teachers 
underwent  changes  in  2018,  the  content  of  exams 
has remained unchanged since the 1990s. Plans to 
amend the access to the profession are on hold. 

Teachers  encounter  difficulties  in  using  ICT  in 
teaching.  According  to  the  2018  TALIS  survey 
(OECD,  2019c),  66%  of  teachers  with  under  5 
years of working experience felt well or very well 
prepared  for  ‘the  use  of  ICT  in  teaching’  when 
they  finished  their  studies.  When  all  teachers  are 
considered,  results  are  significantly  worse  (36%). 
15%  of 
for 
development in ICT skills for teaching.  

report  a  high  need 

teachers 

Tertiary graduates face difficulties finding jobs 
matching  their  qualifications.  Spain  has  a  share 
of tertiary graduates above the EU average (42.1% 
of people aged 30-34 in 2018, against 40.2%), but 
37.1%  of  tertiary  graduates  in  employment  had  a 
job  that  did  not  require  tertiary  diplomas  (against 
22.7%  on  EU  average).  Admittedly,  the  share  of 
tertiary  students  enrolled  in  VET  programmes  in 
Spain (20%) in 2017 was much higher than the EU 
average  (7%).  Only  23%  of  bachelor  students 
followed a STEM curriculum (science, technology, 
engineering and  mathematics), against 29% in  the 
EU  on  average.  In  addition,  among  university 
students,  only  25%  were  enrolled  at  Masters  or 
Doctorate level, much below the 34% EU average. 
According  to  the  Ministry  of  Education  and 
Vocational  Training  (2019a),  28%  of  university 
students who graduated in 2014 were not working 
in 2018, but no information is available at national 

(38)  In  2018,  23,700  permanent  jobs  were  made  available  for 
teachers  in  the  upper  secondary  level  (including  VET).  In 
2019,  22,500  permanent  posts  were  offered  in  primary 
education,  and  8,000  additional  posts 
in  secondary 
education (in some regions). 

with  other  EU  countries  (29%  in  Spain,  against 
13% on EU average). 

Graph 4.3.3:  Population (25-64) by educational attainment 

(1) Low-skilled: people with less than primary and lower 
secondary education (ISCED 0-2). Medium-skilled: people 
with upper secondary and post-secondary non-tertiary 
education (ISCED 3- 4). High-skilled: people with tertiary 
education (ISCED 5-8), including higher VET in Spain. 
Source: Eurostat, [lfsa_egaed]. 

The  performance  of  students  is  influenced  by 
their  parents’  educational  and  socioeconomic 
situation.  The  chances  of  leaving  school  early 
without  an  upper-secondary  diploma  depend  on 
parents’  educational  level,  especially  that  of  the 
mother.  Choi  and  Calero  (2019)  showed  that  the 
performance  gap  in  PISA  2015  tests  between 
students with parents with a low level of education 
(37) compared to those with at least undergraduate 
studies,  is  60  points,  equivalent  to  1.5  academic 
years.  PISA  2018  shows  that  the  impact  of  the 
socio-economic background on  maths and science 
results  is  around  the  OECD  average.  However, 
Save the Children (2019) estimates that the odds of 
grade  repetition  are  four  times  greater  among 
students of low socio-economic status than among 
those  of  high  status.  School  segregation  by 
socioeconomic  status  in  Spain  decreased  in  PISA 
2018 by comparison with PISA 2015, but remains 
high  in  certain  regions.  The  gap  between  pupils 
with  native  and  migrant  backgrounds  narrowed 
due to the deteriorating performance of the  native 
students. 

(37)  Parents  who  have  completed,  at  most,  lower  secondary 

education. 

55 

0%5%10%15%20%25%30%35%40%45%50%EU28ESLow skilled  (ISCED 0-2)Middle skilled (ISCED 3-4)High skilled (ISCED 5-8)  
                                                           
                                                           
4.3. Labour market, education and social policies 

this 

to  a 

the  validation  of 

limited  extent  only.  Firms 

low-skilled.  Adult  learning  in  Spain  faces  two 
main  challenges: 
informal 
qualifications and the provision of relevant training 
in  line  with  current  and  future  labour  market 
needs.  Public  employment 
services  provide 
professional  certification  programmes  (ISCED 
level  2,  3  or  4)  with  nationwide  validity.  Even  if 
the  provision  of  continuing  vocational  training  in 
companies  is  largely  supported  by  public  funds, 
SMEs  lack  the  collective  structures  to  identify 
their  needs  and  organise  the  relevant  training 
courses,  and  chambers  of  commerce  are  involved 
in 
in 
depopulated  areas  face  particular  difficulties  that 
could be addressed by further extending the online 
offer  of  training  and  better  sharing  of  training 
offers  across  regions.  The  impact  of  the  March 
2019  measures  to  improve  the  provision  of  adult 
learning  has  yet  to  be  assessed.  These  measures 
include  changes  in  the  procedure  to  update  the 
specialisations,  public 
catalogue  of 
funding  of  training  for  employment  and  the  state 
register  of  training  entities.  The  national  PES, 
FUNDAE and several big technological companies 
recently signed a collaboration framework to allow 
workers  to  access  free  online  training  in  digital 
skills. 

training 

4.3.3.  SOCIAL POLICY 

Job creation continues to support a reduction in 
the  share  of  people  at  risk  of  poverty  or  social 
exclusion.  In  2018  (income  year  2017),  the  share 
of  people  at-risk-of-poverty  or  social  exclusion 
(AROPE)  decreased  for  the  fourth  consecutive 
year,  to  26.1%  (see  Graph 4.4.4).  However,  the 
gap  with  the  EU  average  remains  large  (4.2 pps) 
and 
increasing.  Large  regional  disparities 
prevail,  with  much  lower  rates  in  the  northern 
regions  (e.g.  12%  in  the  Basque  Country  and 
in 
Navarre) 
Extremadura),  partly  reflecting  strong  differences 
in labour market outcomes. 

(e.g.,  45% 

the  south 

than 

in 

is 

Monetary  poverty  remained  high,  but  the 
income  of  the  poorest  improved.  The  fall  in  the 
at-risk-of-poverty  or  social  exclusion  rate  was 
mainly  due  to  the  2.1 pps  drop  in  the  share  of 
people  living  in  jobless  households  (10.7%)  in 
2018,  thanks  to  declining  unemployment.  At  the 
same  time,  severe  material  deprivation  increased 
again slightly (from 5.1% to 5.4%), as did material 

level  on  the  employment  rate  of  tertiary  VET 
graduates.  

Orientation  guidance  for  students  facing  study 
choices  may  not  sufficiently  take  account  of 
labour  market  needs.  A  recent  survey  indicates 
that  the  low  enrolment  in  STEM  degrees  may  be 
largely  due  to  lack  of  guidance  (65%  of  upper 
secondary respondents) and the perception of these 
degrees  as  being  very  challenging 
(40%) 
(DigitalES,  2019).  Educational  guidance  prior  to 
university  mainly  focuses  on  special  learning 
needs  or  language  difficulties  rather  than  on 
education  pathways  for  smooth  transition  to  the 
labour  market.  According  to  Cedefop  (Cedefop, 
2016)  there  are  shortages  in  some  high-skilled 
occupations,  notably  in  the  fields  of  ICT,  high 
value-added  manufacturing  and  management  (see 
Box 4.3.2). The most in demand university degrees 
are  Management, 
Informatics,  Engineering, 
Industrial  Engineering,  Work  Science,  and  a 
double  degree  in  Management  and  Law  (Adecco, 
2018). Spanish universities increasingly try to take 
the  needs  of  enterprises  into  account  and  to 
promote 
improve 
entrepreneurship.  However,  closer  and  more 
effective cooperation between universities and the 
business  sector  would  be  conducive  to  reducing 
skills  shortages  and  mismatches  for  university 
graduates.  

capacity 

their 

to 

in 

education 

investment 

low.  Investment 

remains 
Public 
in  education  has 
relatively 
stagnated  since  2012  at  around  4.0%  of  GDP 
(compared  to  an  EU  average  of  4.6%  in  2017), 
despite  the  plans  announced  to  raise  spending  to 
5% of GDP. However, total direct expenditure per 
full time student relative to GDP per capita is on a 
par  with 
the  EU  average  (23%).  Education 
expenditure  incurred  by  families  is  comparatively 
high  in  Spain.  In  2017,  1.6%  of  total  household 
expenditure  went  on  education  (against  1.2%  on 
EU average). At the same time, a spending review 
of  university  student  grants  (AIREF,  2019b) 
concludes  that  the  current  system  has  contributed 
to giving poorer students more equal opportunities. 

low  among 

Enrolment in adult learning is improving but is 
especially 
low-skilled  people. 
Enrolment in adult learning (over the 4 weeks prior 
to  the  survey)  in  Spain  continued  to  improve  in 
2018 (up to 10.5%), to just below the EU average 
(11.1%),  but  is  especially  low  (3.7%)  among  the 

56 

4.3. Labour market, education and social policies 

and  social  deprivation  (14.7%  to  15.1%) (39).  The 
at-risk-of-poverty rate (at 60% threshold of median 
equivalised  income)  remained  static  at  21.5%, 
4.4 pps above the EU average. However, there was 
a  significant  reduction  in  the  depth  of  poverty  as 
measured  by  the  at-risk-of-poverty  gap (40)  (from 
32.4% to 28.5%), although it remained among the 
highest in the EU. 

Graph 4.3.4:  At-risk-of-poverty or social exclusion rate and 

its components 

the  EU 

average  of  10.1 pps) 

2018,  3.4 pps  above  the  EU  average (41).  This 
share  remained  static  since  the  significant  hike 
observed in 2014 and 2015. The risk of poverty for 
workers  on  temporary  contracts  (21.3%)  is  three 
times  higher  than  that  of  permanent  workers 
(7.3%),  resulting  in  a  14.0 pps  gap  (much  wider 
than 
(see 
Graph 4.3.5).  Lone-parents  households  are  also 
highly exposed to in-work poverty (28.3%, 4.7 pps 
above the EU average), with an upward trend since 
2012. In-work poverty has increased particularly in 
households  with  a  medium 
to  high  work 
intensity (42), which  may indicate that the Spanish 
social  protection  system  is  not  doing  enough  to 
support  the  incomes  of  people  at  work,  including 
those with children. 

Graph 4.3.5:  In-work poverty rate 

Source: Eurostat, EU-SILC [ilc_peps01, ilc_li02, ilc_mddd11, 
ilc_lvhl11] 

Disposable  income  inequalities  declined,  but 
remained among the highest in the EU. In 2018, 
the  income  share  of  the  20%  richest  households 
was 6.0 times higher than that of the 20% poorest, 
down from 6.6 in 2017. This is the lowest S80/S20 
ratio since 2010, but it remains well above the EU 
average  (5.2).  While  job  creation  helped  improve 
the income of the poorest, the income share of the 
poorest  40% of  the  population,  at  19.1%  in  2018, 
remained  below  its  pre-crisis  levels  and  the  EU 
average (21.0%). 

In-work  poverty  remains  very  high  and  this 
points to poor job quality. The share of people in 
employment  at  risk  of  poverty  reached  13.0%  in 

(39)  The  material  and  social  deprivation  indicator  rate  is  the 
share of people in the total population lacking (because of 
an enforced lack) at least 5 out of the 13 selected items. 
(40)  The  at-risk-of-poverty  gap  is  the  difference  between  the 
median equivalised disposable income of people below the 
at-risk-of-poverty  threshold  and  the  threshold  itself  (60% 
of median equivalised disposable income). 

Source: Eurostat, EU-SILC [ilc_iw01, ilc_iw05, ilc_iw07, ilc_iw02] 

The  weaknesses  of  family  benefits  and  income 
guarantee  schemes  limit  the  capacity  of  social 
transfers  to  reduce  poverty.  Social  transfers 
other  than  pensions  reduced  the  overall  risk  of 
poverty in Spain by 22.9% in 2018. As flagged up 
in the Social Scoreboard, this is one of the lowest 
values in the EU, 10.3 pps below the EU average. 
The poverty-reduction effect is particularly low for 
children,  in  a  context  of  low  and  poorly  targeted 
income  support  for  families  (see  Box 4.3.3). 

(41)  These  data  refer  to  income  year  2017,  so  they  do  not  yet 
reflect the increase in the statutory minimum wage in 2018 
and 2019, designed to reduce in-work poverty. 

(42)  Households in which working age people achieve only part 
of their full time, full year potential. This category includes 
single-earner couples, and people working part time or only 
part of the year. 

57 

051015202530350506070809101112131415161718% of populationAt-risk-of-poverty-or-social-exclusion rateAt-risk-of-poverty rateSevere material deprivationPeople living in low work intensity households0510152025300506070809101112131415161718% of workersTotalTemporaryPart-time    
                                                           
 
                                                           
4.3. Labour market, education and social policies 

Contributory unemployment benefits are relatively 
effective  in  Spain  in  terms  of  coverage  and 
adequacy (43).  By  contrast,  the  non-contributory 
unemployment assistance has major shortcomings. 
77%  of  the  very  long-term  unemployed (44)  in 
Spain  receive  no  benefits  (EPA,  Q1-2019).  The 
non-contributory 
maximum 
amount 
is  €430  a 
unemployment  assistance  received 
month,  equivalent  to  less  than  half  the  statutory 
minimum wage. 

of 

the  national 

unemployment 

to  streamline 

Plans 
income 
guarantee schemes are on hold. At national level, 
non-contributory 
assistance 
remains  split  up  into  multiple  schemes  targeting 
different  groups  of  unemployed  people.  Although 
in  Royal  Decree  Law  28/2018,  the  Government 
committed  to  putting  forward  a  new  model  by 
April 2019, this reform was put on hold. The 2019-
2023  National  Strategy  to  Prevent  and  Combat 
Poverty  and  Social  Exclusion,  approved  in  March 
2019,  announced  that  a  subsistence  minimum 
income  (‘Ingreso  Mínimo  Vital’)  was 
to  be 
developed  by  2023,  possibly  taking  on  board  the 
findings  of  the  ad-hoc  report  produced  by  the 
independent  fiscal  authority  (AIReF,  2019g) (45). 
The introduction of such a scheme at national level 
may  require  changes  to  the  existing  regional 
minimum income schemes. 

the 

in  2018 

income  benefits 

European Commission Joint Research Centre, only 
20%  of  potential  beneficiaries  (according 
to 
regional eligibility criteria) were receiving regional 
(see 
minimum 
Graph 4.3.6 ).  Nationwide, 
number  of 
beneficiaries  decreased  by  7%  between  2016  and 
2018  (MSCBS,  2019),  but  trends  differ  across 
regions. Take-up seems to have improved in some 
regions  (for  instance,  the  number  of  beneficiaries 
tripled  in  the  Balearic  Islands),  while  it  fell  in 
others  (in  Andalusia,  for  instance,  the  number  of 
beneficiaries fell by 49%). The average amount of 
the  benefits  increased  by  2.9%  in  2018,  but  there 
are  still  large  regional  disparities  in  terms  of 
adequacy.  Simulations  suggest  that  the  schemes 
have a limited but varying impact on reducing the 
in  2018 
at-risk-of-poverty  gap 
nationwide, with zero impact in half of the regions 
but  a  very  significant  effect  in  others,  such  as 
Navarre,  the  Basque  Country  and  Asturias).  No 
progress  has  been  made  on  the  portability  of 
benefits across regions in 2019.  

(by  1.5 pps 

Graph 4.3.6:  Estimated coverage ratio of regional minimum 

income schemes, 2018 

The  take-up  of  regional  minimum 
income 
schemes  remains  limited.  Currently,  only  three 
Spanish regions still make the right to their means-
tested  income  support  schemes  conditional  on 
budgetary availability. However, coverage remains 
very 
to 
EUROMOD (46)  simulations  performed  by  the 

regions.  According 

in  most 

low 

(43)  Contributory  unemployment  benefits  cover  around  one  in 
three people in short-term unemployment (in line with the 
EU average). However, temporary workers face difficulties 
with completing the required qualifying period (at least 360 
days over the previous 6 years). Moreover, the duration of 
the  benefit  is  among  the  shortest  in  Europe  (European 
Commission, 2020a), between 4 and 24 months depending 
on the qualifying period. 

(44)  Those who have not had a job for 24 months or more. 
(45)  AIREF  estimates  that  the  nationwide  minimum  income 
scheme  featured  in  the  Popular  Legislative  Initiative 
submitted  to  Parliament  in  2016  would  reduce  extreme 
poverty  by  28%  and  improve  income  distribution  by  4%, 
with  an  annual  budget  impact  of  between  €7.2  and  9.8 
billion. AIREF put forward two alternatives to this scheme 
that,  according  to  their  analysis,  would  be  more  effective 
and cost less. 

(46)  EUROMOD  is  the  tax-benefit  microsimulation  model  for 
the  EU.  It  simulates  individuals'  and  households'  benefit 

(1) The estimated number of beneficiaries in small regions is 
highly dependent of the sample size in EU-SILC. In those 
cases, the estimated confidence intervals are large and 
results must be interpreted cautiously. 
Source: European Commission, Joint Research Centre, 
based on the EUROMOD model and MSCBS data. 

entitlements  and  tax  liabilities  (including  social  security 
contributions)  according  to  the  rules  applicable  in  each 
Member  State.  Simulations  are  based  on  representative 
survey  data  from  the  2017  European  Statistics  on  Income 
and  Living  Conditions  (EU-SILC)  and  cover  the  main 
elements  of  direct  taxation,  social  contributions  and  non-
contributory  benefits.  Incomes  reported  in  the  2017  EU-
SILC  refer  to  2016.  Incomes  are  uprated  to  match  the 
simulated policy year. 

58 

0102030405060708090100Castilla-La ManchaAndalucíaCeutaCanariasCataluñaC. ValencianaMurciaMadridExtremaduraGaliciaCastilla y LeónAragónBalearesCantabriaMelillaAsturiasPais VascoRiojaNavarra%National average                                                           
  
                                                                                   
4.3. Labour market, education and social policies 

Box 4.3.3: Child poverty in Spain 

Children in Spain face one of the highest risk of poverty or social exclusion in the EU, although it has 
started  to  decline.  In  2018,  29.5%  of  children  (0-17  years)  in  Spain  were  at-risk-of-poverty  or  social 
exclusion,  6.3 pps  less  than  in  2014  but  still  5.5 pps  above  the  EU  average.  Monetary  poverty  affects 
especially children with a migrant background (49.2%) or lone parent households (42.9%).  

Despite  very  low  and  decreasing  fertility  rates,  Spain  is  the  country  providing  the  lowest  family 
benefits in the EU. Public spending on family benefits in Spain represented 1.2% of GDP in 2017, half of 
the EU average (2.3%) (Eurostat, ESSPROS). Family benefits come to just €31 PPS per month per child, ten 
times  less  than  the  best  performer  (Graph 4.3.7.a) (1).  This  is  equivalent,  on  average,  to  less  than  1%  of 
equivalised  household  disposable  income  in  Spain.  Even  when  other  benefits  are  taken  into  account,  the 
overall impact of social transfers (excluding pensions) in reducing child poverty in Spain is the lowest in the 
EU (18%, compared to 42% on EU average).  

Graph 4.3.7.a:  Average  family benefits per  

Graph 4.3.7.b:  Children support in 2019 from taxes and 

child (PPPs/month) – 2019 

benefits (pps/month) - breakdown by 
decile 

Source: European Commission, Joint Research Centre, 
based on the EUROMOD model [EU-SILC 2017 data) 

Source: European Commission, Joint Research Centre, 
based on the EUROMOD model [EU-SILC 2017 data). 
Taxes: light colour. Benefits: dark colour. 

Support  to  middle-income  families  is  weak  as  child  benefits  target  the  most  deprived  while  tax 
allowances  tend  to  benefit  the  highest  incomes.  EUROMOD  microsimulations  reveal  that  the  family 
benefits only have a meaningful impact on the income of the 10% poorest (decile 1), accounting for 9.5% of 
their equivalised household disposable income. This share decreases rapidly in the remaining deciles (2.4% 
for  households  in  decile  2,  1.4%  in  decile  3,  etc.).  Meanwhile,  child-related  tax  deductions  benefit  only 
families with taxable incomes above the tax-exempted threshold. As a result, the combined effect of the tax 
and benefit system for families with low-to-medium income (especially, deciles 2 and 3) is very low, as they 
are excluded from the means-tested child benefit and have limited access to tax deductions. Overall, child-
related  tax  deductions  outpace  child  benefits,  so  that  financial  support  to  families  with  children  in  Spain 
follows a regressive pattern (Graph 4.3.7.b) (2). This pattern differs from that of other EU countries with low 
levels of benefits, which tend to be more progressive. Other countries have neutral or regressive patterns but 
provide  much  higher  levels  of  support  for  children,  reflecting  stronger  solidarity  between  childless 
households and those with children. 

The  increase  in  means-tested  child  benefit  is  not  helping  to  reduce  the  risk  of  poverty,  and  it  has  a 
very  limited  impact  on  the  poverty  gap.  According  to  EUROMOD  simulations  performed  by  the 
European Commission Joint Research Centre, the impact of the recent reform on the Gini index and the risk 
of  poverty  is  negligible.  Some  impact  is  observed  on  the  at-risk-of-poverty  rate  of  lone  parents  (-0.6 pps) 
and on the overall at-risk-of-poverty gap (-0.4 pps). The effects are limited because the benefits are very low 
(€341 or 588 annually, depending on annual income) and because the strict means test, which results in low 
coverage. The benefits  are available only to families  with very low incomes (around €14,200 per year  for 

59 

050100150200250300350400BEEELUATDESEFIIEUKFRPLDKLTNLLVSIHUCZROCYSKBGHRITMTELPTES025507510012515017512345678910ES025507510012515017512345678910EL025507510012515017512345678910FR025507510012515017512345678910IT 
 
 
 
4.3. Labour market, education and social policies 

two  parents  with  two  children, well  below  the  poverty  threshold  of  €22,200  –  children  aged  14-17).  As  a 
result, roughly one in two children at risk of poverty or social exclusion receives benefits. Standard families 
above that threshold do not receive regular child benefits, except for children with disabilities.  

(1)  EUROMOD simulations performed by the European Commission Joint Research Centre. The family benefits used here 
are  childbirth–related  benefits  (e.g.  maternity  and  paternity  benefits,  parental  benefits,  etc.)  as  well  as  other  regular 
benefits associated with the cost of raising children (e.g. child grant, periodic child allowances, etc.). The average is 
calculated for all children, not only those receiving benefits. PPS: Power Purchasing Standards. 

(2)  Only the simulated family benefits are captured in this graph (i.e., all type of child benefits, including refundable tax 

credits). Maternity /paternity leave benefits are not included. 

Although  steps  to  combat  child  poverty  were 
taken  in  2019,  they  are  still  not  commensurate 
with  the  scale  of  the  challenge.  In  March  2019, 
the  amount  of  the  means-tested  child  benefit  was 
increased  after  an  18-year  freeze,  from  €291  per 
year  and  child  to  €341  (or  €588  for  the  most 
deprived  families).  However,  the  impact  of  this 
measure  on  child  poverty 
(see 
Box 4.3.3).  Tackling  child  poverty  is  one  of  the 
main  priorities 
the  2019-2023  National 
Strategy  to  Prevent  and  Combat  Poverty  and 
Social  Exclusion  that  was  approved  in  March 
2019. To this end, the strategy proposes to step up 
the coverage and adequacy of the child allowance, 
quantified 
without, 
objectives.  Other  measures  adopted 
in  2019 
include  an  increase  in  the  budget  for  the  VECA 
programme for vulnerable children.  

however, 

limited 

setting 

any 

for 

is 

Family-friendly  policies  could  contribute  to 
mitigating demographic challenges, in a context 
of  very  low  birth  rates  and  ageing  population. 
Life  expectancy  in  Spain  (83.4  in  2017)  is  the 
highest  in  the  EU,  and  in  2018  there  were  on 
average 1.2 persons older than 64 for every person 
under  16  years  old.  Spain  also  has  the  second 
lowest  fertility  rate  in  the  EU  (1.31  children  per 
woman in 2018, compared to 1.59 on EU average) 
and  women  tend  to  have  their  first  child  later  (at 
30.9  years  in  2017,  against  29.1  years  on  EU 
average).  

Older adults face a much lower risk of poverty 
or  social  exclusion  than  children  and  working 
age adults. In 2018, 17.6% of people over 65 were 
at-risk-of-poverty  or  social  exclusion,  0.7 pps 
below  the  EU  average.  This  rate  has  been  rising 
since  2014  but  remains  well  below  the  pre-crisis 
level  and  the  rate  for  other  age  groups.  Spanish 
pensions compare well with other pension systems 
in  the  EU  in  terms  of  adequacy  (see  the  2019 
country  report).  The  increases  in  the  minimum 

pensions  may  help  to  keep  the  at-risk-of-poverty 
gap relatively small.  

Coordination  between  employment  and  social 
services  is  improving,  but  still  varies  across 
regions. Two  new  working  groups  were set  up in 
2019  as  part  of  the  Social  Inclusion  Network 
(RIS),  to  discuss  tools  to  improve  the  assessment 
of  vulnerability  and  the  sharing  of  information 
between  the  third  sector  and  public  employment 
and  social  services.  Progress  has  been  limited  so 
far.  Pilot  projects  are  under  way  to  improve  the 
cooperation between regional employment services 
and  social  services.  Meanwhile,  the  ‘universal 
social  card’  continued  to  be  rolled  out  in  2019. 
This 
to 
information  on  benefits  received  by  individuals 
and 
thereby  facilitating  coordination  between 
employment  and  social  services.  All  data  on 
recipients of national benefits are uploaded into the 
system,  but  significant  gaps  remain  on  benefits 
managed by regional and local authorities. 

improves  service  providers’  access 

to 

in-work  poverty 

Non-EU  migrants  and  Roma  population 
continue to face integration challenges. Non-EU 
born  people  face  a  much  higher  risk  of  severe 
material  deprivation  (14.8%)  than  natives  (3.9%). 
They  are  more  exposed  to  precarious  working 
conditions  and 
(44.3%, 
compared  to  17.1%  for  natives).  The  Roma 
community  also  shows  high  social  vulnerability. 
Only  17%  of  Roma  complete  lower  secondary 
education  and  63%  of  young  Roma  are  neither  in 
employment,  nor 
training 
(Fundación  Secretariado  Gitano,  2019).  Poor 
educational  outcomes  result  in  low  employment 
rate  (30%),  very  high  unemployment  (52%)  and 
extremely  high  at 
risk-of-poverty  or  social 
exclusion (92%). These results are consistent with 
the  work  of  the  Fundamentals  Rights  Agency 
(FRA,  2016),  which  showed  that  Roma  in  Spain 
face  similar  challenges  to  those  of  other  deprived 
Roma  communities  in  the  EU.  The  2012-2020 

in  education  or 

60 

 
4.3. Labour market, education and social policies 

National Roma Integration Strategy will need to be 
updated  in  the  near  future.  There  are  also  some 
regional strategies (e.g. Andalusia, Catalonia. They 
face  the  challenge  of  achieving  a  real  impact  on 
sectoral policies. 

model  for  pharmaceuticals  mostly  penalises  low-
income  workers  and  recipients  of  minimum 
income  benefits  relative  to  pensioners  (AIREF, 
2019a). 

The  number  of  homeless  people  spending  the 
night  in  shelters  continues  to  rise.  In  2018, 
18,000  people  were  hosted  in  a  shelter  daily  on 
average, 9.5% more than in 2016 (INE, 2019). The 
the  2015-2020  National 
implementation  of 
Strategy  against  Homelessness, 
the 
development  of  the  ‘housing  first’  approach,  has 
been 
lacks  synergies  with  an 
overarching housing strategy. A legislative change 
in  March  2019  strengthened  the  protection  for 
vulnerable households at risk of eviction. 

limited  and 

including 

in  2017)  (EU-SILC),  pointing 

Spain has adopted a national strategy to combat 
energy poverty. In 2018, 9.1% of people were not 
able to keep their homes adequately warm, 1.1 pps 
more  than  in  2017  and  1.8 pps  above  the  EU 
average.  The  situation  deteriorated  particularly 
among people at risk of poverty (20.8%, compared 
to 
to  19.4% 
problems  in  the  deployment  of  the  social  tariff. 
The  2019-2024  Strategy  against  Energy  Poverty 
adopted  in  April  2019  aims  to  reduce  the  number 
of  people  affected  by  the  different  dimensions  of 
energy  poverty  by  at  least  25%  by  2025.  This 
Strategy  restricts  the  conditions  for  cutting  the 
electricity  supply  and  outlines  a  reform  of  the 
social  tariff.  The  political  deadlock  has  impeded 
further development. 

4.3.4.  HEALTHCARE AND LONG-TERM CARE 

Spain guarantees universal access to healthcare 
but out-of-pocket payments on dental care are a 
barrier  to  access  for  low-income  households. 
Spaniards report one of the lowest levels of unmet 
needs  for  medical care in the EU (0.2% in 2018). 
By  contrast,  the  share  of  unmet  needs  for  dental 
care is relatively high (4.6%, 1.7 pps above the EU 
average),  particularly  among  people  in  the  lowest 
income  quintile  (12%,  6  pps  above  the  EU 
average).  Direct  out-of-pocket 
spending  by 
households  (mainly  on  dental  care  and  to  some 
extent, on pharmaceuticals) reached 23.6% of total 
health expenditure in 2017, 7.8 pps above the EU 
average  (OECD,  2019e).  A  spending  review  by 
AIReF  highlights  that  the  current  co-payment 

and 

epidemiological 

The  primary  care  system  performs  well,  but 
needs  further  adaptation  to  cope  with  the 
shifts. 
demographic 
Population  ageing  creates  new  health  care  needs, 
as nearly 60% of Spaniards aged 65+ have at least 
one  chronic  disease,  more  than  20%  have  some 
limitations in daily activities and almost 40% have 
reported symptoms of depression. A new strategic 
framework for primary and community care (April 
2019),  is  designed  to  strengthen  the  role  of  the 
Interterritorial  Council 
to 
prioritise financial and human resources dedicated 
to  primary  care  and  step-up  the  provision  of 
primary  care  as  well  as  the  use  of  information 
technologies.  The  strategic  framework  still  needs 
to be implemented, including through allocation of 
relevant 
for 
resources.  Moreover, 
preventive measures are limited.  

its  commitment 

resources 

in 

There are inefficiencies in the purchase and use 
of  pharmacy-dispensed  medicines.  A  spending 
review  (AIREF,  2019a)  concluded  that  regional 
variations  in  spending  on  pharmacy-dispensed 
medicines  are  not  explained  by  healthcare  needs. 
Some measures, including a new tool for assessing 
the  therapeutic  value  of  medicines,  aim  to  tackle 
these  inefficiencies.  The  use  of  generic  medicines 
remains  below  the  EU  average,  and  has  not 
increased since 2014 (48%). An Action Plan for a 
more  sustainable  use  of  medicines 
is  being 
prepared and includes 17 measures to increase the 
use  of  generics  and  biosimilars.  Spending  on 
pharmaceuticals  in  hospitals  continues  to  rise 
while  spending  levels  also  vary  considerably 
across regions. A spending review of hospital drug 
and investment expenditure, which is due by 2020, 
should provide recommendations.  

large 

Inefficiencies are also linked to the recruitment 
and  working  conditions  of  health  workers.  The 
persistent use of temporary contracts contributes to 
the 
turnover of  health  workers.  The 
authorisation  to recruit 83,100 permanent  workers 
nationwide  in  2018-2019  aims  to  address  this 
challenge,  although  the  recruitment  competitions 
are  progressing  at  slow  pace  and  the  transition  to 
permanent 
healthcare 
professionals  remains  insufficient.  The  number  of 

employment 

for 

61 

4.3. Labour market, education and social policies 

nurses  per  1,000  people  is  well  below  the  EU 
average  (5.7  in  Spain  vs.  8.5  in  the  EU)  and  the 
new advanced nurse practice is still not in place in 
all regions. There are plans to continue increasing 
the places accredited and offered for the training of 
specialists  in  Family  and  Community  Medicine.  
However,  there  is  a  lack  of  consensus  between 
educational  and  health  authorities  on  medium  to 
long-term  needs.  Measures  to  promote  teamwork 
in primary care and a better territorial distribution 
of healthcare professionals still have to be defined. 

in 

the 

In  a  context  of  rapid  ageing  of  the  population, 
growing  needs  for  long-term  care  are  likely  to 
increase 
future.  The  number  of 
beneficiaries of the long-term care system rose by 
5.8%  over  2019.  The  coverage  ratio  remains 
slightly  above  80%  (December  2019),  but  large 
regional disparities persist (from 68% in Catalonia 
to  99%  in  Castile  and  León).  People  with  severe 
dependency have lower coverage (66%) than those 
with  moderate  dependency  (88%).In  a  context  of 
rapid  population  ageing,  public  services  lack  the 
resources (47)  to  meet  the  demand.  As  of  April 
2019, exemption from social security contributions 
boosted  the  affiliation  of  informal  carers,  89%  of 
whom  are  women,  to  the  system  (from  6,700  in 
March  2019  to  55,100  in  December).  There  are 
shortcomings  in  the  coordination  between  social 
and  health  services  and  in  the  quality  of  the 
services.  Increasing  needs  for  long-term  care  may 
add  to  other  fiscal  concerns  in  the  long  run  (see 
Box 4.1.1). 

(47)  Out-of-pocket  costs  are  near  100%  of  the  disposable 
income  for  care  recipients  with  severe  needs  in  Spain 
(OECD, 2019d).  

62 

                                                           
4.4.  COMPETITIVENESS, REFORMS, AND INVESTMENT 

4.4.1.  INVESTMENT, COMPETITIVENESS, AND 

PRODUCTIVITY * 

the 

and 

and 

foster 

innovation 

the  green 

Medium  to  long-term  growth  prospects  will 
depend on investments to increase productivity 
and 
green 
transformation.  The 
level  of  Spanish  non-
construction  investment  has  reached  its  pre-crisis 
peak, but remains below the euro area average (see 
Section 1 and Box 4.4.3). Investment needs persist 
innovation; 
in  public  and  private  R&D  and 
digitisation; 
transformation, 
including  eco-innovation,  resource  efficiency  and 
the  circular  economy.  Such  investment  would  be 
more  effective  if  accompanied  by  appropriate 
labour  and  product  market  measures,  as  well  as 
improvements  in  the  skills  of  the  workforce  (see 
Section 4.3).  Spain  is  well  served  overall  with 
transport  infrastructure,  but  the  improvements  in 
rail 
connections  with 
energy 
neighbouring  countries  would  improve  access  to 
markets,  both  domestic  and  European,  in  an 
environmentally sustainable way.  

freight 

and 

Competitiveness 

Graph 4.4.1:  Changes in current account and drivers 

a  solid  surplus  since  2013,  driven  by  an 
improvement  in  both  the  goods  and  services 
balance. In the case of goods, this was due to both 
an increase in exports and, in the earlier stages of 
the  crisis,  a  decline  in  imports.  In  the  case  of 
services,  the improvement has been mostly due to 
an increase in exports. The balance of net primary 
income  has  also  improved  mostly  due  to  the 
decline of interest payments to the rest of world, as 
a  consequence  of  the  reduction  of  both  interest 
rates and the total amount of external liabilities.  

Spain’s dependency on imported energy acts as 
a  major  drag  on  the  goods  trade  balance.  By 
product  type,  Spain  has  consistently  recorded  a 
surplus  in  food  and  drink  products,  as  well  as 
automobiles  (Graph 4.4.2).  However,  this  surplus 
is  not  enough  to  offset  the  large  deficit  in  energy 
products.  Spain’s  energy 
import  dependency 
(measured  as  the  share  of  net  imports  in  gross 
inland  energy  consumption)  is  74%,  substantially 
higher  than  the  EU  average  of  55%.  This  implies 
that energy prices have a major impact on Spain’s 
trade  balance  of  goods.  Equipment  goods, 
manufactured  and  durable  consumption  goods 
(other 
to  some  extent, 
intermediate  manufactured  goods,  also  show  a 
deficit.  

than  vehicles),  and 

Graph 4.4.2:  Trade balance by product type (Jan-Sep) 

Source: Ameco. 

Spain’s  current  account  has  been  in  surplus 
since  2013.  The  current  account  surplus  is  the 
result  of  a  large  surplus  in  services,  notably 
tourism,  which  more  than  offsets  the  deficit  in 
goods  and  a  small  surplus  in  net  primary  income 
(see Graph 4.4.1). The current account balance has 
moved from a large deficit in the pre-crisis years to 

Source: Datacomex 

Spain  also  records  a  trade  surplus  in  most 
categories  of  non-tourist  services.  Although 
tourism  revenues  represent  about  half  the  total 

63 

-6-4-20246813141516171819*20*21*% of GDPNet current transfersNet primary incomeTrade balance of goodsTrade balance of servicesTerms of tradeBalance of current transactions-100-80-60-40-2002040080910111213141516171819bn EUREnergy productsOther merchandiseManufactured consumption goodsDurable consumption goodsAutomobileEquipment goodsIntermediate manufactured goodsRaw materialsFood, drinks and tobaccoTotalNon-energy 
  
  
4.4. Competitiveness, reforms, and investment 

is  more  exposed 

value  chains,  which 
to 
competition  from  emerging  countries  (European 
Commission,  2016a,  2017a,  2018a,  2019a,  and 
Bank  of  Spain,  2019e).  Much  of  the  increase  in 
exported  value  in  recent  years  has  been  achieved 
by  very  large  exporters,  which  have  on  average 
recorded  more 
labour  cost 
developments  than  smaller  exporters,  given  their 
higher  productivity  growth 
(see  European 
Commission, 2017a).  

favourable  unit 

Graph 4.4.4:  Share of high-tech exports 

Source: Eurostat. 

and 

productivity 

non-cost 
Enhancing 
competitiveness  are  crucial 
in  preserving 
Spain’s  external  surplus.  From  2009  to  2018, 
Spain's  cost-competitiveness  against  the  main  37 
industrial  countries  –  as  measured  by  the  real 
effective exchange rate – improved by around 15% 
based  on  unit  labour  costs.  However,  as  wage 
growth is expected to rise and productivity growth 
to  remain  subdued,  this  should  result  in  moderate 
cost-competitiveness losses vis-à-vis the euro area 
in  2019  and  2020  (see  Sections  1  and  3). 
could 
Maintaining 
become  a  challenge  unless  it  is  supported  by 
improved  non-cost 
productivity  growth  and 
competitiveness 
quality 
innovation 
through 
upgrading.  

competitiveness 

external 

in  non-tourist 
services 

exports  of  services,  they  account  for  most  of  the 
service  trade  surplus  (see  Graph 4.4.3,  see  also 
Box 4.4.1).  However,  non-tourist  services  also 
record  a  surplus  in  most  categories,  which  is 
transport  services  and 
largest 
business 
and 
consultancy, 
(R&D, 
professional  services).  In  contrast,  intellectual 
property  services  (a  subpart  of  “technological 
services”  not  depicted  separately),  record  a  small 
deficit linked to the reliance of Spain on imported 
technology, as well as financial services.  

Graph 4.4.3:  Trade balance in services 

Source: BDE, own calculations. 

less 

price 

sensitive 

Spain  is  largely  reliant  on  cost  competitiveness 
for 
its  exports.  There  have  been  structural 
improvements  in  the  development  of  exports  in 
recent  years.  Namely,  exports  have  become 
(European 
somewhat 
Commission,  2018a),  and  the  number  of  regular 
exporters  has  continued  to  increase,  also  during 
2019.  Still,  Spanish  exports  are  concentrated  in 
goods and services that compete mainly on prices. 
The share of high-tech exports remains below that 
of  other 
(see 
Graph 4.4.4), and in terms of value added, Spain is 
more  present  in  the  downstream  part  of  global 

large  EU  Member  States 

64 

-10123456131415161718% of GDPTourismTransportConstructionFinancialEnterpriseTechnologyOther0510152025070809101112131415161718%EU-28ESDEFRIT  
  
4.4. Competitiveness, reforms, and investment 

Box 4.4.1: Tourism industry 

Building upon its coastal natural beauty and cultural heritage, tourism has always been an important 
source  of  foreign  revenue  for  Spain.  International  tourism  expenditure  accounts  for  16.4%  of  Spain’s 
export  revenues  and  about  half  of  its  service  export  revenues.  While  inbound  tourism  is  a  key  economic 
driver  for  many  of  the  Mediterranean  countries  (Graph 4.4.5.a),  Spain  also  enjoys  a  prominent  domestic 
tourism. With 90% of resident tourists travelling inside the country, domestic tourism expenditure represents 
2.2% of GDP (1). Overall, the total contribution of Spanish tourism to GDP in 2018 was 12.3% and the share 
of tourism-related employment a sizeable 12.7%. Moreover, the tourism-related economy contracted less in 
2012-2017, and then recovered faster than the overall economy both in terms of both tourism value (2) (total 
and inbound) and tourism-related employment (Graph 4.4.5.b).  

Graph 4.4.5.a: 

Expenditure by international 

Graph 4.4.5.b: 

Tourism demand, employment 

tourists, 2018 

and GDP; annual growth 

Source: Eurostat, BoP data 

Note: 2019 data release for: GDP (all years), total 
tourism (2016-2018), total employment (all years), 
tourism employment (2016-2018); and 2018 data 
release for all other data. 
Source: INE - Tourism Satellite Account (TSA), The 
Economically Active Population Survey (EAPS). 

Spain is seeking to diversify from the typical “sun and sea” tourism model and move towards a higher 
value added production of tourism by attracting interest in culture, heritage and sports. The National 
and  Integral  Tourism  Plan  2012-2015,  adopted  by  the  government  in  2012,  focused  on  providing 
differentiated  products  and  addressing  new  markets.  In  line  with  this  strategy,  the  share  of  international 
tourist expenditure for cultural reasons has increased over the past three years by roughly  four percentage 
points  (reaching  approximately  15%),  while  the  share  of  seaside  tourism  expenditure  gradually  decreased 
from just over half in 2016 to 43.4% in 2018 (Egatur, INE). Moreover, while the number of tourism-related 
firms increased by 2.3% (1.2% excluding tourism related real estate) between 2015 and 2019, the number of 
companies providing sports, recreation, creative and arts activities has grown by an annual average of 7.5% 
since  2015  (INE).  In  January  2019,  the  government  also  developed  the  Strategy  for  Sustainable  Tourism 
2030,  designed  to  strengthen  the  sector  with  a  focus  on  its  socio-economic,  environmental  and  territorial 
sustainability. The strategy seeks to promote the natural and cultural values of different destinations, while 
overcoming  the  potential  negative  effects  of  tourism  such  as  loss  of  identity  of  destinations,  (seasonal) 
saturation of spaces and environmental pollution. 

65 

 - 10 20 30 40 50 60 70% As % of service export revenues As % of total export revenuesAs % of GDP-505101518171615141312% growthInbound tourismTotal tourismGDPTourism employmentTotal employment 
 
 
 
 
 
 
 
  
4.4. Competitiveness, reforms, and investment 

Despite  the  heavy  concentration  of  tourist  activities  along  the  coastline,  Spain  also  has  several 
emerging tourism regions where the sector is developing fast. With a share of 10.3% of the total inbound 
tourists’ expenditure in 2018, Madrid has seen rapid development, constantly overtaking the national growth 
of international expenditure since 2014. Extremadura and Galicia recorded even faster development of their 
tourist potential, though they account for much smaller shares of non-resident tourist expenditure (1.9% and 
2%  in  2018,  respectively).  Moreover,  during  the  past  two  years,  regions  such  as  Catalonia,  Galicia  and 
Murcia  have  seen  an  increase  in  average  expenditure  per  tourist  that  exceed  the  rise  in  GDP/capita, 
potentially indicating a move towards a more quality-oriented tourism model.  

Despite recent positive trends, the tourism sector might be vulnerable to both a general slowdown of 
global  demand  and  external  shocks  (see  Section 4.5).  After  two  years  marked  by  significant  growth  of 
foreign tourist arrivals, by 10.5% in 2016 and 8.6% in 2017, figures for 2018 show an abrupt deceleration, to 
1.2%. In addition, there is a slowdown in total expenditure growth, from 10% in 2017 to 1% in 2018.  The 
cause might be the overall European growth slowdown or the fading away of security risks in North African 
countries and Turkey. Moreover, with 22.3% of visitors coming from the UK, the bankruptcy of the British 
travel group Thomas Cook might also have a short-term negative effect on Spain’s 2019 figures, given the 
group’s  outstanding  debt  of  €260 million  to  over  600  Spanish  hotels (3).  With  an  estimated  loss  of  direct 
employment  of  more  than  3,400  jobs  (workers  at  the  company’s  head  office  in  Spain  and  other  hotel 
representatives), the bankruptcy might also generate spill-over effects on other sectors, such as transport or 
commerce.  

(1)  Eurostat, expenditure on tourism trips by purpose (tour_dem_expur) 
(2)  According to the Tourism Satellite Account, tourism demand is measured as the sum of tourism-related amounts within 
each  GDP  demand  component  (consumption  by  resident  consumers  or  domestic  tourists’  expenditure;  public 
expenditure  -  e.g.  grants  provided  for  the  development  of  the  sector;  gross  fixed  capital  formation  –  e.g. 
accommodation  or  transport  infrastructure;  exports  or  foreign  tourists’  expenditure;  and  imports  or  resident  tourists’ 
expenditure abroad). 

(3)  However, the government recently approved the opening of a credit line worth €200 million, meant to help companies 

affected by Thomas Cook’s bankruptcy. 

Productivity developments 

Labour productivity growth has been relatively 
weak  in  recent  years.  Between  the  start  of  the 
economic  recovery  in  2014,  and  2018,  apparent 
labour  productivity,  measured  as  real  output  per 
worker, has been growing at a pace below the EU 
average, at an average annual rate of 0.5%. It even 
fell  slightly  in  2018  and  was  projected  to  fall 
further  in  2019.  Based  on  a  standard  growth 
the 
accounting  exercise,  Graph 4.4.6  dissects 
supply-side determinants of average annual growth 
in  Spain  and  the  EU  during  the  past  five  years  of 
economic expansion. The picture reveals that total 
factor  productivity  (TFP)  has  grown  in  line  with 
the EU average. By contrast, capital deepening has 
decreased,  as  the  increase  in  the  capital  stock  has 
not kept pace with the rapid job creation recorded 
by  Spain 
Indeed, 
Graph 4.4.6  shows  that  Spain  outperformed  the 
rest  of  the  EU  in  terms  of  the  contribution  of 
labour  input  to  growth,  in  particular  thanks  to  a 
significant 
rate. 
However, the level of unemployment remains very 
high in Spain. 

the  unemployment 

recovery  years. 

fall 

the 

in 

in 

Graph 4.4.6:  Real GDP growth and its supply-side 

determinants 

Note: "unemployment” is shown with opposite sign 
Source: Ameco, own calculations. 

Labour  productivity  in  Spain  remains  below 
the  EU  average.  When  measured  over  a 
representative  aggregate  of  the  market  economy 
and  expressed  in  purchasing  power  standards 
(PPS), the level of apparent labour productivity in 
Spain  was  11.5%  below  the  EU  average  in  2016, 
and  significantly  below  that  of  other  large  euro 

66 

-1.0-0.50.00.51.01.52.02.53.0Annual average % change2014-2018ESEU-28Labour inputLabour productivity 
  
  
4.4. Competitiveness, reforms, and investment 

area  Member  States  (European  Commission, 
2019a). 

Graph 4.4.7:  A decomposition of Spain’s productivity gap to 

the EU average 

large firms for a number of reasons such as smaller 
economies  of  scale,  less  capital  intensity,  more 
difficult  access  to  (non-bank)  finance,  and  lower 
capacity to adopt new technologies.  

reveals 

looking 

individual 

sectors, 
that 

at 
analysis 

Productivity 
in  the  Spanish  manufacturing 
sector is on a par with that in the EU, but most 
other  market  sectors  display  a  negative  gap. 
the 
When 
decomposition 
in 
manufacturing,  transportation  and  storage,  and 
accommodation  and  food  services,  Spanish  firms 
are, on average across size classes more productive 
than  their  EU  peers  (size-class  productivity).  This 
tends to (more than) outweigh the negative impact 
of  the  smaller  average  size  of  Spanish  firms  in 
these sectors (size distribution effect). By contrast, 
in  construction,  wholesale  and 
trade, 
professional  services,  and  administrative  and 
support  activities,  Spanish  firms  tend  to  be  both 
less  productive  than  their  EU  peers  on  average 
across  size-classes,  and  also  suffer  from  the 
negative impact of being smaller. Unlike the other 
sectors,  information  and  communication  activities 
benefit from a larger average firm size, but overall 
the 
labour 
productivity  because  firms  are  on  average  across 
size-classes  less  productive  than  their  European 
peers.  

apparent 

records 

sector 

lower 

retail 

productivity 

Improving  within-firm 
and 
allocative  efficiency  are  key  to  raising  overall 
productivity  in  Spain.  Within-firm  productivity 
depends on the ability of firms to innovate, invest 
in tangible and intangible assets and make best use 
of  their  human  capital  endowment,  as  well  as  on 
their  organisation  and  management.  On  many  of 
these  dimensions,  Spain  underperforms  its  peers. 
The  quality  of  human  capital  is  affected  by  low 
and/or  under-utilised  skills  and  skills  mismatches 
on  the  labour  market.  Evidence  also  points  to 
significant  gaps  in  managerial  practices  in  Spain 
compared  to  best  international  practices  (see 
Box 4.4.2), as well as under-investment in research 
and 
regulatory 
fragmentation  and  labour  market  segmentation 
hamper the efficient allocation of resources.  

innovation. 

addition, 

In 

Sectors: C: manufacturing; F: construction; G: wholesale and 
retail trade; repair of motor vehicles and motorcycles; H: 
transportation and storage; I: accommodation and food 
service activities; J: information and communication; M: 
professional, scientific and technical activities; N: 
administrative and support service activities. 
These sectors account for 60% of Spanish GDP. 
Source: Eurostat SBS and JRC calculations, Bauer et al., 2020. 

Spain’s  productivity  gap  to  the  EU  average  is 
due  to  a  larger  proportion  of  employment  in 
low-productivity 
low-productivity  firms  and 
activities.  Graph 4.4.7  shows  a  breakdown  of 
Spain’s  productivity  gap  with  respect  to  the  EU 
average  along  three  dimensions:  (i)  firm  size 
distribution,  (ii)  size  class  productivity,  and  (iii) 
sectoral  composition  (Bauer  et  al.  2020) (48).  The 
graph shows that about half of Spain’s productivity 
gap to the EU average is attributable to the sectoral 
composition of its economy. This means that Spain 
has a relatively high share of sectors characterised 
by  lower  apparent  labour  productivity.  The  other 
half of the gap is explained by Spain’s larger share 
of  employment  in  smaller  firms  (size  distribution 
effect). This is consistent  with the  general  finding 
that  small  firms  tend  to  be  less  productive  than 

(48)  Firm  size  is  measured  in  terms  of  number  of  employees 
and is divided into five size classes: 0-9, 10-19, 20-49, 50-
249,  and  250  and  more  employees.  The  size  class 
productivity compares Spain’s and the EU’s average  level 
of productivity for each of the five firm size classes. 

67 

-30-20-10010203040Agg.*CFGHIJMNpercentage difference to EU28, 2016Size distributionSize class productvitySectoral compositionTotal  
                                                           
4.4. Competitiveness, reforms, and investment 

Box 4.4.2: Management practices and productivity 

Managerial  proficiency  in  the  organisation  and  utilisation  of  labour  and  capital  (sometimes  called 
“organisational  capital”)  is  key  to  firm  productivity  (e.g.  McGowan  and  Andrews,  2015,  and  Giorcelli, 
2019).  A  positive  correlation  is  found  between  “best  management  practices” –as  measured  by  the  World 
Management  Survey  indicator (1)–,  and  GDP per  head,  as  well  as  with  TFP  (Graph 4.4.8.a)  (Bloom  et  al, 
2012,  2014).  Management  skills  and  practices  are  particularly  important  for  the  introduction  of  new 
technologies  such  as  information  technology  (IT)  and  digitisation,  because  the  adoption  of  IT  usually 
requires management capacity to introduce the appropriate changes in firm organisation (2). 

Graph 4.4.8: 

TFP growth, management practices indicator and employers’ educational attainment 

(*) Diamonds indicate the share of employment in each educational level for each country 
Source: OECD, WMS, Eurostat, Commission services. 

On  average,  Spanish  firms  rank  second-lowest  among  advanced  economies  on  the  World  Management 
Survey indicator of best management practices, well below the US, as well as below the best performers in 
Europe (Graph 4.4.8.a). For Spain, a large part of the difference in management quality stem from a larger 
proportion  of  firms  that  perform  poorly,  in  the  low  tail  of  the  distribution.  Given  that  best  management 
practices tend to be more widespread in larger firms (3), it is also likely that Spain’s bad performers are of 
small  size  and  usually  less  productive.  This  could  point  to  a  comparatively  low  level  of  product  market 
competition, which would result in low performers being able to stay in the market.  

The  use  of  innovative  practices  by  managers  is  also  likely  to  be  favoured  by  managers’  educational 
attainment and learning process, as shown by the positive association between management human capital -
measured by the share of employers with a university degree- and management practices (Bloom et al., 2014 
and  Broszeit  et  al.,  2016).  In  Spain,  a  larger  proportion  of  entrepreneurs  have  a  low  level  of  educational 
attainment  relative  to  the  Eurozone  average  (Graph 4.4.8.b),  and  this  proportion  is  also  higher  than  the 
overall  share  of  the  low  skilled  in  the  total  working  population.  By  contrast,  in  the  other  large  euro  area 
Member  States  and  in  the  euro  area  as  a  whole,  employers  are  more  highly  educated on  average  than  the 
working population.  

(1)  The World Management Survey (WMS) collects answers from firm managers in 33 countries from Europe, Asia and 
America in four main management areas: innovative operations, performance monitoring, target setting and incentives 
for workers and management. WMS data aggregate responses from these different areas into a combined indicator as a 
whole measure of management practices, which is shown in Graph 4.4.8.a in deviations from the average of advanced 
economies for the period (2004 - 2015). 

(2)  Management and  IT  adoption  are  complementary  inputs  in the  production process  (Saia  et  al., 2015,  Andrews  et  al. 

2018, Schivardi and Schmitz, 2019). 

(3)  There is a positive correlation between best management practices and firm size in most countries. 

68 

AUCAFRDEUKELITJPNZPTIEESSEUSy = 0.3104x + 0.1865R² = 0.3718-1.5-1.0-0.50.00.51.01.5-2.0-1.00.01.02.0TFP growth, %Management practice indicator (dev.)a. TFP growth and management practices (2004-2015)0102030405060         Low          Medium          HighShare, %b. Employers educational attainment (2018)  ES  EA19  FR  DE  
 
4.4. Competitiveness, reforms, and investment 

Research and innovation  

Graph 4.4.9:  Evolution of business and public R&D intensity, 

2000-2017 

the  EU 

innovator” 

Spain’s  innovation  performance  is  below  the 
EU  average,  though  it  has  recorded  some 
improvement  since  2011.  Spain  ranks  as  a 
“moderate 
(European 
in 
Innovation  Scoreboard,  2019).  Spain  scores  high 
on  indicators  such  as  sales  of  new-to-market/firm 
innovations, broadband penetration, new doctorate 
graduates  and  tertiary  education.  Weak  points  are 
firm  expenditures  on  R&D, 
links  between 
innovative  small  and  medium-sized  companies, 
links  between  academia  and  business, 
and 
knowledge-intensive  service  exports,  and 
the 
proportion  of  innovative  SMEs.  Spain  also  ranks 
below the EU average in knowledge-based capital 
assets,  including  organisational  capital (OECD, 
2018  and  2019).  Overall  Spain’s  weak  innovation 
performance hampers productivity growth and the 
structural  change  towards  a  knowledge-based  and 
green economy. Measures to improve  the  Spanish 
research  and 
innovation  performance  would 
contribute to advancing towards SDG 9 (Industry, 
innovation and infrastructure). 

Total 

performance. 

Low investment in R&D is holding back Spain’s 
innovation 
R&D 
expenditures declined from 1.35% of GDP in 2009 
to  1.24%  in  2018.  Public  R&D  expenditure  was 
cut  during  the  crisis  and  the  cuts  have  not  been 
reversed. Public investment in R&D declined from 
0.65% to 0.54% of GDP between 2009 and 2018, 
well  below  the  EU  average  of  0.69%.  Private 
investment  in  R&D  fell  from  0.73%  of  GDP  in 
2007  to  0.64%  in  2016.  It  has  since  recovered  to 
0.7% in 2018, but it is still low compared with the 
EU average of 1.41% (2018).  

Although  the  quality  of  the  Spanish  public 
research  system  has  improved  in  recent  years, 
on  average  the  quality  is  still  lagging  behind. 
The research system has changed in various ways, 
including  an  update  of  the  evaluation  criteria  for 
research  staff.  This  has  spurred  growth  in  the 
volume  of  research.  However,  the  quality  of 
research,  measured  by  the  percentage  of  Spanish 
scientific  articles  in  the  top  10%  most  cited 
publications  worldwide, 
lagging 
behind (Salazar-Elena  J.C.  and  Sanchez-Martinez, 
M.,  2020),  and  it  remains  below  the  EU  average 
(European Innovation Scoreboard, 2019). 

still 

is 

(1) Business R&D intensity: business enterprise expenditure on 
R&D (BERD) as% of GDP.  
(2) Public R&D intensity: government intramural expenditure 
on R&D (GOVERD) plus higher education expenditure on 
R&D (HERD) as% of GDP.  
(3) Business R&D intensity: breaks in series between 2002 and 
the previous years and between 2008 and the previous 
years. 
Source: Eurostat. 

There  has  been  limited  progress  in  developing 
systematic  evaluations  of  public  research  and 
innovation policy. Spain has made progress on the 
evaluation  of  research  projects  submitted  for 
public  funding,  but 
is  still  scope  for 
there 
improvements  in  other  aspects  of  public  research 
impact 
and 
to  apply 
evaluations.  More  could  be  done 
international  best  practices  and  expertise 
to 
evaluation. 

innovation 

especially 

policy, 

Human  resources  are  still  a  critical  challenge 
for the Spanish research and innovation system. 
The  low  proportion  of  researchers  employed  by 
firms (in 2017 0.55% of total employment against 
0.85% in the EU as a whole, and more than 1% in 
other  big  Member  States  (Eurostat)  reduces 
innovations.  The 
Spain’s  capacity 
to  absorb 
proportion  of 
tertiary 
education  has risen to above  the EU average over 
the  past  decade.  However,  Spanish 
tertiary 
education  does  not  seem 
to  be  responding 
adequately  to  the  need  to  improve  the  innovation 
capacity  or  meet  market  needs  (see  also  above 
under ‘productivity’ and Section 4.3.2). 

the  population  with 

69 

0.30.40.50.60.70.800010203040506070809101112131415161718% of GDPPublicBusiness  
4.4. Competitiveness, reforms, and investment 

in  research  and 

Spain has taken action to improve coordination 
and  synergies 
innovation 
policies.  The  Spanish  Ministry  for  Science, 
Innovation  and  Universities  led  the  design  of  the 
post-2020  strategic  framework  for  innovation  in 
coordination  with  other  relevant  national  and 
regional bodies. The splitting of that Ministry into 
two  in  early  2020  -  a  Ministry  for  Science  and 
Innovation and a Ministry for Universities  - could 
make  coordination  more  challenging.  Spain  has 
also  actively  engaged  with  smart  specialisation 
strategies,  notably  through  the  participation  of 
Spanish  regions  as  leaders  of  12  out  of  32 
interregional partnerships on energy, agri-food and 
industrial modernisation. The Spanish Network on 
Public  Policies  for  Research,  Development  and 
Innovation  (RED  IDI)  has  published  guidance  on 
monitoring  and  evaluation  of  smart  specialisation 
strategies  in  preparation  for  the  next  Structural 
Funds  programming  period  (RED  IDI,  2019). 
However, ensuring that Spain’s multi-level system 
of  research  and  innovation  governance  operates 
smoothly remains challenging. 

includes  at 

SME participation in innovative projects is low. 
Besides  Technological  Centres  and  Platforms, 
Spain’s  Association  of  Science  and  Technology 
Parks 
technology  parks 
least  23 
sponsored  by  universities,  with  Tecnocampus 
(Barcelona)  and  The  Cube  (Madrid)  being  among 
the  leading  start-up  hubs  in  Europe.  However, 
while  in  the  EU  as  a  whole  the  percentage  of 
SMEs  cooperating  with  partner  organisations  on 
innovative  projects  is  almost  12%,  the  figure  in 
Spain  is  6.4%.  The  low  level  of  utilisation  of 
available  knowledge  by  Spanish  firms  prevents 
them from participating in innovation projects on a 
larger  scale  (Salazar-Elena  J.C.  and  Sanchez-
Martinez,  M.,  2020).  Some  improvements  have 
recently  introduced  with  the  Cervera  Transfer 
Network 
the  Missions 
Programme,  both  managed  by  CDTI,  along  with 
the  new  University  Sexennium  on  Knowledge 
Transfer.  However,  more  could  be  done 
to 
promote SME participation in innovative projects. 

Programme 

and 

The “General Guidelines of the New Industrial 
Policy  2030” focus  on  five  priority  themes: 
competitiveness, 
sustainability,  digitisation, 
alignment with EU policy and the role of SMEs. 

of 

review 

the  greening  of 

this  regard, 
the 

The  guidelines  were  issued  by  the  Ministry  of 
Industry,  Trade  and  Tourism  in  February  2019. 
They  provide  a  framework  for  industrial  policy 
measures in areas of high relevance for growth and 
jobs  and 
the  economy. 
Implementation, 
resources  and  efficiency  of 
spending  will  be  key  for  the  success  of  the  new 
the  AIReF 
industrial  policy.  In 
spending 
national  Re-
industrialisation  and  Industrial  Competitiveness 
Programme (RIC) (AIReF, 2019e) showed that the 
Programme 
firm’s 
not 
competitiveness, has a high financial cost, does not 
respond  to  identified  needs,  and  that  procedures 
for using the programme are cumbersome (see Box 
4.1.4). This Program has been reviewed to respond 
to  AIReF’s  recommendations.  In  addition,  the 
Strategic  Framework  on  SME  Policy  2030  was 
adopted in April 2019. It aims at improving  SME 
competitiveness  and  promoting  a  growth  friendly 
environment. 

improve 

does 

investment 

Public  support 
in 
for  private 
research  and  innovation  has  a  low  impact. 
Public  support  in  the  form  of  loans  has  become 
less  attractive  with  the  normalisation  of  credit 
conditions. Spain offers one  of the  most generous 
tax benefits for research amongst OECD countries 
and  partner  economies,  through  a  combination  of 
tax  credit  for  research  and  exemption  for  social 
security  contributions  exemption  for  qualified 
research staff. However, the tax scheme has had a 
limited  impact  (see  Section 4.1.4.).  Furthermore, 
venture  capital  is  underdeveloped  in  Spain  (see 
Section 4.2.3.).  

Digital economy  

Spain  is  committed  to  the  advancement  of  new 
technologies.  While  the  Ministry  of  Science  has 
published  its  strategy  for  research  in  the  field  of 
artificial  intelligence  (AI)  (Ministry  of  Science, 
Innovation  and  Universities,  2019),  eleven  other 
ministerial  departments  are  working  on  a  new 
National  AI  Strategy.  Furthermore,  Spain  benefits 
in  place  a  high-performance 
from  having 
computing 
national 
and 
cybersecurity strategy designed to complement EU 
policies  with  national  policies  (Department  of 
National Security, 2019).  

infrastructure 

a 

70 

4.4. Competitiveness, reforms, and investment 

Box 4.4.3: Investment barriers and challenges in Spain 

Investment  has  rebounded  strongly  in  recent  years,  led  by  business  investment,  and  the  level  of  non-
construction investment is back at its pre-crisis level. However, investment in intangibles remains below the 
euro area average, despite steady growth in recent years. Construction investment has been growing strongly 
since  2014,  but  from  very  low  levels  after  the  collapse  of  construction  investment  during  the  crisis.  Only 
public  investment  did  not  contribute  to  the  overall  rebound  in  investment,  and  has  instead  kept  declining 
during the recovery. It now stands at 2.0% of GDP, slightly less than half its pre-crisis peak level. 

Table 4.4.1:  Investment barriers 

Source: European Commission. 

In  Spain  the  most  common  long-term  barriers  to  investment  remain  uncertainty  about  the  future  (cited  by 
80% of  firms),  followed by business regulations (74%), energy costs (68%), labour market regulations and 
the  availability of  skilled  staff  (both  65%)  Business  regulation  and  access  to  finance  are  more  likely  to  be 
considered barriers by SMEs than by large  firms (1).The share of  external  finance is about 40%, somewhat 
higher than the EU average (36%). Bank loans account for most of external finance (76%).  Firms receiving 
external  finance  are  on  balance  satisfied  with  the  amount,  cost,  maturity,  collateral  and  type.  The  highest 
proportions of dissatisfaction are with the cost (7%) and the collateral requirements (6%).   

Selected investment barriers 

1. Skills mismatches constrain productivity growth and innovation (see Sections 4.3.1, 4.3.2, and 4.4.1). The 
high share of temporary employment reduces both workers' and employers' incentives to invest in training 
and  improving  job-specific  skills.  Skills  mismatches  are  high,  especially  for  tertiary  graduates.  Enrolment 
rates to secondary vocational educational training (VET) are relatively low. In order to strengthen the VET 
system a new strategy for VET has been adopted by the government (see Box 4.3.2).  

2. Restrictive  and  fragmented  regulations  across  regions  continue  to  discourage  investment  (see 
Section 4.4.2). Despite the commitment to implement the Law on Market Unity there are still few tangible 
results.  Reform  of  professional  services  are  still  pending.  No  measures  have  been  taken  to  eliminate 
unnecessary  size-contingent  regulations  that  prevent  firms  from  growing.  Policies  designed  to  support 
investment  in  research  and  innovation  have  a  limited  impact,  and  despite  improvements,  science-business 
cooperation could be improved.  

European Fund for Strategic Investments 

The  EU  supports  investment  in  Spain  also  via  the  European  Fund  for  Strategic  Investments  (EFSI).  By 
December  2019  total  financing  under  the  EFSI  amounted  to  €10.4 billion,  intended  to  trigger  in  total 
€49.8 billion in additional investments.  

71 

Regulatory/ administrative burdenCSRTaxationPublic administrationCSRAccess to financePublic procurement /PPPsCSRCooperation btw academia, research and businessJudicial systemFinancing of R&D&ICSRInsolvency frameworkBusiness services / Regulated professionsCompetition and regulatory frameworkRetailEPL & framework for labour contracts CSRConstructionWages & wage settingDigital Economy / TelecomEducation, skills, lifelong learning CSREnergyCSRTransportCSRLegend:No barrier to investment identifiedSome progressCSRInvestment barriers that are also subject to a CSRSubstantial progressNo progressFully addressedLimited progressNot assessed yetPublic administration/ Business environmentFinancial Sector / TaxationR&D&ISector specific regulationLabour market/ Education 
  
 
4.4. Competitiveness, reforms, and investment 

The current experience with the EU financial instruments and the EFSI budgetary guarantee demonstrated a 
need  for  simplification,  streamlining  and  better  coordination  of  the  EU’s  investment  support  instruments 
during the next 2021-27 programming period. By the end of 2020, EFSI and other EU financial instruments 
will  come  under  the  roof  of  the  new  InvestEU  programme  that  promotes  a  more  coherent  approach  to 
financing EU policy objectives and increases the choice of policy implementation options and implementing 
partners  to  tackle  country  specific  market  failures  and  investment  gaps.  In  addition,  under  InvestEU, 
Member  States  can  set-up  a  national  compartment  by  allocating  up  to  5%  of  their  structural  funds  to 
underpin  additional  guarantee  instruments  supporting  the  financing  of  investments  with  a  higher  level  of 
local specificities. InvestEU will be policy-driven and focus on four main areas: Sustainable Infrastructure, 
Research, Innovation, and Digitisation, Small Businesses, and Social Investment and Skills.  

(1)  EIB Investment Survey, Spain (2019).  

Several  technological  frameworks  designed  at 
national level have already been put in place or 
are to be tested. Part of Industry 4.0 Strategy, the 
HADA  platform,  a  free  online  application  that 
enables companies to obtain an assessment of their 
digital  maturity,  is  meant  to  incentivise  and 
for  5G 
improve  company  digitalisation.  As 
technology,  24  Spanish  cities  will  host  several 
pilot  projects  and  the  launch  of  commercial  5G 
services.  The  public  consultation  to  define  the 
spectrum  management  of  the  700 MGz,  1.5 GHz 
and  26 GHz  bands  was  closed  in  mid-2019  and 
Spain expects to finalise the migration to the band 
700 MGz by June 2020.  

little  use  of  new 
Spanish  SMEs  make 
technologies. In 2016, 19% of SMEs were selling 
online  (in  comparison  with  17%  of  EU  SMEs), 
against 36% for large firms, and only 10% of their 
turnover comes from online sales. The adoption by 
SMEs  of  other  technologies  also  remains  low  in 
the field of big data (10% of companies) and cloud 
access  (21%  of  companies).  The  low  level  of 
adoption of digital technologies by SMEs might be 
due to a general lack of digital skills and shortage 
of  ICT  specialists 
in  Spain  (see  Box 4.3.2) 
(European  Commission,  2020c).  With  the  main 
objective  of  fostering  the  adoption  of  digital 
technologies in the Spanish agro-food and forestry 
sector,  the  Ministry  of  Agriculture,  Fisheries  and 
Food adopted a Digitisation Strategy for the Agri-
Food  and  Forestry  Sector  and  Rural  Areas  in 
March 2019. 

Spain is doing well in the area of digital public 
services,  having  implemented  its  e-government 
strategy  in  good  time.  The  digital-by-default 
principle  is  the  central  point  of  the  strategy  for 
simplifying  Spanish  public 
improving 

and 

the 

administration, reducing burdens and saving costs. 
The 2015-2020 Plan for the Digital Transformation 
of  the  Public  Administration  sets  out  the  strategy 
for 
implementation  of  digital-by-default 
services throughout the central administration. The 
deadline for its implementation has been extended 
until  October  2020  to  make  allowances  for  some 
specific  aspects  that  are  not  yet  fully  developed, 
mainly in some smaller administrations. 

is  below 

The  low  share  of  ICT  specialists  renders  the 
challenge of digitisation more difficult. Although 
more  and  more  Spaniards  are  going  online,  only 
57%  of  people  aged  between  16  and  74  have  at 
least  basic  digital  skills.  In  addition,  the  share  of 
ICT  specialists  as  a  percentage  of  the  total 
workforce 
the  EU  average  (3.2% 
compared to 3.9%), and is particularly low among 
women  (only  1.1%  of  total  female  employment). 
However, Spain performs above the EU average as 
regards well as regards to ICT graduates (49) (4.0% 
of graduates, above the EU average of 3.6%). The 
Government  is  working  in  a  new  digital  strategy 
with a focus on addressing digital skills in different 
areas of the economy.  

(49)  ICT  graduates  are  a  consolidated  figure  for  graduates  in 
Information  and  Communication  Technologies,  Computer 
use,  Database  and  network  design  and  administration, 
Software  and  applications  development  and  analysis,  and 
Inter-disciplinary programmes and qualifications involving 
information and Communication Technologies. 

72 

 
 
                                                           
4.4. Competitiveness, reforms, and investment 

allocation  of  services  and  the  free  movement  of 
professionals throughout Spain (51).  

certain 

growth 

beyond 

Size  contingent  regulations  in  favour  of  SMEs 
may  negatively  affect  their  growth  dynamics. 
Such  regulations  are  often  put  in  place  to  reduce 
the  regulatory  and  fiscal  burden  on  smaller  firms, 
but  they  can  have  the  unintended  effect  of 
discouraging 
size 
thresholds.  A  2017  government  study  by  the 
Ministry  of  Economy  identified  more  than  130 
regulations  with  size  contingent  thresholds;  when 
measured  in  terms  of  employees,  many  of  these 
thresholds  concentrate  around  250,  50  and  10 
employees.  Softening  or  (gradually)  removing  the 
most  critical  ones  could  help  firms  grow.  At  the 
same  time,  the  fact  that  many  firms  are  unable  to 
grow  beyond  a  certain  size  and  benefit  from 
economies of scale is likely to be primarily related 
to  within-firm  features  bearing  on  productivity, 
such as their ability to innovate, and make best use 
of 
and 
capital 
their 
management.  

endowment 

human 

The  collaborative  economy  is  creating  new 
opportunities for consumers and workers, but it 
can  have  undesired  effects  on  markets  and 
workers.  While  the  collaborative  economy  has 
been  developing  strongly  in  sectors  such  as 
tourism (short-term rentals) or private transport, its 
potential  extends  to  other  areas.  By  exerting 
competitive  pressure  on  established  business,  it 
may  enhance  consumers'  welfare  and  overall 
productivity  in  the  economy.  In  the  absence  of  a 
coordinated national approach to the  collaborative 
economy,  local  authorities  in  some  areas  have 
introduced  restrictions  on  short-term  rentals  of 
accommodation  and  private-hire  vehicles.  These 
restrictions have been motivated by concerns about 
the  availability  of  affordable  housing  and  the 
protection  of 
the 
environment.  The  collaborative  economy  also 
generates  new  employment  opportunities,  often 
enabling  people  to  work  according  to  flexible 
arrangements. However, the working conditions of 
platform workers should be monitored carefully, as 

communities 

local 

and 

4.4.2.  MARKET FUNCTIONING AND 

GOVERNANCE 

Regulatory framework 

on 

the 

Spain  weigh 

Restrictiveness and fragmentation of regulation 
business 
within 
environment  and  prevent  companies  from 
(50). 
benefitting 
According  to  the  World  Bank  “Doing  Business” 
report  (2020),  Spain  was  ranked  30th  out  of  190 
countries in the world on “ease of doing business” 
(see also EIB Investment Survey, 2019).  

from  economies  of  scale 

the 

Restrictions  in  retail  services  remain  high. 
According  to  the  Retail  Restrictiveness  Indicator 
(see  European  Commission,  2018f),  Spain  is 
among 
ten  Member  States  with  most 
restrictions on setting up retail premises, while it is 
the  second  most  restrictive  when  it  comes  to 
operating  them.  According  to  the  OECD  Product 
Market  Regulation  Indicator  (OECD,  2018d), 
Spain  is  also  more  restrictive  than  most  of  the  22 
EU  members  of  the  OECD.  Regulating  retail 
business  is  the  responsibility  of  the  autonomous 
communities,  and  there  are  significant  differences 
between  regions  in  the  level  of  restrictions  on 
establishing  and  running  retail  businesses.  The 
most  restrictive  autonomous  communities  (La 
Rioja, Extremadura and Galicia) appear to be more 
than  three  times  more  restrictive  than  the  least 
restrictive  ones  (Murcia  and  Castilla-La  Mancha), 
which suggests that there may be scope for reform 
in  a  number  of  regions  (Ministry  of  Industry, 
Trade and Tourism, 2019). 

to 

continue 

in  2016 

indicator  developed  by 

restrict 
Regulatory  barriers 
competition in certain professional services. The 
restrictiveness 
the 
Commission 
(COM(2016) 820 final) 
showed  that  a  number  of  professional  services  in 
Spain  (e.g.  architecture,  civil  engineering,  tourist 
guide  services)  are  subject  to  more  restrictive 
regulation 
the  EU  average.  Moreover, 
regional  differences  as  regards  membership  of 
the  efficient 
professional  bodies  can  affect 

than 

(50)  Mora-Sanguinetti and Pérez-Valls, 2020. 

indicator 

(51)   The  OECD’s  Product  Market  Restrictiveness  Indicator 
(PMR) may show different scores for the same professions. 
This 
the 
restrictiveness  indicator  developed  by  the  Commission  in 
2016,  which  uses  a  different  methodology  and  takes  into 
account  additional  restrictions,  such  as  those  applied  at 
regional level. 

is  not  directly  comparable 

to 

73 

                                                           
                                                           
4.4. Competitiveness, reforms, and investment 

number of directives incorrectly transposed and the 
delays  in  complying  with  Court  rulings  are  also 
substantial.  Ineffective  enforcement  of  single 
market  rules  increases  uncertainty  for  economic 
operators,  reducing  their  incentives  to  invest. 
Additional  efforts  to  eliminate  the  compliance 
deficit  would  boost  cross-border  trade  and  boost 
real incomes in the long run (53). Moreover, in the 
area  of 
the  Single  Market  Transparency 
Directive(54),  Spain  accounts  for  only  3.6%  of  all 
notifications  sent  by  the  Member  States  to  the 
European  Commission  from  2016  to  2018,  which 
appears low in view of the existence of regulatory 
powers at different levels of government in Spain. 
Improved administrative coordination would result 
in  a  higher  number  of  notifications  of  draft 
technical  regulations,  which  helps  to  prevent 
barriers to trade in the internal market.  

Public procurement 

Progress  on  establishing  a  new  governance 
structure  for  public  procurement  has  been 
modest. Two years after the entry into force of the 
law on public sector contracts, the new governance 
structure  is  still  not  fully  operational  (see  also 
Section 4.1.2  and  European  Commission,  2019a). 
The  Cooperation  Committee  has  not  met  since  it 
was  established  in  February  2018.  The  newly 
established Independent Office for Regulation and 
Supervision of Public Procurement lacks sufficient 
resources  to  perform  its  duties.  As  a  result,  it  has 
focused  on  its  supervisory  function  so  far  leaving 
aside most of its other tasks. In December 2019, it 
adopted  its  first  annual  supervision  report,  whose 
conclusions and recommendations are expected to 
be  used  in  the  elaboration  of  the  upcoming 
National  Strategy  on  Public  Procurement.  Despite 
some  preparatory  work, 
the  new  National 
Evaluation  Office  is  not  yet  fully  operational,  as 
the implementing regulation has not been adopted, 
yet,  and  there  is  a  lack  of  resources.  This  office 
will  be  responsible  for  issuing  mandatory  reports 
the  financial  sustainability  of  concession 
on 
projects.  Overall, 
these  preventive  measures 
designed to improve budget and contract execution 
are not being used.  

(53)  A  full  transposition  of  internal  market  rules  and  the 
infringement  proceedings,  have  been 
elimination  of 
estimated to increase real income with up to 1 percent and 
intra-EU trade by to 14% (WIFO, 2019). 

(54)  Directive (EU) 2015/1535 

their  jobs  are  often  precarious  or  of  low  quality 
(see Section 4.3.1).  

activities, 

Lack  of  effective  multi-level  cooperation  and 
limited  awareness  of 
its  benefits  among 
potential users delay the implementation of the 
Market  Unity  Law.  The  Law  was  adopted  in 
2013  with  a  better  regulation  aim.  It  seeks  to 
remove  restrictions  to  the  establishment  of  firms 
and  the  free  movement  of  goods  and  services 
across  the  country  by  enhancing  better  regulation 
principles and cooperation among Administrations. 
Typical  cases  of  these  concern  restrictions  on 
professional 
and 
telecommunications. 
conferences, 
bringing together regional and central government 
representatives to discuss and define approaches to 
improve regulation and overcome fragmentation in 
a number of policy areas, are intended to facilitate 
the  implementation  of  the  law.  However,  these 
important  cooperation  instruments  are  still  to  be 
fully  exploited.  Moreover,  the  enforcement  of  the 
law  would  be  more  effective  if  it  were  better 
known.  The  authorities  have  therefore  taken  steps 
to  increase  awareness  of  the  law  among  potential 
users,  and  civil  servants  are  being  trained  in  its 
application.  

trade, 
Sectoral 

transport 

High-speed rail passengers may reap important 
benefits  from  the  forthcoming  opening  of  the 
rail  passenger  market 
in  Spain,  although 
features  of  its  rail  network  will  hamper  the 
spilling  over  of  benefits  from  the  high-speed  to 
conventional  network.  The  Fourth  Railway 
Package (52)  “market  pillar”  opens  the  domestic 
rail  passenger  markets  in  all  Member  States  to 
competition. It will become effective with the train 
timetable  change  in  December  2020.  Its  opening-
up  seems  to  be  attracting  keen  interest  among 
European train operators. However, in Spain, only 
the high-speed network has the International Union 
of  Railways  (UIC)  standard  gauge.  Therefore, 
access  to  the  Iberian  gauge  network  will  be 
hampered  by  the  incompatibility  of  the  national 
standards  for  its  rolling  stock  with  the  UIC 
standards.  

The  level  of  overall  enforcement  of  internal 
market rules is very low in Spain. The delays in 
the  number  of 
transposing  directives  and 
infringement  cases  double  the  EU  average.  The 

(52)  https://ec.europa.eu/transport/modes/rail/packages/2013_en  

74 

                                                           
                                                           
4.4. Competitiveness, reforms, and investment 

where the availability of electronic means is more 
widespread. Measures to improve the performance 
of 
to 
advancing  towards  SDG 16  (Peace,  justice  and 
strong institutions). 

justice  system  would  contribute 

the 

Fight against corruption  

Although  perceptions  of  corruption  have 
decreased significantly over the past few years, 
they remain  high. The perception that corruption 
is  widespread  has  decreased  substantially  since 
2013 in Spain (88% in 2019 vs 97% in 2013), but 
it remains much higher than the EU average (63% 
in  2019).  Half 
the  companies  surveyed  see 
corruption  as  a  serious  problem  when  doing 
business  in  Spain  (+6  pps  more  in  2019  than  in 
2013)  and  almost  half  say 
the  same  about 
patronage  and  nepotism  (46%,  10  pps  more  in 
2019 than in 2013). The percentage  of companies 
that  think  corruption  is  widespread  in  public 
procurement  has  also  risen  somewhat  (75%  in 
2019  vs  71%  in  2015). (European  Commission, 
2019f).  On  a  global  scale,  Spain’s  score  on  the 
the  World 
control  of  corruption 
Governance  Indicators  and  on  the  Corruption 
Perception  Index  have  improved  somewhat  in 
2019 (55).  

index 

in 

Legislative  plans  regarding 
lobbying  and 
whistle-blower protection, and an omnibus anti-
corruption  bill  were  discontinued  at  the  end  of 
the  previous  legislature.  However,  the  Spanish 
Parliament  adopted  a  new  ethical  code  for  its 
Members 
in  April  2019  and  established  a 
Parliamentary  Office  of  Conflicts  of  Interests  to 
interpret  and  oversee  its  implementation.  The 
Criminal Code was revised in February 2019 with 
a  view  to  transposing  the  Directive  “on  the  fight 
against  fraud  to  the  Union's  financial  interests  by 
means  of  criminal  law” (56).  The  transparency 
framework  continues  to  be  implemented  and  all 
Spanish  regions  now  have 
legal 
framework  in  this  area.  The  workload  of  the 
Transparency  Council  has  continued  to  increase, 
reaching  1.780  complaints  2019,  compared  with 
517  in  its  first  year  of  operation  in  2015.  The 
Council  faces  challenges  as  regards  staff  and 

their  own 

(55)  Spain now ranks in the 72th percentile on this index. 
(56)  Directive (EU) 2017/1371 of the European Parliament and 

the Council of 5 July 2017. 

of 

by 

efficient 

adoption 

The 
the  National  Public 
Procurement  Strategy  has  been  delayed.  The 
law  on  public  sector  contracts  stipulated  its 
adoption  by  August  2018.  This  Strategy  is  to  be 
drawn  up  with  the  participation  of  all  levels  of 
government,  based  on  robust  analysis  identifying 
possible 
inefficiencies  and  dysfunctions.  The 
strategy  is  intended  as  a  tool  for  making  public 
procurement  more 
clarifying 
responsibilities  and  establishing  inter-institutional 
cooperation.  It  may  also  help  to  set  the  direction 
for  specific  policy  priorities  such  as  green 
in  support  of  eco-
innovative  procurement 
innovation,  the  circular  economy,  and  energy 
efficiency  (see  Section 4.5).The  Strategy  would 
also cover issues such as further interconnection of 
existing  electronic  platforms,  the  fight  against 
corruption and the professionalisation of the public 
sector  in  procurement  matters.  In  this  area,  there 
are plans for a programme of certification of high-
level specialists in public procurement. 

switch 

to  mandatory 

Once completed, the effective implementation of 
the 
electronic 
procurement  from  March  2018  will  be  a 
significant  step  towards  transparency  in  public 
is  scope 
procurement.  At  present, 
to 
the  quality  of 
improve 
various 
information 
procurement  platforms.  The  ability  to  exploit 
available  big  data  in  an  effective  manner  by  the 
various  institutions  and  bodies  dealing  with  the 
different  procurement  aspects  under  Spanish  law 
remains a challenge. 

the  supervision  of 

published 

across 

there 

the 

Justice system 

length  of  proceedings 

in  civil  and 
The 
commercial  litigious  cases  has  been  increasing 
since  2016.  In  addition,  the  clearance  rate  in  this 
category  of  cases  has  fallen  further  (86.7%  in 
2018).  As  more  cases  came  to  court  than  were 
resolved  during  the  period  in  question,  the  case 
backlog increased by 16.5%. The clearance rate in 
administrative courts of first instance has also been 
falling.  In  2018  it  fell  below  100%  (EU  Justice 
Scoreboard, 2020, forthcoming).  

Spain  performs  well  on  quality  of  justice.  In 
the 
particular  as  regards  e-justice, 
implementation  of  the  project  “Justicia  Digital” 
continued,  and  according  to  the  2020  EU  Justice 
Scoreboard,  Spain  is  among  the  Member  States, 

in  2019, 

75 

                                                           
4.4. Competitiveness, reforms, and investment 

been somewhat uneven,  with some poorer regions 
having  converged  more  slowly  than  richer  ones 
towards  the  EU  average  in  GDP  per  capita 
(Graph 4.4.12) 

Graph 4.4.10: Regional competitiveness index, 2019 

(1) EU-28=0 
© EuroGeographics Association for administrative 
boundaries 
Source: Eurostat, DG REGIO elaboration. 

budget  and  has  had  no  President  since  November 
2017.  

While Spain has no overarching anti-corruption 
strategy,  the  National  Strategy  against  Serious 
and  Organised  Crime  sets  out  some  relevant 
initiatives. The strategy, adopted in February 2019 
(Ministry of the Presidency, 2019) (57) is designed 
to  improve  investigative  capacity  and  access  to 
financial  databases  and  to  boost  inter-agency 
cooperation.  The  Special  Prosecutor’s  Office 
against  Corruption  and  Organised  Crime  received 
additional  staff  resources  following  a  government 
measure  taken  in  April  2019.  There  were  some 
visible successes with prosecuting and sanctioning 
high-level corruption. Despite this, with regards to 
perceptions,  only  15%  of  businesses  in  Spain 
believe  that  individuals  and  businesses  caught 
engaging 
in  petty  corruption  are  adequately 
punished (last in the EU), while only 21% believe 
that  penalties  are  adequately  applied  for  those 
caught  bribing  a  senior  official.  Measures  to 
address  corruption  would  contribute  to  advancing 
towards  SDG 16 
justice  and  strong 
institutions). 

(Peace, 

4.4.3.  REGIONAL DISPARITIES 

The  vast  majority  of  Spanish  regions  rank 
below the EU average on the 2019 EU Regional 
Competitiveness  Index.  Madrid  and  the  Basque 
Country  are  exceptions  (Graph 4.4.10).  The  index 
in  2019  was  similar  to  the  2016  index  for  most 
regions,  except  for  Extremadura  and  Melilla, 
where the index fell sharply. Spanish regions score 
well  in  terms  of  health  services,  but  significant 
gaps  remain  with  respect  to  the  EU  average, 
mostly in terms of labour market efficiency, higher 
education and lifelong learning.  

Variation  of  regional  GDP  per  capita  within 
Spain  is  moderate  in  the  EU  context,  but 
remains above its pre-crisis level. In 2017, GDP 
per  capita  in  Madrid  was  almost  double  that  in 
Extremadura  (Graph 4.4.11).  After  increasing  in 
the  aftermath  of  the  crisis,  regional  disparities 
started to decrease in 2014, but in 2017 they were 
still larger than before the crisis. Convergence has 

(57)  BOE 

 46, 

of 

22 

February 

2019, pages 17048- 

17074 https://www.boe.es/diario_boe/txt.php?id=BOE-A-
2019-2442. 

76 

                                                           
 
 
 
Graph 4.4.11: GDP per capita (in PPS) in Spain, 2017 

(1) Index, EU-28=100 
© EuroGeographics Association for administrative 
boundaries 
Source: Eurostat, DG REGIO elaboration. 

Graph 4.4.12: GDP per capita by NUTS2 regions: level in 2010 

and growth rate 2010-2017 

4.4. Competitiveness, reforms, and investment 

Andalusia,  Murcia  and  Extremadura.  Therefore, 
the higher regional disparities in terms of GDP per 
capita than in terms of labour productivity are due 
to  the  poorer  labour  market  outcomes  in  the 
regions  with  lower  GDP  per  capita:  in  2018,  the 
employment  rate  was  above  67%  in  six  regions 
with high GDP per capita and below 55% in  four 
regions  with  low  GDP  per  capita.  Similarly,  the 
unemployment rate varied between 10% and more 
than 20%.  

tertiary  education 

Large  regional  disparities  persist 
in  key 
education  and  social  indicators,  particularly  as 
regards early school leaving rates and participation 
in  early  childhood  education  and  care  (0-3 
years). (58)  In  2018,  in  half  the  regions,  over  20% 
of  18-24  year-olds  had  completed  at  most  lower 
secondary education.  Around 35% of people aged 
30-34  had  completed 
in 
Andalusia and Extremadura, against around half in 
the  Basque  Country. 
Madrid,  Asturias  and 
Unemployment  tends  to  be  higher  in  the  regions 
with  the  lowest  educational  attainment  levels. 
(Graph 4.4.13).  The  share  of  people  at-risk-of-
poverty  or  social  exclusion  (AROPE)  also  varies 
significantly  across  Spanish  regions,  again  with  a 
strong  correlation  with  the  unemployment  rate. 
Over  one  third  of  people  in  Ceuta,  Extremadura, 
Andalusia,  the  Canary  Islands  and  Castilla-La 
Mancha are at risk of poverty and social exclusion, 
while  the  rate  remains  below  13%  in  the  Basque 
Country  and  Navarre.  As  regards  healthcare, 
waiting  times  for  elective  surgery  in  Spain  are 
different  amongst 
regions  and  have  overall 
increased.  

(58)  Early  leavers from  education and training account for less 
than  10%  of  18-24-year-olds  only  in  the  Basque  Country 
(6.9%) and Cantabria (9.8%). 

(1) Bubble size: population, 2017 
(2) The orange bubble represents the capital region 
Source: Eurostat, DG REGIO elaboration. 

Regional variation in employment rates is wide. 
When  measured  by  GDP  per  employed  person  – 
that  is,  labour  productivity  -  regional  differences 
within  Spain  are  even  smaller:  in  2017,  labour 
productivity  in  the  Basque  Country,  Madrid  and 
Navarre  was  only  about  27%  higher  than  in 

77 

MDGAASCBPVNCRIARCLCMEXCTVCIBANMCCEMLCN-1.0-0.50.00.51.01.55060708090100110120130140Annual real GDP per head growth 2010-2017GDP (PPS) per head in 2017 (EU=100)Capital regionOther NUTS2 regionsNational averageEU28 
 
 
  
                                                           
4.4. Competitiveness, reforms, and investment 

Graph 4.4.13: Unemployment rate and population educated 

to tertiary level, 2018, Spain NUTS2 regions 

while expenditure by the central government stood 
at  19%.  Moreover,  autonomous  communities  and 
local authorities hold significant regulatory powers 
and  shape  policies  in  a  variety  of  socio-economic 
areas. Most growth-friendly public expenditure is a 
matter  for  sub-national  authorities.  This  is  why 
effective  coordination  between  different  levels  of 
for  effective  policy 
government 
implementation  of  growth-enhancing  public 
expenditures. 

is  crucial 

Source: Eurostat, DG REGIO elaboration. 

regions 

leading 

All regions in Spain score below the EU average 
in  the  2019  Regional  Innovation  Scoreboard. 
The  innovation  system  is  highly  concentrated  in 
(the  Basque  Country, 
three 
Catalonia  and  Madrid),  where  R&D  intensity  is 
nevertheless  below  that  of  the  EU  as  a  whole. 
Furthermore,  although  Spain  has  one  of  highest 
broadband  coverages  of  networks  capable  of 
providing  gigabit  speeds  internet  access  speeds, 
the  digital  divide  between  rural  and  urban  areas 
persists.  While  over  80%  of  households  in  urban 
areas  can  connect  to  Gigabit  speeds  through  fiber 
networks, only 40.3% can do so in rural areas (59).  

Spain  faces  severe  demographic  challenges 
caused by depopulation (mostly in rural areas), 
and  ageing.  Over  80%  of  Spain’s  municipalities 
saw  their  population  fall  between  2011  and  2018. 
Combined  with  ageing  (see  Section 4.3.3),  the 
effects  of  depopulation  pose  a  challenge  for  the 
provision of basic services, such as healthcare and 
long-term care services. 

Regional and local levels of government account 
for  a  sizeable  share  of  public  expenditure  in 
Spain. Public expenditure at sub-national levels of 
government reached almost 21% of GDP in 2018, 

(59)  In December 2019, the European Commission approved a 
State-aid scheme for €400 million running from 2020-2022 
to support the rollout of high speed networks in white and 
certain grey areas, mostly rural. 

78 

MDGAASCBPVNCRIARCLCMEXCTVCIBANMCCEMLCN3035404550556051015202530Population aged 30-34 with tertiary education  level attainement, 2018 Unemployment rate (% of active population), 2018  
                                                           
4.4. Competitiveness, reforms, and investment 

The  Canary  Islands (60),  the  Balearic  Islands 
and the autonomous cities of Ceuta and Melilla 
face specific challenges. Their remote and isolated 
location  and  small  size  impose  higher  transport 
and  communication  costs,  generate 
limited 
economies of scale, and result in dependence on a 
limited  number  of  economic  activities.  These 
factors  constrain  their  growth  and  convergence 
with  national  indicators  in  a  number  of  socio-
economic areas. In the specific case of the Canary 
Islands  and  the  Balearic  Islands,  the  intensive 
development  of  tourism  and  related  activities  put 
their ecosystems under pressure (see Box 4.4.1 and 
Section 4.5). 

(60)  The  Canary  Islands  is  an  outermost  region  as  defined  in 

Article 349 of TFEU. 

79 

                                                           
4.5.  ENVIRONMENTAL SUSTAINABILITY 

Adapting  to  climate  change,  ensuring  a  more 
efficient  water  and  waste  management, 
reducing  emissions  from  transport,  further 
decarbonising  energy  and  increasing  energy 
efficiency  are  key  challenges 
for  Spain. 
According  to  the  2019  draft  National  Energy  and 
Climate  Plan (NECP) (61), the  energy transition is 
estimated  to  require  €236  billion  in  public  and 
private  investments  up  to  2030.  This  is  estimated 
to potentially lift GDP by 1.8% and create 364,000 
additional  jobs  by  2030 (62).  Actions  to  reskill 
workers  exposed  to  the  consequences  of  climate 
change  and  the  energy  transition  will  be  required 
to maintain social and territorial cohesion. A more 
systematic use of environmental taxation may also 
help  make 
(see 
Section 4.1).  

policies  more 

effective 

Adapting to climate change 

The  geographical  location  and  topography  of 
Spain  make  it  particularly  vulnerable  to  the 
adverse effects of climate change. The impact of 
climate  change  will  result 
in  reduced  water 
resources, coastal erosion, loss of biodiversity and 
natural  ecosystems,  increased  soil  erosion  and 
more 
weather-related 
phenomena.  It  is  estimated  that  flood  damage 
alone  will  cost  an  average  of  €800 million  per 
year. (Ministry  for  the  Ecological  Transition  and 
the Demographic Challenge, 2019).  

frequent 

extreme 

The 2006 National Climate Change Adaptation 
Plan is currently being implemented through a 
third  work  programme.  Work  is  in  progress  to 
prepare  the  next  National  Adaptation  Plan,  2021-
2030.  Spain  performs  well  on 
involving 
stakeholders  and  developing  knowledge  to  tackle 
climate  risks.  However,  land  use  and  spatial 
planning  policies  do  not  fully  factor  in  climate 
risks,  yet.  Nor  are  prevention  and  preparedness 
risk 
strategies  under 
management  plans  in  place,  yet.  Insurance  or 
policy instruments that could provide incentives to 
invest 
are 
underdeveloped,  except  in  agriculture.  Certain 

the  national  disaster 

prevention  measures 

risk 

in 

(61)  The  Commission  will  assess,  in  the  course  of  2020,  the 
final National Energy and Climate Plan. Spain has not yet 
submitted its final Plan. 

(62)  An  updated  draft  of  the  NECP  with  revised  figures  has 

been published on 20 January 2020: 
https://www.miteco.gob.es/images/es/pniec_2021-
2030_borradoractualizado_tcm30-506491.pdf 

sectors,  such  as  agriculture,  fisheries  or  tourism, 
are  more  exposed  to  these  effects  and  sectoral 
strategies are needed to mitigate their impact. 

Water shortages will be exacerbated by climate 
change.  In  certain  areas  of  Spain,  water  demand 
exceeds  the  water  resources  available  and  this 
shortage  will  worsen  in  the  future (European 
Commission,  2019g).  Sectors  like  agriculture, 
tourism and energy are heavily dependent on water 
supply and irrigation is crucial for the economy in 
most rural areas (63). Implementing an appropriate 
water-pricing  policy  to  recover  the  costs  of  water 
services  in  all  river  basin  districts  would  be  a 
means  to  promote  a  more  efficient  use  of  water, 
especially in the agriculture sector (64).  

the  regional 

In  water  management,  further  infrastructure 
investments  are  needed  to  reduce  leaks  in  the 
networks  and 
improve  water  supply  and 
wastewater treatment. According to INE data, in 
2016, 16.3% of the water supplied at national level 
was  lost.  Wastewater  reuse  stood  at  10.4%  in 
2016,  which  is  quite  high  compared  to  the  rest  of 
top 
the  EU.  However,  without 
performers, notably Murcia, Valencia, the Balearic 
and the Canary Islands, the average  percentage of 
reutilised water accounted for only 2.4% in Spain. 
OECD estimates the investment needed up to 2030 
to  ensure  compliance  by  Spain  with  the  Urban 
Waste Water Directive at €24,867 million (OECD, 
2020). A National Plan for Wastewater, Sanitation, 
Efficiency,  Saving  and  Water  Reuse  is  currently 
being  drawn  up.  These  initiatives  will  help  make 
sustained progress towards SDG 6, which seeks to 
ensure availability and sustainable management of 
water and sanitation for all. 

Tackling emissions in transport 

Transport  is  the  sector  where  greenhouse  gas 
emissions  continue  to  grow  most.  The  total 

(63)  In 2018 annual water consumption in Spain was 30,169.38 
Hm3  of  which  78%  is  for  agricultural  use,  18%  for 
domestic use and 4% for industrial use. 

(64)  Commission  own  analysis.  In  the  River  Basin  Districts 
(RBDs),  cost  recovery  (for  irrigation  water  abstraction, 
treatment  and  distribution)  ranges  from  0.01  €/m3  on 
average in Minho-Sil and La Palma to 0.9 €/m3 in Eastern 
Cantabrian.  While  all  RBDs  reported  that  they  include 
included 
financial  costs  and 
environmental  and  resource  costs  in  their  economic 
analysis,  the  extent  to  which  financial  costs  were  covered 
varies  from  22%  in  the  Gomera  to  94%  in  the  Balearic 
Islands. 

they  “partially” 

that 

80 

 
                                                           
 
                                                           
4.5. Environmental sustainability 

traffic  congestion 

poor  air  quality  (especially  because  of  nitrogen 
dioxide (NO2) emissions) is a concern in the major 
metropolitan areas, notably Madrid and Barcelona, 
where  seasonal  problems  with  air  quality  are 
exacerbated  by 
(European 
Environmental  Agency,  2019b).  Encouraging  the 
use  of  alternative  fuels  and  electric  vehicles  in 
public  and  private  transport  and  ensuring  the 
efficient  use  of  vehicles  could  help  address  this 
problem  and  meet  SDG 11.  For  this  purpose, 
financial  incentives  for  zero  and  low  emission 
vehicles,  the  set-up  of  low  emissions  zones  in 
cities  and  the  improvement  of  public  transport 
could  be  helpful 
first  National 
Programme  for  Control  of  Air  Pollution  was 
approved by the Council of Ministers in September 
2019. 

tools.  The 

Energy efficiency and decarbonisation  

Spain  pursues  an  ambitious  decarbonisation 
strategy.  In  2017,  the  14  coalmines  in  operation 
were  producing  3  million  tons  of  brown  and  hard 
coal. With the  exception of one  mine, all of them 
have  been  closed  now.  Despite  the  closures,  coal 
was  still  an  important  energy  source  in  the 
electricity  mix  (14.3%,  Red  Eléctrica  de  España). 
The share of coal in the electricity mix is expected 
to  go  down  to  5.0%  in  2019  (provisional  figures 
for  2019,  Red  Eléctrica  de  España).  Most  coal-
fired  power  plants  have  largely  exceeded  their 
service  life  and  are  being  de-commissioned,  with 
than  planned. 
many  plants  stopping  earlier 
Accelerated  closures  increase  the  need  for  new 
electricity generating capacity, notably renewables, 
to  avoid 
increasing  Spain’s  dependency  on 
imported fossil fuels. 

Spain has a target of 20% of renewables of final 
gross  energy  consumption  in  2020  and  42%  in 
2030. With a share of 17.4% in 2018, Spain is on 
track to meet its 2020 target of 20%. However, it is 
the  first  time  since  2011  that  this  share  has 
decreased  in  comparison  with  the  previous  year. 
Spain  introduced  in  2014  a  new  support  scheme 
for  renewable  electricity  to  address  some  of  the 
inefficiencies  and  problems  created  by 
the 
previous  remuneration  schemes (67).  However,  in 
order  to  reach  42%  in  2030  set  in  the  National 

(67)  Approved  by  Decision  of  10  November  2017  "SA.40348: 
Spain –  Support  for  electricity  generation  from  renewable 
energy sources, cogeneration and waste" (OJ C/442/2017). 

be 

€64.3 billion 

external  costs  of  road  transport  in  Spain  are 
estimated 
annually, 
to 
corresponding 
to  5.18%  of  Spain’s  GDP 
(2016) (European  Commission,  2019h).  This 
reflects mostly costs associated with road transport 
such  as  accidents  and  congestion,  but  also  noise, 
air pollution, climate  and habitat damage and fuel 
production  costs.  According  to  the  latest  national 
projections, in the absence of new measures, Spain 
is  expected  to  miss  its  2030  target  by  10  pps. 
(percentage points) for sectors not included in  the 
EU  Emissions  Trading  System,  such  as  transport, 
buildings,  agriculture  and  waste.  However,  if  the 
additional  measures  outlined  in  the  2019  draft 
NECP were implemented – such as encouraging a 
modal  shift  for  transport  –  the  2030  target  would 
be overachieved by 13 pps (65). 

for 

road 

lines 

transport 

Spain  heavily  relies  on  roads  for  freight 
transport.  Overall,  Spain  is  well  served  in  terms 
of  transport  infrastructure,  but  it  relies  almost 
exclusively  on 
freight. 
Investments implementing the requirements of the 
TEN-T (Trans-European  Transport) (66)  network 
are  foreseen  to  improve  links  with  ports  and 
logistic  hubs,  upgrade  railway 
to  UIC 
(International  Union  of  Railways)  gauge  and 
support a gradual modal shift towards railways and 
short sea shipping. In this context, the completion 
of the Atlantic and Mediterranean corridors would 
facilitate  using  rail  for  exports  to  Central  Europe. 
the 
Additional 
investments  are  needed 
the 
maintenance  of 
conventional rail lines connecting the inland cities 
with  Madrid  and  the  Atlantic  and  Mediterranean 
corridors.  Finally, 
road 
transport  in  line  with  the  Intelligent  Transport 
System  Strategy,  and  the  building  up  of  an 
alternative  fuels  infrastructure  will  improve  the 
safety and sustainability of road transport. 

for 
the  existing  roads  and 

the  optimisation  of 

Beyond  the  modal  shift,  further  action  could 
support  and  accelerate  the  transition  to  clean 
and  sustainable  mobility.  Overall,  emissions  in 
Spain  have  fallen  in  recent  decades.  However, 

(65)  An  updated  draft  of  the  NECP  with  revised  figures  has 
2020: 
on 

been 
https://www.miteco.gob.es/images/es/pniec_2021-
2030_borradoractualizado_tcm30-506491.pdf 

published 

January 

20 

(66)  Regulation (EU) No 1315/2013 of the European Parliament 
and  of  the  Council  of  11  December  2013  on  Union 
guidelines  for  the  development  of  the  trans-European 
transport network and repealing Decision No 661/2010/EU 

81 

                                                           
                                                           
4.5. Environmental sustainability 

Energy and Climate Plan, Spain has calculated that 
investments in renewable energy would amount to 
€101.6  billion  until  2030,  and  legislation  still 
needs  to  be  put  in  place.  If  any  new  support 
scheme  was  needed,  compliance  with  State  aid 
rules would ensure a cost-effective support suitable 
to promote renewables. Reaching 42% renewables 
would greatly contribute to further reducing GHG 
emissions,  the  import  dependency  of  fossil  fuels 
and  improving  air  quality.  These  efforts  will  also 
ensure progress on SDG 7.  

were  directly  related  to  coal  mining (68).  Large 
areas in these regions face challenges due to weak 
economic  activity,  remoteness  and  demographic 
decline (69). The Spanish Government is helping to 
tackle the social consequences in the most affected 
areas  through  its  Just  Transition  Strategy.  The 
European  Commission  has  also  proposed  a  Just 
Transition  Fund  to  support  people  in  the  regions 
most affected (see Annex D). 

Sustainable industry 

in 

Further 

Spain’s electricity interconnection capacity with 
neighbouring  countries  is  still  well  below  the 
target of at least 10% of its installed capacity by 
2020. 
electricity 
investment 
interconnections  is  needed  to  meet  this  target  and 
the  target  of  15%  interconnection  capacity  by 
2030.  New  electricity  interconnectors  are  being 
developed  between  Spain  and  France  (in  the  Bay 
of  Biscay)  and  between  Spain  and  Portugal.  As 
some  renewable  sources  are  variable,  higher 
interconnection  capacity  would  enable  Spain  to 
balance its network better, when those sources are 
not  available,  while  making  it  easier  for  Spain  to 
supply  surplus  power  to  its  neighbours.  Higher 
interconnection  capacity  is  therefore  important 
both  for  security  of  supply  and  for  promoting 
renewables. 

for  2030  underline 

The Spanish business sector is key to addressing 
the  sustainability  challenge  set  out  in  SDG 9 
through  digitisation, 
innovation,  a  more 
efficient  use  of  resources  and  the  upskilling  of 
people.  The  General  Guidelines  on  Industrial 
Policy 
this  aspect  (see 
Section 4.4.1)  addressing  in  particular  the  need  to 
reconcile  industrial  progress  with  sustainability. 
One of the main challenges is the transformation of 
the  automotive 
industry,  which  directly  and 
indirectly  accounts  for  more  than  10%  of  GDP, 
12.5%  of  exports,  and  9%  of  employment.  This 
transformation would contribute to the transition to 
a  clean  and  sustainable  mobility  using  more 
efficient  technologies,  emissions  reductions,  and 
improvement 
and 
comfort (ANFAC, 2019). 

connectivity, 

safety 

in 

Spain  is  not  on  track  to  meet  its  2020  energy 
efficiency  targets.  Spain  also  needs  to  increase 
investments  into  energy  efficiency  in  order  to 
contribute  to  the  EU  target  of  32.5%  by  2030. 
Spain’s  draft  NECP  sets  the  target  for  primary 
energy consumption at 92.8 Mtoe, while the target 
for  final  energy  consumption  is  74.4 Mtoe.  The 
targets were set at a sufficiently ambitious level to 
take  account  of  the  need  to  increase  collective 
efforts  to  achieve  the  2030  energy  consumption 
targets.  Meeting  them  will  require  continued 
in 
investments 
buildings.  This  would  also  contribute  importantly 
to reducing emissions. 

in  energy  efficiency,  notably 

Energy  decarbonisation  poses  threats  to  social 
cohesion  in  coal  mining  areas.  Coal  mining  and 
related sectors have had a significant weight in the 
local  economy  of  Asturias,  Castile  and  León, 
Aragon,  Andalusia  and  Galicia,  where  6,400  jobs 

Digitisation  has  great  potential  for  improving 
resource  efficiency  and  reducing  emissions. 
Developing  and  applying  artificial  intelligence, 
5G,  the  internet  of  things,  low-power  processors, 
cloud  and  edge  computing  will  facilitate  more 
efficient  use  of  energy  and 
in 
manufacturing,  construction,  agri-food  and  other 
sectors.  Digital  technologies  and  applications  can 
save 7-10 times more emissions than they produce 
and  enable  a  9-20%  reduction  of  global  CO2 
emissions  by  2030  (GeSi  and  Deloitte,  2019, 
Digital Europe, 2019). 

resources 

The  public  sector  has  the  potential  to  help 
achieve  progress  on  SDG 12  through  green 
procurement. The objective of the Plan for Green 
Public  Procurement 
the  central  public 
in 
administration  for  2018-2025  is  to  boost  the 

(68)  At national level, there were about 10 000 indirect jobs in 

coal related activities (Alves Dias et al., 2018). 

(69)  General  Guidance  on  the  National  Strategy  for  the 

demographic challenge. 

82 

                                                           
4.5. Environmental sustainability 

Spanish  circular  economy  strategy.  The  Plan 
includes  a  series  of  general  green  procurement 
criteria,  of  a  voluntary  nature.  These  may  be 
into  procurement  documents  as 
incorporated 
selection or award criteria, technical specifications 
and  special  conditions  for  contract  performance. 
Some regions have also implemented measures on 
green  procurement  criteria  (Catalonia  and  the 
Basque Country) (European Commission, 2019g). 

The  national  strategy  on  the  circular  economy 
drafted  in  2018  is  still  in  the  process  of  being 
adopted.  Regional  strategies  exist  or  are  in  the 
pipeline,  but  additional  efforts  are  also  needed  at 
regional level in order to make further progress on 
SDG 12. 

Sustainable tourism 

Spain's  resource  efficiency  has 
improved 
significantly since 2009, but waste management 
and  the  circular  economy  remain  important 
challenges. In terms of resource productivity (how 
efficiently the economy uses material resources to 
produce  wealth),  Spain  is  performing  better  than 
average  in  the  EU,  with  €2.72 /kg  compared  to  € 
2.24 /kg for the EU in 2018 (Eurostat). Despite the 
progress  in  the  transition  towards  a  circular 
economy,  waste  management  is  still  a  challenge, 
but  with  substantial  differences  between  regions. 
The  amount  of  landfilled  waste,  which  remains 
considerable, is preventing faster progress towards 
to 
the 
the 
circular 
Report’ 
Commission’s 
(2018) (European  Commission,  2018o),  Spain  is 
one of the Member States at risk of missing the EU 
target  of  recycling  50%  of  municipal  waste  by 
2020. According to the last available data, Spain’s 
overall  municipal  recycling  rate  was  of  36%  in 
2018.  Barriers  to  investing  in  this  sector  include 
low  landfill  disposal  charges  and  lack  of  co-
ordination  between  the  different  administrative 
levels  (European  Investment  Bank,  2019).  The 
capital  investment  requirements  needed  to  reach 
EU 
at 
€2,457 million  for  2021-35  for  Spain  as  a 
whole (Eunomia,  European  Commission,  COWI, 
2019). 

economy.  According 
‘Early  Warning 

estimated 

recycling 

targets 

are 

including 

Tourism  faces  the  challenge  of  becoming  more 
sustainable.  The  Spanish  tourism  sector  faces 
several  challenges, 
the  pressure  of 
demand  on  infrastructure,  natural  resources  and 
destinations, as well as needing to adapt to climate 
change and its consequences for inland and coastal 
tourism.  A  new  Strategy  for  Sustainable  Tourism 
2030  was  published  in  January  2019  by  the 
Spanish  Ministry  of  Industry,  Trade  and  Tourism 
with  the  objective  of  diversifying  the  Spanish 
tourism sector away from its emphasis on “sun and 
beach” tourism (see Box 4.4.1). Important tools to 
make  the  tourism  sector  more  sustainable  could 
include 
(“polluter  pays  principle”), 
certification  of  sites (70),  the  reskilling  of  workers 
in the sector, and as sustainable land-use planning. 
The  Sectorial  Plan  for  Nature  and  Biodiversity 
Tourism 2014-2020 is a positive step. Around 27% 
of the Spanish territory belongs to the Natura 2000 
network,  and  Spain  could  further  capitalise  on  its 
rich  natural  capital  to  promote  green  growth  and 
job creation through tourism. 

taxation 

(70)  In  the  year  2019,  Spain  has  48  hotels  with  EMAS 
certificate  (Eco-Management  and  Audit  Scheme)  and  31 
tourist  services  (hotels  and  campsites)  with  certificate  of 
the EU Ecolabel. 

83 

                                                           
ANNEX A: OVERVIEW TABLE 

2019 country-specific recommendations (CSRs)  

Summary assessment (1) 

Spain  has  made  Limited  Progress  in  addressing 
CSR 1 (this overall assessment of CSR 1 does not 
include  an  assessment  of  compliance  with  the 
Stability and Growth Pact). 

in  2020,  corresponding 

CSR 1: Ensure that the nominal growth rate of net 
primary  government  expenditure  does  not  exceed 
0.9% 
to  an  annual 
structural  adjustment  of  0.65%  of  GDP.  Take 
measures  to  strengthen  the  fiscal  and  public 
procurement 
levels  of 
government.  Preserve  the  sustainability  of  the 
pension  system.  Use  windfall  gains  to  accelerate 
the reduction of the general government debt ratio. 
(MIP relevant)  

frameworks 

all 

at 

  Ensure  that  the  nominal  growth  rate  of  net 
primary  government  expenditure  does  not 
exceed  0.9%  in  2020,  corresponding  to  an 
annual structural adjustment of 0.65% of GDP.  

  The  compliance  assessment  with  the  Stability 
and  Growth  Pact  will  be  included  in  Spring 
2020  when 
for  2019  will  be 
available.  

final  data 

  Take  measures 
framework 

to 

strengthen 

the 

fiscal 

  No progress 

  and  public  procurement  frameworks  at  all 

levels of government. 

  Limited  Progress.  Further  progress  on 
establishing  an  effective  new  governance 
structure  for  public  procurement  has  been 
modest.  Almost  two  years  after  the  entry  into 
force of the law on public sector contracts, the 
new  governance  structure  is  still  not  fully 
functioning.  The  elaboration  of  the  Public 
Procurement Strategy foreseen for is delayed. 

  Preserve 
system. 

the  sustainability  of 

the  pension 

  No  progress.  Departures  from 

through  Royal  Decree  Laws. 

the  2013 
pension  reform  has  been  made  on  an  ad-hoc 
basis 
In 
particular,  pensions  have  been  revalued  by 
inflation (CPI) rather than the Index of Pension 
Revaluation, resulting in a more rapid increase 
in  pension 
the 
sustainability mechanism, which was supposed 
to  kick-in  in  2019  and  which  links  initial 
pension 
life 
expectancy, was postponed to 2023. 

expenditure.  Moreover, 

the  evolution  of 

levels 

to 

  Use  windfall  gains  to  accelerate  the  reduction 

of the general government debt ratio. 

  The  compliance  assessment  with  the  Stability 
and  Growth  Pact  will  be  included  in  Spring 
2020,  when  final  data  for  2019  will  be 
available. 

84 

 
 
 
 
CSR 2:  Ensure 
that  employment  and  social 
services  have  the  capacity  to  provide  effective 
support.  Foster  transitions  towards  open-ended 
contracts,  including  by  simplifying  the  system  of 
hiring  incentives.  Improve  support  for  families, 
reduce  fragmentation  of  national  unemployment 
assistance  and  address  coverage  gaps  in  regional 
minimum  income  schemes.  Reduce  early  school 
leaving and improve educational outcomes,  taking 
into 
Increase 
cooperation between education and businesses with 
a view to improving the provision of labour market 
relevant  skills  and  qualifications,  in  particular  for 
information and communication technologies. 

disparities. 

regional 

account 

  Ensure  that  employment  services  have  the 

capacity to provide effective support. 

  Ensure that social services have the capacity to 

provide effective support. 

A. Overview table 

Spain  has  made  Limited  Progress  in  addressing 
CSR 2  

plan 

started, 

(ALMP), 

  Some progress. During 2019 the hiring of the 
the  regional  public 
3 000  new  staff  by 
employment 
as 
(PES) 
services 
envisaged  in  the  2019-2021  Action  Plan  for 
the  2019-2021 
Youth  Employment  and 
long-term 
the 
for 
ReincorporaT 
unemployed.  Both  plans  contain  positive 
features  to  improve  the  effectiveness  and 
outreach  of  PES  and  active  labour  market 
been 
policies 
complemented  with  other  measures  (e.g.,  the 
2019-2021  call  for  proposals  corresponding  to 
for 
subventions 
provide 
employees). 
individualised services to jobseekers, including 
through profiling and IT tools, are slowly being 
developed.  Average  spending  on  ALMP 
measures  per  unemployed  person  remains  low 
and  only  1  in  4  unemployed  use  PES  for  job 
search.  Large 
remain 
concerning the performance of regional PES.  

regional  disparities 

courses 
to 

Measures 

training 

have 

and 

for 

  Some  Progress.  Coordination 

between 
employment and social services continues to be 
enhanced.  Two  new  working  groups  were 
created in 2019 as part of the Social Inclusion 
Network  (RIS),  while  three  pilot  projects  to 
improve 
three 
the  coordination  started 
regions.  Further  political  involvement  in  some 
regions 
faster  progress.  The 
deployment  of  the  Universal  Social  Card  has 
continued  in  2019  but  its  use  at  regional  level 
remains limited. 

is  allowing 

in 

85 

 
 
 
A. Overview table 

  Foster 

transitions 

towards 

open-ended 

contracts, 

 

including  by  simplifying  the  system  of  hiring 
incentives.  

  Limited progress. Spain continues to have the 
highest  share  of  employees  on  temporary 
contracts  in  the  EU,  despite  the  increase  of 
open-ended  contracts  among  newly  created 
jobs.  The  strengthened  capacity  of  labour 
inspectorates, along with the action plans in the 
frame of the Master Plan for Decent Work, are 
contributing  to  the  conversion  of  fixed-term 
contracts  in  open-ended  contracts.  However, 
temporary  contracts  are  widespread  even  in 
sectors  with  little  seasonality  (including  the 
public 
is 
increasingly shorter (50 days on average during 
the  year  2019,  with  30%  of  all  temporary 
contracts  shorter  than  one  week).  Measures 
such as the increase of the social security costs 
for contracts shorter than 6 days are not having 
a  clear  effect  yet.  The  organisation  of 
recruitment  competition  to  reduce  fixed-term 
employment  in  the  public  sector  sped  up  in 
2019, but the share of public sector employees 
on  temporary  contract  remains  well  above  the 
8% 
the  2020 
target  set  for 
recruitment competitions. 

the  end  of 

duration 

sector), 

their 

and 

  Limited  progress.  Hiring  incentives  account 
for  around  40%  of  total  spending  on  ALMP, 
despite  the  lack  of  evidence  on  the  positive 
effects of these subsidies for promoting quality 
employment.  The  Government  removed  some 
hiring incentives at the end of 2018, such as the 
“Contract 
to  entrepreneurs”. 
However, the plans for the young and the long-
term  unemployed  contain  new  forms  of  hiring 
incentives.  The  ongoing  spending  review  on 
hiring incentives carried out by AIReF (due by 
mid-2020)  may  provide  helpful  inputs  on 
avenues for reform. 

support 

for 

 

Improve support for families,  

  Limited Progress. The overall impact of social 
transfers  (other  than  pensions)  in  reducing 
child poverty in Spain remains the lowest in the 
EU.  This  partly  reflects  the  low  coverage  and 
adequacy  of  family  benefits.  Means-tested 
child  benefits  target  only  the  most  deprived 
(around  one  in  two  children  at  risk  of  poverty 
or  social  exclusion  do  not  receive  it)  and  tax 
allowances  are  of  limited  benefit  for  low-to-
medium  income  families,  which  determines  a 
regressive  pattern  of  the  financial  support  to 
families  with  children.  Steps  taken  in  2019  to 
fight child poverty are an improvement but do 

86 

A. Overview table 

not match the extent of the challenge. The rise 
in the child benefit for poor families is the first 
in 18 years and is having limited effects, as it is 
not helping to reduce the risk of poverty and is 
having  a  very  limited  impact  on  the  reduction 
of the poverty gap. 

 

fragmentation 
reduce 
unemployment assistance  

of 

national 

  and  address  coverage  gaps 
minimum income schemes.  

in 

regional 

  Reduce early school leaving  

  and improve educational outcomes, taking into 

account regional disparities.  

  Limited  progress.  There  has  been  no  further 
progress  in  this  area  during  2019.  Political 
deadlock  has  postponed  the  government  plans 
to  streamline  the  multiple  schemes  of  non-
contributory  unemployment 
at 
announced 
national 
development of a subsistence minimum income 
is on hold. The report commissioned to AIReF 
and  published  in  June  2019  offers  interesting 
insight that may help outline these plans.  

level,  while 

assistance 

the 

  Limited  progress.  The  take  up  of  regional 
minimum 
remains  very 
income  schemes 
limited in average, estimated at around 20% of 
potential  beneficiaries,  although  some  regions 
are  showing  positive  results.  Amounts,  and 
consequently  impact  on  poverty  reduction, 
present  large  regional  disparities,  and  three 
regions  still  make  the  right  to  a  means-tested 
minimum 
income  conditional  on  budget 
availability.  The  issue  of  portability  of  the 
benefits across regions remains unsolved.  

  Limited Progress. Early school leaving (ESL) 
rate remains the highest in the EU and regional 
disparities  persist,  with  20 pps  difference 
between  the  best  and  the  worst  performing 
regions. The ESL rate keeps decreasing but at a 
slower  pace  than  in  previous  years.  Measures 
adopted try to mitigate the challenge but are of 
limited scope. 

  Limited  progress.  Levels  of  basic  skills 
measured  through  the  2018  PISA  survey  have 
worsened slightly, amid significant differences 
across regions. Grade repetition in primary and 
lower secondary school remains very high. 

87 

A. Overview table 

 

Increase  cooperation  between  education  and 
businesses  with  a  view  to  improving  the 
provision  of  labour  market  relevant  skills  and 
qualifications,  

  Some 

between 
progress.  Cooperation 
education  institutions  and  business  remains 
weak  but  improving,  in  a  context  of  strong 
skills  mismatches.  The  new  Strategic  Plan  for 
Vocational  Education  and  training  (VET)  may 
play  a  role  in  reducing  skills  mismatches  and 
early  school  leaving,  once  fully  implemented. 
It should help in making VET more responsive 
to  the  needs  of  the  productive  system,  by 
expanding  the range of courses,  increasing the 
number of places and strengthening the system 
of distance learning. The business sector’s role 
is  being 
in 
reinforced. 

the  design  of  qualifications 

 

particular 

in 
communication technologies. 

for 

information 

and 

  Some  progress.  The  recently  adopted  2019-
including  a 
2022  VET  Strategy  proposes 
module on digitisation in all VET programmes 
at  all  levels.  It  also  intends  to  ensure  that  the 
VET  programmes  cover  the  needs  of  the  new 
digital sectors. Work is underway on a Digital 
Skills  National  Strategy.  Basic  digital  skills 
levels  remain  below  the  EU  average  and  the 
proportion of ICT specialists represents a lower 
percentage  of  the  workforce  compared  to  the 
EU  average.  Female  ICT  specialists  account 
for a mere 1.1% of total female employment. 

CSR 3: Focus investment-related economic policy 
on  fostering 
innovation,  resource  and  energy 
efficiency, upgrading rail freight infrastructure and 
extending electricity interconnections with the rest 
into  account  regional 
of 
disparities.  Enhance  the  effectiveness  of  policies 
supporting research and innovation.  

the  Union, 

taking 

  Focus  investment-related  economic  policy  on 

fostering innovation,  

Spain  has  made  Limited  Progress  in  addressing 
CSR 3  

to 

innovation.  Efforts 

  Limited  Progress:  Spain  has  made  limited 
progress  on  increasing  investment  in  research 
and 
increase  R&D 
investment  by  both  large  and  small  firms 
through  improved  public  support  for  private 
investments  have  seen  limited  progress.  The 
rationale of R&I policy initiatives is not always 
clear. 
political 
initiatives/strategies  (IA,  Blue  Economy,  Start 
Up)  lack  a  budget,  coordination  with  existing 
strategies, and an assessment  of their potential 
impact. 

Some 

new 

the 

of 

88 

  Resource efficiency 

  and energy efficiency 

  upgrading rail freight infrastructure 

  extending  electricity  interconnections  with  the 
rest  of  the  Union,  taking  into  account  regional 
disparities. 

A. Overview table 

  Limited  Progress:  Overall,  Spain  has  not 
increased  environmental  investments  in  2019. 
However,  some  good  initiatives  have  been 
adopted  or  are  under  preparation.  The  first 
National  Programme 
for  Control  of  Air 
Pollution  was  approved  by  the  Council  of 
Ministers  in  September  2019.  The  Plan  for 
the  central 
Green  Public  Procurement 
Administration  for  the  period  2018-2025  was 
approved  in  December  2018;  it  has  now  to  be 
implemented. A National Plan for Wastewater, 
Sanitation, Efficiency, Saving and Water reuse 
is under elaboration. The National Strategy on 
Circular Economy was prepared in 2018, but it 
has not been adopted yet. 

in 

  Some  progress:  Meeting  the  2030  energy 
efficiency  and  consumption  targets  requires 
continued  investments  in  energy  efficiency, 
notably  in  buildings.  Initiatives  such  as  the 
National Plan for Energy Efficiency 2017-2020 
and  the  National  Fund  for  Energy  Efficiency 
2014-2020  can  contribute  to  giving  greater 
focus on investment in this area. In the building 
renovation  sector,  the  State  Plan  for  the 
Housing  Sector  2018-2021 
the 
improvement of energy efficiency  in buildings 
through assistance and aid programs 

includes 

  Limited  progress:  Overall  investments  in  rail 
transport  infrastructure  and  in  freight  rail 
transport  infrastructure  have  not  increased  in 
2019. 

  Some 

New 
under 

progress: 
are 

electricity 
development 
interconnectors 
between France and Spain (Bay of Biscay) and 
between  Spain  and  Portugal.  There  has  been 
some progress on ongoing projects, but further 
support  is  needed.  Spain  continues  to  be 
actively  involved  in  regional  fora  to  extend 
electricity interconnections with the rest of the 
EU. 

89 

  Enhance 

of 
supporting research and innovation. 

effectiveness 

the 

A. Overview table 

policies 

introduced 

  Limited  progress.  There  has  been  limited 
progress  on  increasing  the  systematic  use  of 
evaluations of research and innovation policies. 
to 
Some  measures  have  been 
decrease  red  tape  or  to  improve  working 
conditions  of  researchers.  Profound  reforms  to 
improve  carriers  of 
to 
stimulate  mobility  and  to  promote  jobs  and 
carriers for industrial-based researchers are still 
lacking.  Reforms  to  improve  collaboration 
between  public  research  and  private  firms  are 
still 
between 
Autonomous  Communities  and  the  national 
government could still be improved.  

Coordination 

researchers, 

missing. 

top 

CSR 4: Further the implementation of the Law on 
Market  Unity  by  ensuring  that,  at  all  levels  of 
government, rules governing access to and exercise 
of  economic  activities,  in  particular  for  services, 
are  in  line  with  the  principles  of  that  Law  and  by 
improving cooperation between administrations. 

  Further  the  implementation  of  the  Law  on 
Market  Unity  by  ensuring  that,  at  all  levels  of 
government,  rules  governing  access  to  and 
exercise of economic activities, in particular for 
services,  are  in  line  with  the  principles  of  that 
Law 

  and  by 

improving 

cooperation  between 

administrations. 

  Spain has made limited progress in addressing 

CSR 4. 

  Limited progress. Some  measures  were taken 
to  implement  the  Law  on  Market  Unity  with 
limited  effect  and  progress  is  slow.  The  main 
measures  are:  a)  the  improvement  of  training 
raising  with 
for  officials,  b)  awareness 
publications  on  better  market 
regulation, 
monthly  publications  on  Market  Unity,  an 
improved web page, dissemination events, and 
c) 
information  and 
consolidation of doctrine. 

improvement  of 

the 

  Limited  progress: 

Improving  cooperation 
between national, regional and local authorities 
is  relevant  to  make  progress.  Some  measures 
have  been  implemented/initiated  such  as:  a) 
fostering  relations  with  the  network  of  contact 
points  for  the  Law  on  Market  Unity,  b) 
fostering  relations  with  other  departments 
within  the  national  authorities,  c)  improving 
the  procedures  for  mechanisms  laid  down  in 
Article  26  of  Law  on  Market  Unity,  d) 
cooperation with sectorial conferences through 
the  preparation  of  notes  and  e)  improved 
cooperation  with  the  competition  authority.  In 
spite  of  these  measures,  progresss  is  slow.

90 

 
 
 
Europe 2020 (national targets and progress)  

Employment rate target: 74%.  

R&D target set in the NRP: 2% of GDP  

National  greenhouse  gas  (GHG)  emissions  target:  
- 10% in 2020 compared with 2005 (in sectors not 
included in the EU emissions trading scheme)  

2020 renewable energy target: 20%  

Energy  efficiency,  2020  energy  consumption 
targets:  

  Spain's  2020  energy  efficiency  target  is  122.6 
energy 
in 
Mtoe 
consumption  (87.23 Mtoe  expressed  in  final 
energy consumption)  

expressed 

primary 

A. Overview table 

The  employment  rate  for  20-64  age  group 
increased  to  68.0%  in  the  first  three  quarters  of 
2019,  remaining  6.7 pps  below  the  EU  average 
(72.2%) and 6.0 pps below the Europe 2020 target 
for Spain.  

With an overall R&D spending of 1.24%, reaching 
the  2%  national  R&D  intensity  target  in  2020 
remains practically unattainable. 

Emissions  from  sectors  not  covered  by  the  EU 
Emission  trading  scheme  were  reduced  by  14% 
between  2005  and  2018,  which  is  above  Spain's 
2020  target  of  -10%  compared  to  2005.  Based  on 
the  latest  national  projections  taking  into  account 
existing measures, the 2020 target is expected to be 
exceeded by a margin of 4 pps. However, Spain is 
expected  to  miss  the  2030  target  of  -26%  by  10 
pps.  

With  a  renewable  energy  share  of  17.4%  (2018), 
Spain is above its indicative trajectory to reach the 
2020  target,  despite  a  slight  decrease  compared 
with 2017, which will make the increase to meet its 
2020 target, steeper.  

Latest  preliminary  figures  (2018)  show  a  slight 
decrease 
energy 
to  124.6  Mtoe  primary 
consumption  and  an  increase  to  86.8  Mtoe  final 
energy  consumption.  Whilst  the  figures  for  final 
energy consumption still remain below the Spanish 
indicative 
energy 
target, 
consumption  exceeds  it.  Spain  should  further 
intensify  its  commitment  to  energy  efficiency  in 
order  to  reverse  this  trend  and  make  sure  that 
demand remains below both targets during the next 
years. 

primary 

2020 

Early school/training leaving target: 15%.  

Tertiary education target: 44% of population aged 
30-34.  

The  rate  of  early  school  leaving  (ESL)  (18-24 
years old) decreased by 0.4 pps in 2018 to 17.9%, 
still the highest in the EU and almost 3 pps above 
the  Spanish  Europe  2020  target.  The  indicator 
varies  greatly  across  regions  and  it  is  especially 
high for students with disabilities and non-EU born 
background. 

In  2018,  the  proportion  of  30-34  year-old  tertiary 
graduates  increased  further  to  42.4%.  It  is  above 
the  EU  average  (40.7%)  and  not  far  from  the 
Europe 2020 national target of 44%. 

91 

 
A. Overview table 

Target for reducing the number of people at risk of 
poverty  or  social  exclusion,  expressed  as  an 
absolute  number  of  people:  -1,400,000  compared 
to 2008  

Although  the  number  of  people  at  risk  of  poverty 
or  social  exclusion  is  decreasing  since  2014,  in 
2018 it was still 1,261,000 more than in 2008. The 
Europe 2020 target is therefore far from reach. 

(1) The  following  categories  are  used  to  assess  progress  in  implementing  the  country-specific 
recommendations (CSRs):  

No  progress:  The  Member  State  has  not  credibly  announced  nor  adopted  any  measures  to  address  the 
CSR. This category covers a number of typical situations to be interpreted on a case by case basis taking 
into account country-specific conditions. They include the following:  

  no legal, administrative, or budgetary measures have been announced  

 

 

in the national reform programme, 

in any other official communication to the national Parliament/relevant parliamentary committees 
or the European Commission, 

  publicly (e.g. in a press statement or on the government's website); 

  no non-legislative acts have been presented by the governing or legislative body; 

 

the  Member  State  has  taken  initial  steps  in  addressing  the  CSR,  such  as  commissioning  a  study  or 
setting up a study group to analyse possible measures to be taken (unless the CSR explicitly asks for 
orientations or exploratory actions). However, it has not proposed any clearly-specified measure(s) to 
address the CSR. 

Limited progress: The Member State has:  

  announced certain measures but these address the CSR only to a limited extent; and/or 

  presented legislative acts in the governing or legislative body but these have not been adopted yet and 

substantial further, non-legislative work is needed before the CSR is implemented; 

  presented  non-legislative  acts,  but  has  not  followed  these  up  with  the  implementation  needed  to 

address the CSR. 

Some progress: The Member State has adopted measures  

 

that partly address the CSR; and/or  

 

that address the CSR, but a fair amount of work is still needed to fully address the CSR fully as only a 
few of the measures have been implemented. For instance, a measure or measures have been adopted 
by the national Parliament or by ministerial decision but no implementing decisions are in place.  

Substantial progress: The Member State has adopted measures that go a long way towards addressing 
the CSR and most of them have been implemented.  

Full  implementation:  The  Member  State  has  implemented  all  measures  needed  to  address  the 
CSR appropriately.  

92 

 
 
ANNEX B: COMMISSION DEBT SUSTAINABILITY ANALYSIS AND 

FISCAL RISKS 

93 

General government debt projections under baseline, alternative scenarios and sensitivity tests2018201920202021202220232024202520262027202820292030Gross debt ratio97.696.796.696.096.196.596.996.796.596.396.095.895.7Changes in the ratio (-1+2+3)-1.0-0.9-0.1-0.60.10.30.4-0.1-0.2-0.3-0.3-0.2-0.2of which(1) Primary balance (1.1+1.2+1.3)-0.1-0.1-0.1-0.1-0.4-0.8-1.1-1.1-1.1-1.1-1.1-1.1-1.2(1.1) Structural primary balance (1.1.1-1.1.2+1.1.3)-0.4-0.8-1.1-1.0-1.1-1.1-1.1-1.1-1.1-1.1-1.1-1.1-1.2(1.1.1) Structural primary balance (bef. CoA)-0.4-0.8-1.1-1.0-1.0-1.0-1.0-1.0-1.0-1.0-1.0-1.0-1.0(1.1.2) Cost of ageing0.10.10.10.10.10.10.10.20.2(1.1.3) Others (taxes and property incomes)0.00.00.00.00.00.00.00.00.0(1.2) Cyclical component0.61.01.01.00.60.30.00.00.00.00.00.00.0(1.3) One-off and other temporary measures-0.3-0.20.00.00.00.00.00.00.00.00.00.00.0(2) Snowball effect (2.1+2.2+2.3)-0.9-0.9-0.6-0.7-0.3-0.5-0.7-1.3-1.3-1.4-1.4-1.3-1.4(2.1) Interest expenditure2.42.32.12.01.91.81.71.61.61.51.51.51.5(2.2) Growth effect-2.2-1.8-1.4-1.3-0.7-0.5-0.5-1.0-1.0-1.0-1.0-0.9-1.0(2.3) Inflation effect-1.1-1.4-1.3-1.4-1.5-1.7-1.9-1.9-1.9-1.9-1.9-1.9-1.9(3) Stock-flow adjustments-0.2-0.10.40.00.00.00.00.00.00.00.00.00.0Note: For further information, see the European Commission Debt Sustainability Monitor (DSM) 2019. b. For the medium term, the risk category (low/medium/high) is based on the joint use of the S1 indicator and of the DSA results. The S1 indicator measures the fiscal adjustment required (cumulated over the 5 years following the forecast horizon and sustained after that) to bring the debt-to-GDP ratio to 60 % by 2034. The critical values used are 0 and 2.5 pps of GDP. The DSA classification is based on the results of five deterministic scenarios (baseline, historical SPB, higher interest rate, lower GDP growth and negative shock on the SPB scenarios) and the stochastic projections. Different criteria are used such as the projected debt level, the debt path, the realism of fiscal assumptions, the probability of debt stabilisation, and the size of uncertainties. c. For the long term, the risk category (low/medium/high) is based on the joint use of the S2 indicator and the DSA results. The S2 indicator measures the upfront and permanent fiscal adjustment required to stabilise the debt-to-GDP ratio over the infinite horizon, including the costs of ageing. The critical values used are 2 and 6 pps of GDP. The DSA results are used to further qualify the long term risk classification, in particular in cases when debt vulnerabilities are identified (a medium / high DSA risk category). [2]Thechartspresentaseriesofsensitivitytestsaroundthebaselinescenario,aswellasalternativepolicyscenarios,inparticular:thehistoricalstructuralprimarybalance(SPB)scenario(wheretheSPBissetatitshistoricalaverage),theStabilityandGrowthPact(SGP)scenario(wherefiscalpolicyisassumedtoevolveinlinewiththemainprovisionsoftheSGP),ahigherinterestratescenario(+1pp.comparedtothebaseline),alowerGDPgrowthscenario(-0.5pp.comparedtothebaseline)andanegativeshockontheSPB(calibratedonthebasisoftheforecastedchange).Anadversecombinedscenarioandenhancedsensitivitytests(ontheinterestrateandgrowth)arealsoincluded,aswellasstochasticprojections. Detailed information on the design of these projections can be found in the FSR 2018 and the DSM 2019.ES - Debt projections baseline scenario[1]Thefirsttablepresentsthebaselineno-fiscalpolicychangescenarioprojections.Itshowstheprojectedgovernmentdebtdynamicsanditsdecompositionbetweentheprimarybalance,snowballeffectsandstock-flowadjustments.Snowballeffectsmeasurethenetimpactofthecounteractingeffectsofinterestrates,inflation,realGDPgrowth(andexchangerates in some countries). Stock-flow adjustments include differences in cash and accrual accounting, net accumulation of assets, as well as valuation and other residual effects.[3] The second table presents the overall fiscal risk classification over the short, medium and long term. a. For the short-term, the risk category (low/high) is based on the S0 indicator. S0 is an early-detection indicator of fiscal stress in the upcoming year, based on 25 fiscal and financial-competitiveness variables that have proven in the past to be leading indicators of fiscal stress. The critical threshold beyond which fiscal distress is signalled is 0.46. 70758085909510010511020172018201920202021202220232024202520262027202820292030Debt as % of GDP -ESBaselineEnhanced lower GDP growth scenarioAdverse combined scenarioEnhanced higher interest rate scenario70809010011020172018201920202021202220232024(% of GDP)Stochastic debt projections 2020-2024 -ESp10_p20p20_p40p40_p60p60_p80p80_p90p50Baseline70758085909510010511020172018201920202021202220232024202520262027202820292030Debt as % of GDP -ESBaselineHistorical SPB scenarioSGP scenario70758085909510010511020172018201920202021202220232024202520262027202820292030Debt as % of GDP -ESBaselineHigher interest rate scenarioNegative shock on the SPBLower GDP growth scenarioBaselineHistorical SPBLower GDP growthHigher interest rateNegative shock on SPBStochastic projectionsRisk categoryHIGHHIGHHIGHHIGHHIGHHIGHDebt level (2030)95.794.1100.7101.096.3Debt peak year20242019203020302024Percentile rank73.0%71.0%Probability debt higher51.1%Dif. between percentiles20.9MEDIUMLong termLOW(S2 = 1.8)S1S2Short termLOW(S0 = 0.4)DSAHIGHDebt sustainability analysis (detail)Medium termHIGHHIGH(S1 = 3.8) 
ANNEX C: STANDARD TABLES 

Table C.1: 

Financial market indicators 

(1) Latest data Q3 - 2019. Includes not only banks but all monetary financial institutions excluding central banks. 
(2) Latest data Q2 - 2019. 
(3) Quarterly values are annualised. 
* Measured in basis points. 
Source: European Commission (long-term interest rates); World Bank (gross external debt); Eurostat (private debt); ECB (all 
other indicators). 

94 

201420152016201720182019Total assets of the banking sector (% of GDP)(1)288.0262.5244.9234.4220.0216.9Share of assets of the five largest banks (% of total assets)58.360.261.863.768.5-Foreign ownership of banking system (% of total assets)(2)6.55.33.94.54.74.7Financial soundness indicators:(2)              - non-performing loans (% of total loans)8.16.35.74.43.73.4              - capital adequacy ratio (%)13.614.514.715.415.415.4              - return on equity (%)(3)6.76.65.07.08.27.6Bank loans to the private sector (year-on-year % change)(1)-4.8-2.3-1.60.1-1.9-0.4Lending for house purchase (year-on-year % change)(1)-3.7-4.2-2.8-2.3-1.1-1.4Loan-to-deposit ratio(2)90.391.792.589.390.692.3Central bank liquidity as % of liabilities(1)6.26.16.97.97.96.4Private debt (% of GDP)168.2155.8147.5139.7133.5-Gross external debt (% of GDP)(2) - public48.851.349.648.949.953.8    - private54.650.047.342.442.041.3Long-term interest rate spread versus Bund (basis points)*155.7123.9130.3123.8102.593.0Credit default swap spreads for sovereign securities (5-year)*71.472.668.137.833.625.4 
  
 
  
 
C. Standard tables 

Table C.2: 

Headline Social Scoreboard indicators 

(1) People at risk of poverty or social exclusion (AROPE): individuals who are at risk of poverty (AROP) and/or suffering from 
severe material deprivation and/or living in households with zero or very low work intensity. 
(2) Unemployed persons are all those who were not employed but had actively sought work and were ready to begin 
working immediately or within two weeks. 
(3) Gross disposable household income is defined in unadjusted terms, according to the draft 2019 joint employment report. 
(4) Reduction in percentage of the risk-of-poverty rate, due to social transfers (calculated comparing at-risk-of-poverty rates 
before social transfers with those after transfers; pensions are not considered as social transfers in the calculation). 
(5) Average of first three quarters of 2019 for the employment rate, unemployment rate and gender employment gap. 
Source: Eurostat. 

95 

201420152016201720182019 5Equal opportunities and access to the labour marketEarly leavers from education and training (% of population aged 18-24)21.920.019.018.317.9:Gender employment gap (pps)10.211.211.511.912.112.0Income inequality, measured as quintile share ratio (S80/S20)6.86.96.66.66.0:At-risk-of-poverty or social exclusion rate(1) (AROPE)29.228.627.926.626.1:Young people neither in employment nor in education and training (% of population aged 15-24)17.115.614.613.312.4:Dynamic labour markets and fair working conditionsEmployment rate (20-64 years)59.962.063.965.567.067.9Unemployment rate(2) (15-74 years)24.522.119.617.215.314.2Long-term unemployment rate (as % of active population)12.911.49.57.76.45.5Gross disposable income of households in real terms per capita(3) (Index 2008=100) 88.091.793.995.096.7:Annual net earnings of a full-time single worker without children earning an average wage (levels in PPS, three-year average)219992258423077:::Annual net earnings of a full-time single worker without children earning an average wage (percentage change, real terms, three-year average)-0.771.081.94:::Public support / Social protection and inclusionImpact of social transfers (excluding pensions) on poverty reduction(4)28.626.624.423.922.9:Children aged less than 3 years in formal childcare36.939.739.345.850.5:Self-reported unmet need for medical care0.60.60.50.10.2:Individuals who have basic or above basic overall digital skills (% of population aged 16-74):54.053.055.0::  
 
 
   
 
C. Standard tables 

Table C.3: 

Labour market and education indicators 

* Non-scoreboard indicator 
(1) Long-term unemployed are people who have been unemployed for at least 12 months. 
(2) Difference between the average gross hourly earnings of male paid employees and of female paid employees as a 
percentage of average gross hourly earnings of male paid employees. It is defined as "unadjusted", as it does not correct for 
the distribution of individual characteristics (and thus gives an overall picture of gender inequalities in terms of pay). All 
employees working in firms with 10 or more employees, without restrictions for age and hours worked, are included. 
(3) PISA (OECD) results for low achievement in mathematics for 15 year-olds. 
(4) Impact of socio-economic and cultural status on PISA (OECD) scores. 
(5) Average of first three quarters of 2019. Data for youth unemployment rate is seasonally adjusted. 
Source: Eurostat, OECD. 

96 

Labour market indicators201420152016201720182019 5Activity rate (15-64)74,274,374,273,973,773,7Employment in current job by durationFrom 0 to 11 months15,616,516,917,517,7:From 12 to 23 months6,87,48,38,79,0:From 24 to 59 months13,312,312,113,014,6:60 months or over64,363,862,660,858,7:Employment growth* (% change from previous year)1,02,82,12,72,22,2Employment rate of women(% of female population aged 20-64)54,856,458,159,661,061,9Employment rate of men (% of male population aged 20-64)65,067,669,671,573,173,9Employment rate of older workers* (% of population aged 55-64)44,346,949,150,552,253,6Part-time employment* (% of total employment, aged 15-64)15,815,615,114,914,514,5Fixed-term employment* (% of employees with a fixed term contract, aged 15-64)24,025,226,126,826,926,4Transition rate from temporary to permanent employment(3-year average)13,612,210,711,513,9:Youth unemployment rate (% active population aged 15-24)53,248,344,438,634,333,3Gender gap in part-time employment17,817,316,517,017,217,0Gender pay gap(2) (in undadjusted form)14,914,215,115,1::Education and training indicators201420152016201720182019Adult participation in learning(% of people aged 25-64 participating in education and  training)10,19,99,49,910,5:Underachievement in education(3):22,2::24,7:Tertiary educational attainment (% of population aged 30-34 having successfully completed tertiary education)42,340,940,141,242,4:Variation in performance explained by students' socio-economic status(4):13,4:::: 
  
 
 
  
C. Standard tables 

Table C.4: 

Social inclusion and health indicators 

* Non-scoreboard indicator 
(1) At-risk-of-poverty rate (AROP): proportion of people with an equivalised disposable income below 60 % of the national 
equivalised median income.  
(2) Proportion of people who experience at least four of the following forms of deprivation: not being able to afford to i) pay 
their rent or utility bills, ii) keep their home adequately warm, iii) face unexpected expenses, iv) eat meat, fish or a protein 
equivalent every second day, v) enjoy a week of holiday away from home once a year, vi) have a car, vii) have a washing 
machine, viii) have a colour TV, or ix) have a telephone. 
(3) Percentage of total population living in overcrowded dwellings and exhibiting housing deprivation. 
(4) People living in households with very low work intensity: proportion of people aged 0-59 living in households where the 
adults (excluding dependent children) worked less than 20 % of their total work-time potential in the previous 12 months. 
(5) Ratio of the median individual gross pensions of people aged 65-74 relative to the median individual gross earnings of 
people aged 50-59. 
(6) Fixed broadband take up (33%), mobile broadband take up (22%), speed (33%) and affordability (11%), from the Digital 
Scoreboard. 
Source: Eurostat, OECD. 

97 

201320142015201620172018Expenditure on social protection benefits* (% of GDP)Sickness/healthcare6.56.56.66.26.1:Disability1.91.81.71.71.6:Old age and survivors12.112.312.112.011.9:Family/children1.41.31.31.31.2:Unemployment3.32.72.21.91.8:Housing0.10.10.10.10.1:Social exclusion n.e.c.0.20.20.20.20.2:Total25.525.124.323.423.0:of which: means-tested benefits3.73.63.23.02.9:General government expenditure by function (% of GDP)Social protection18.017.717.116.916.6:Health6.26.16.16.16.0:Education4.14.14.14.04.0:Out-of-pocket expenditure on healthcare24.024.423.823.923.6:Children at risk of poverty or social exclusion (% of people aged 0-17)*32.635.834.432.931.329.5At-risk-of-poverty  rate(1) (% of total population)20.422.222.122.321.621.5In-work at-risk-of-poverty rate (% of persons employed)10.512.513.113.113.112.9Severe material deprivation rate(2)  (% of total population)6.27.16.45.85.15.4Severe housing deprivation rate(3), by tenure statusOwner, with mortgage or loan1.00.91.00.70.31.1Tenant, rent at market price3.83.33.03.12.84.2Proportion of people living in low work intensity households(4) (% of people aged 0-59)15.717.115.414.912.810.7Poverty thresholds, expressed in national currency at constant prices*705068136869708473797528Healthy life yearsFemales9.09.48.910.412.4:Males9.710.19.510.412.3:Aggregate replacement ratio for pensions(5)0.60.60.70.70.70.7Connectivity dimension of the Digital Economy and Society Index (DESI)(6):44.553.254.159.5:GINI coefficient before taxes and transfers*51.552.752.952.852.1:GINI coefficient after taxes and transfers*33.734.734.634.534.1: 
   
 
  
C. Standard tables 

Table C.5: 

Product market performance and policy indicators 

*While the indicator values from 2003 to 2013 are comparable, the methodology has considerably changed in 2018. As a 
result, past vintages cannot be compared with the 2018 PMR indicators.    
1 Value added in constant prices divided by the number of persons employed.    
2 Compensation of employees in current prices divided by value added in constant prices.    
3 The methodologies, including the assumptions, for this indicator are shown in detail here: 
http://www.doingbusiness.org/methodology.     
4 Average of the answer to question Q7B_a. "[Bank loan]: If you applied and tried to negotiate for this type of financing over 
the past six months, what was the outcome?". Answers were codified as follows: zero if received everything, one if received 
75% and above, two if received below 75%, three if refused or rejected and treated as missing values if the application is still 
pending or don't know.    
5 Percentage population aged 15-64 having completed tertiary education.    
6 Percentage population aged 20-24 having attained at least upper secondary education.    
7 Index: 0 = not regulated; 6 = most regulated. The methodologies of the OECD product market regulation indicators are 
shown in detail here: http://www.oecd.org/competition/reform/indicatorsofproductmarketregulationhomepage.htm    
8 Simple average of the indicators of regulation for lawyers, accountants, architects and engineers.    
9 Aggregate OECD indicators of regulation in energy, transport and communications (ETCR).    
Source: "European Commission; World Bank — Doing Business (for enforcing contracts and time to start a business); OECD (for 
the product market regulation indicators); SAFE (for outcome of SMEs' applications for bank loans)." 

98 

Performance indicators201320142015201620172018Labour productivity per person1 growth (t/t-1) in %Labour productivity growth in industry1.022.390.870.620.18-1.87Labour productivity growth in construction1.991.69-1.232.40-0.02-1.69Labour productivity growth in market services1.67-0.18-0.210.960.591.23Unit Labour Cost (ULC) index2 growth (t/t-1) in %ULC growth in industry0.14-2.44-1.24-0.941.353.07ULC growth in construction-4.57-1.47-0.13-1.720.784.65ULC growth in market services-2.460.741.30-1.041.001.04Business environment201320142015201620172018Time needed to enforce contracts3 (days)510510510510510510Time needed to start a business3 (days)24.014.014.013.013.012.5Outcome of applications by SMEs for bank loans40.980.970.660.560.490.55Research and innovation201320142015201620172018R&D intensity1.281.241.221.191.211.18General government expenditure on education as % of GDP4.104.104.104.004.00:Employed people with tertiary education and/or people employed in S&T as % of total employment444545464647Population having completed tertiary education5313232333334Young people with upper secondary education6646669717273Trade balance of high technology products as % of GDP-0.70-0.88-1.07-0.99-1.11-1.10Product and service markets and competition2003200820132018*OECD product market regulation (PMR)7, overall1.791.591.441.03OECD PMR7, retail3.673.482.881.67OECD PMR7, professional services82.922.742.430.94OECD PMR7, network industries92.271.651.591.09 
  
 
 
  
C. Standard tables 

Table C.6:  Green growth 

All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2010 prices) 
     Energy intensity: gross inland energy consumption (in kgoe) divided by GDP (in EUR) 
     Carbon intensity: greenhouse gas emissions (in kg CO2 equivalents) divided by GDP (in EUR) 
     Resource intensity: domestic material consumption (in kg) divided by GDP (in EUR) 
     Waste intensity: waste (in kg) divided by GDP (in EUR) 
Energy balance of trade: the balance of energy exports and imports, expressed as% of GDP.  
Weighting of energy in HICP: the proportion of 'energy' items in the consumption basket used for the construction of the HICP. 
Difference between energy price change and inflation: energy component of HICP, and total HICP inflation (annual% 
change). 
Real unit energy cost: real energy costs as% of total value added for the economy. 
Industry energy intensity: final energy consumption of industry (in kgoe) divided by gross value added of industry (in 2010 
EUR). 
Real unit energy costs for manufacturing industry excluding refining: real costs as% of value added for manufacturing sectors. 
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP. 
Electricity and gas prices for medium-sized industrial users: consumption band 500–20 00MWh and 10 000 -100 000 GJ; figures 
excl. VAT. 
Recycling rate of municipal waste: ratio of recycled and composted municipal waste to total municipal waste. 
Public R&D for energy or for the environment: government spending on R&D for these categories as% of GDP. 
Proportion of GHG emissions covered by EU emissions trading system (ETS) (excluding aviation): based on GHG emissions. 
(excl. land use, land use change and forestry) as reported by Member States to the European Environment Agency. 
Transport energy intensity: final energy consumption of transport activity including international aviation (kgoe) divided by 
gross value added in transportation and storage sector (in 2010 EUR). 
Transport carbon intensity: GHG emissions in transportation and storage sector divided by gross value added in transportation 
and storage sector (in 2010 EUR). 
Energy import dependency: net energy imports divided by gross inland energy consumption incl. consumption of 
international bunker fuels. 
Aggregated supplier concentration index: Herfindahl index covering oil, gas and coal. Smaller values indicate larger 
diversification and hence lower risk. 
Diversification of the energy mix: Herfindahl index covering natural gas, total petrol products, nuclear heat, renewable 
energies and solid fuels. Smaller values indicate larger diversification. 
* European Commission and European Environment Agency - 2018 provisional data. 
Source: European Commission and European Environment Agency (Share of GHG emissions covered by ETS); European 
Commission (Environmental taxes over labour taxes and GDP); Eurostat (all other indicators). 

99 

Green growth performance201320142015201620172018MacroeconomicEnergy intensity kgoe / €0.120.110.110.110.11-Carbon intensity kg / €0.320.320.320.300.30-Resource intensity (reciprocal of resource productivity)kg / €0.380.380.380.360.360.38Waste intensity kg / €-0.11-0.12--Energy balance of trade % GDP-3.4-2.9-2.0-1.5-1.8-2.1Weighting of energy in HICP%12.3912.3012.3811.6510.9011.14Difference between energy price change and inflation %-1.92.6-4.5-10.27.22.6Real unit of energy cost% of value added15.415.716.517.4--Ratio of environmental taxes to labour taxesratio0.120.110.120.120.11-Environmental taxes% GDP1.91.91.91.91.81.8Sectoral Industry energy intensity kgoe / € 0.090.090.080.080.08-Real unit energy cost for manufacturing industry excl. refining% of value added19.218.719.520.4--Share of energy-intensive industries in the economy% GDP7.037.197.558.427.68-Electricity prices for medium-sized industrial users€ / kWh0.120.120.120.110.100.11Gas prices for medium-sized industrial users€ / kWh0.040.040.030.030.030.03Public R&D for energy % GDP0.010.010.010.020.010.01Public R&D for environmental protection% GDP0.020.020.020.020.020.02Municipal waste recycling rate%32.530.830.033.933.136.0Share of GHG emissions covered by ETS*%38.038.541.238.440.438.6Transport energy intensitykgoe / €0.770.750.750.810.80-Transport carbon intensitykg / €1.091.051.081.101.101.07Security of energy supplyEnergy import dependency%70.272.772.971.573.9-Aggregated supplier concentration indexHHI19.725.320.718.315.9-Diversification of energy mixHHI27.226.927.027.627.8- 
  
 
ANNEX D: INVESTMENT GUIDANCE ON JUST TRANSITION FUND 

2021-2027 FOR SPAIN  

Building  on  the  Commission  proposal,  this  Annex (71)  presents  the  preliminary  Commission  services’ 
views on priority investment areas and framework conditions for effective delivery for the 2021-2027 Just 
Transition  Fund  investments  in  Spain.  These  priority  investment  areas  are  derived  from  the  broader 
analysis  of  territories  facing  serious  socio-economic  challenges  deriving  from  the  transition  process 
towards  a  climate-neutral  economy  of  the  Union  by  2050  in  Spain,  assessed  in  the  report.  This  Annex 
provides  the  basis  for  a  dialogue  between  Spain  and  the  Commission  services  as  well  as  the  relevant 
guidance  for  the  Member  States  in  preparing  their  territorial  just  transition  plans,  which  will  form  the 
basis for programming the Just Transition Fund. The Just Transition Fund investments complement those 
under  Cohesion  Policy  funding  for  which  guidance  in  the  form  of  Annex  D  was  given  in  the  2019 
Country Report for Spain72. 

With the closure of the coalmines and the ongoing decommissioning of the coal-fired power plants, Spain 
has engaged in an ambitious decarbonisation strategy of its energy production. This transition comes with 
significant  social  and  economic  consequences  in  the  concerned  areas,  and  a  temporary  increase  of  the 
energy dependency of the country. 

The  coal-mining  sector  has  lost  more  than  8 000 jobs  since  2008,  mostly  in  Asturias,  Teruel  (Aragon), 
and  León  and  Palencia  (Castilla  y  León)  (73).  At  the  end  of  2018,  14  coal-fired  power  plants  were 
operating in Spain, four in Asturias, four in León and Palencia (Castilla y León), three in Cádiz, Almería 
and  Córdoba  (Andalucía),  two  in  A  Coruña  (Galicia),  and  one  in  Teruel  (Aragon),  with  an  installed 
capacity of around 10 000 MW (74). Around 3 300 people were working in the operation and maintenance 
of these power plants, while 10 000 indirect jobs would be concerned by the closure of the coalmines and 
of the coal-fired power plants (75). 

The  Spanish  Government  has  prepared  a  Just  Transition  Strategy  (76)  and  adopted  urgent  mitigation 
measures, but further action is necessary to face the social consequences in the areas concerned. Most of 
these areas are confronted with depopulation and limited economic activities, which amplify the negative 
consequences of the decarbonisation process. 

In order to tackle these challenges, high priority investment needs have been identified for diversifying 
and  making  the  regional  economy  more  modern  and  competitive  in  Asturias,  León,  Palencia,  Cádiz,  A 
Coruña, Córdoba, Almería, and Teruel. The smart specialisation strategies (77) of these regions provide an 
important framework to set priorities for innovation in support of economic transformation. Based on this 
preliminary assessment, it appears warranted that the Just Transition Fund concentrates its intervention on 
these  areas,  complementing  the  efforts  of  the  national  just  transition  strategy.  Key  actions  of  the  Just 
Transition Fund could target in particular: 

• 

• 

investment  in  the  creation  of  new  firms,  including  through  business  incubators  and  consulting 
services; 

investment  in  deployment  of  technology  and  infrastructures  for  affordable  clean  energy,  in 
greenhouse gas emission reduction, energy efficiency and renewable energy; 

(71)  This Annex is to be considered in conjunction with the EC proposal for a Regulation of the European Parliament and of the 
Council  on  the  Just  Transition  Fund  2021-2027  (COM  (2020) 22)  and  the  EC  proposal  for  a  Regulation  of  the  European 
Parliament and of the Council laying down common provisions on the European Regional Development Fund, the European 
Social Fund Plus, the Cohesion Fund, and the European Maritime and Fisheries Fund and financial rules for those and for the 
Asylum and Migration Fund, the Internal Security Fund and the Border Management and Visa Instrument (COM (2020) 23). 

(72)  SWD(2019) 1008 final 
(73)  Ministerio para la transición ecológica, Consulta de estadísticas mineras 2008-2017 
(74)  Ministerio para la transición ecológica, Informes de aplicación de la Ley 1/2005 por instalaciones, 2018 
(75)  European Commission’s Joint Research Centre, EU coal regions: opportunities and challenges ahead 
(76)  Plan Nacional Integrado de Energía y Clima (PNIEC) 2021-2030 (draft, February 2019) 
(77)  As defined in Article 2(3) of Regulation EU 1303/2013 (CPR) 

100 

 
                                                           
D. Investment guidance on Just Transition Fund 2021-2027 for Spain  

• 

• 

• 

• 

investment in the circular economy; 

investment in research and innovation activities and fostering the transfer of advanced technologies;  

productive investments in SMEs, including start-ups; and, 

investment  in  the  regeneration  and  decontamination  of  sites,  land  restoration  and  repurposing 
projects. 

Moreover, priority investment needs have been identified for alleviating the social costs of the transition 
in the above-mentioned areas. Key actions of the Just Transition Fund could target in particular: 

• 

• 

• 

upskilling- and reskilling of workers; 

job-search assistance to jobseekers; and, 

active inclusion of jobseekers. 

101 

 
ANNEX E: PROGRESS TOWARDS THE SUSTAINABLE 

DEVELOPMENT GOALS (SDGS) 

Assessment of Spain’s short-term progress towards the SDGs (78) 

Table E.1 shows the data for Spain and the EU-28 for the indicators included in the EU SDG indicator set 
used by Eurostat for monitoring progress towards the SDGs in an EU context (79). As the short-term trend 
at EU-level is assessed over a 5-year period, both the value at the beginning of the period and the latest 
available  value  is  presented.  The  indicators  are  regularly  updated  on  the  SDI  dedicated  section  of  the 
Eurostat website. 

Table E.1: 

Indicators measuring Spain’s progress towards the SDGs 

 (78) Data  extracted  on  9  February  2020 

from 

the  Eurostat  database 

(official  EU  SDG 

indicator 

set; 

see 

https://ec.europa.eu/eurostat/web/sdi/main-tables).  

(79)  The EU SDG indicator set is aligned as far as appropriate with the UN list of global indicators, noting that the UN indicators are 
selected for global level reporting and are therefore not always relevant in an EU context. The EU SDG indicators have strong 
links with EU policy initiatives. 

(Continued on the next page) 

102 

 
 
                                                           
 
  
 
E. Progress towards the Sustainable Development Goals (SDGs) 

Table (continued) 

(Continued on the next page) 

103 

 
 
 
  
 
E. Progress towards the Sustainable Development Goals (SDGs) 

Table (continued) 

(Continued on the next page) 

104 

 
 
 
  
 
E. Progress towards the Sustainable Development Goals (SDGs) 

Table (continued) 

(Continued on the next page) 

105 

 
 
 
  
 
E. Progress towards the Sustainable Development Goals (SDGs) 

Table (continued) 

Source: Eurostat 

106 

 
 
  
 
REFERENCES 

Adecco,  (2018),  Informe  Infoempleo  Adecco  XXII  Edición,  Oferta  y  demanda  de  empleo  en  España, 
https://cdn.infoempleo.com/infoempleo/documentacion/Informe-infoempleo-adecco-2018.pdf 

Andrews  D.,  G.  Nicoletti  and  C.  Timiliotis.  (2018),  “Digital  technology  diffusion:  A  matter  of 
capabilities, incentives of both?”, OECD Economics Department WP n. 1476. 

AIReF, 
https://www.airef.es/es/estudio-1-estrategia-y-procedimiento-en-la-concesion-de-subvenciones/ 

(2019),  Evaluación 

del  Gasto 

Proyecto 

Público 

2018, 

1 

(Suvbenciones), 

AIReF,  (2019a),  Evaluación  del  Gasto  Público  2018,  Proyecto  2  (Medication  dispensed  through 
https://www.airef.es/en/spending-review.-study-2---medication-dispensed-through-
prescription), 
prescription/ 

AIREF  (2019b),  Evaluación  del  Gasto  Público  2018,  Proyecto  3  (Active  labour  market  policies), 
https://www.airef.es/es/politicas-activas/ 

AIReF,  (2019c),  Evaluación  del  Gasto  Público  2018,  Proyecto  4  (University  Education  Scholarships), 
https://www.airef.es/en/study-4-university-education-scholarships/ 

AIReF,  (2019d),  Evaluación  del  Gasto  Público  2018,  Proyecto  5  (Promotion  of  Talent  and  its 
Employability  in  R&D),  https://www.airef.es/en/study-5-program-for-the-promotion-of-talent-and-its-
employability-in-rdi/ 

AIReF,  (2019e),  Evaluación  del  Gasto  Público  2018,  Proyecto  6  (RCI),  Estudio  Fortalecimiento  de  la 
Competitividad  Empresarial.  https://www.airef.es/wp-content/uploads/2019/07/ESTUDIOSR6/WEB-
PROYECTO-6_.pdf 

AIReF,  (2019f),  Evaluación  del  Gasto  Público  2018,  Proyecto  7  (Universal  Postal  Service), 
https://www.airef.es/en/spending-review.-study-7---universal-postal-service/ 

AIReF,  (2019g),  Estudio  sobre  los  programas  de  rentas  mínimas  en  España,  https://www.airef.es/wp-
content/uploads/RENTA_MINIMA/20190626-ESTUDIO-Rentas-minimas.pdf 

ANFAC,  (2019),  Spanish  Association  of  Automobile  and  Truck  Manufacturers,  Annual  Report  2018 
published in July 2019: https://anfac.com/categorias_publicaciones/informe-anual/ 

Arslanalp, S, Bornhorst, F, Gupta, S, Szehttps, E (2010), Public Capital and Growth, IMF Working Paper. 
https://www.imf.org/external/pubs/ft/wp/2010/wp10175.pdf 

(2019),  Cómo 

ATA, 
content/uploads/2019/08/np-Perfil-del-aut%C3%B3nomo-primer-semestre-2019.pdf 

los  autónomos 

el  perfil  de 

es 

en  España?,  https://ata.es/wp-

Bank of Spain, (2020), La intervención pública en el mercado del alquiler de vivienda: Una revisión de la 
experiencia  internacional,  David  López-Rodríguez  and  Maria  de  los  Llanos  Matea,  Occassional  Paper 
2002, 23 January 2020.  

Bank  of  Spain,  (2019a),  Un  análisis  del  impacto  de  las  subida  del  salario  mínimo  en  2017  sobre  la 
probabilidad  de  perder  el  empleo,  Aitor  Lacuesta,  Mario  Izquierdo,  Sergio  Puente,  Documentos 
Ocasionales Number 1902, 
https://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosOcasional
es/19/Fich/do1902.pdf 

107 

 
 
 
References 

Bank of Spain, (2019b), Recent housing market developments in Spain, Pana Alves and Alberto Urtasun, 
Economic Bulletin, 11 April 

Bank of Spain, (2019c), Recent developments in the rental market in Spain, David López-Rodriguez and 
Maria de los Llanos Matea, Economic Bulletin, 11 April 

Bank of Spain, (2019d), Financial Stability Report, 
https://www.bde.es/bde/en/secciones/informes/boletines/Informe_de_Estab 

Bank  of  Spain,  (2019e),  Exporting  Spanish  Firms.  Stylized  Facts  and  Trends,  Gutiérrez  Chacón  E  and 
Martín 
1903. 
https://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosOcasional 
es/19/Files/do1902e.pdf 

Ocasionales, 

Documentos 

Machuca 

Number 

C, 

Bank 
https://www.bde.es/bde/es/secciones/informes/boletines/Boletin_economic/ 

Economic 

(2019f), 

Bulletin 

Spain 

of 

1/2019, 

pp 

26-28. 

Bauer,  P.,  Fedotenkov,  I.,  Genty,  A.,  Hallak,  I.,  Harasztosi,  P.,  Martinez  Turegano,  D.,  Nguyen,  D., 
Preziosi,  N.,  Rincon-Aznar,  A.,  Sanchez-Martinez,  M.,  (2020).  Productivity  in  Europe:  Trends  and 
Drivers in a Service-Based Economy. JRC Technical Report. Joint Research Centre. Brussels, Belgium. 

BBVA  Research,  Situación  España  1T2020,  https://www.bbvaresearch.com/publicaciones/situacion-
espana-primer-trimestre-2020/ 

Bloom N., R. Lemos, (2014), R. Sadum,  D. Scur and J. Van Reenen, “The new empirical economics of 
management”, NBER WP 20102, May. 

Broszeit  S.,  (2016)  U.  Fritsch,  H.  Gorg  and  M.C.  Laible,  “Management  practices  and  productivity  in 
Germany”, IZA Discussion Paper 10370, November  

CEDEFOP, (2019), 2018 Skills forecast – Spain, 
https://www.cedefop.europa.eu/files/cedefop_skills_forecast_2018_-_spain.pdf  

CEDEFOP, (2018), European Skills Index, 
https://skillspanorama.cedefop.europa.eu/en/indicators/european-skills-index 

CEDEFOP, (2016), Skills Panorama, 
https://skillspanorama.cedefop.europa.eu/en/analytical_highlights/spain-mismatch-priority-occupations 

CESGAR, (2019), “La financiación de la PYME en España”. 

Choi,  A. and J. Calero (2019).  Socioeconomic inequality and students outcomes in Spanish schools. In: 
Volante, L.; Schnepf, S.V.; Jerrim, J.; Klinger, D.A. Eds.  (2019). Socioeconomic inequality and student 
outcomes. Cross-national trends, policies and practices. Chapter 6 (pages 95-110). Springer 

Congress of Deputies, press release, 2 April 2019 
http://www.congreso.es/portal/page/portal/Congreso/Congreso/SalaPrensa/NotPre?_piref73_7706063_73
_1337373_1337373.next_page=/wc/detalleNotaSalaPrensa?idNotaSalaPrensa=32975&mostrarvolver=N  

Council  of  the  European  Union  2017,  Recommendation  of  11  July  2017  on  the  on  the  2017  National 
Reform Programme of Spain and delivering a Council opinion on the 2017 Stability Programme of Spain, 
OJ C 261, 9.8.2017, p. 31. https://op.europa.eu/en/publication-detail/-/publication/7b297f6c-7cc8-11e7-
b2f2-01aa75ed71a1/language-en 

108 

 
 
 
 
 
 
References 

Christiano, L., Eichenbaum, M., Rebelo, S. (2011). “When is the government spending multiplier large?”, 
Journal of Political Economy 119, 78-121 

Department of National Security (2019). “National Cybersecurity Strategy”. 
https://www.dsn.gob.es/en/documento/estrategia-nacional-ciberseguridad-2019  

DigitalEs 
https://www.digitales.es/wp-
content/uploads/2019/09/Informe-EL-DESAFIO-DE-LAS-VOCACIONES-STEM-DIGITAL-AF-1.pdf  

(2019)  El 

vocaciones 

desafío 

STEM, 

las 

de 

DigitalEurope (2019), “Digitalisation as key for a sustainable Europe” 

Eurobarometer  (2020),  Special  Eurobarometer  498  –  Undeclared  work  in  the  European  Union 
[forthcoming] 

Eunomia, European Commission, COWI (2019). “Study on investment needs in the waste sector and on 
the financing of municipal waste management in Member States”, p. 67. 
https://op.europa.eu/en/publication-detail/-/publication/4d5f8355-bcad-11e9-9d01-
01aa75ed71a1/language-en/format-PDF  

Alves Dias, P., Kanellopoulos, K., Medarac, H., Kapetaki, Z., Miranda-Barbosa, E., Shortall, R., Czako, 
V., Telsnig, T., Vazquez-Hernandez, C., Lacal Arántegui, R., Nijs, W., Gonzalez Aparicio, I., Trombetti, 
M., Mandras, G., Peteves, E., Tzimas, E., (2018), EU coal regions: opportunities and challenges ahead, 
JRC Science for Policy Report, European Commission. 

Eurofund,  (2019a),  Energy  scenario:  Employment  implications  of  the  Paris  Climate  Agreement, 
Publications Office of the European Union, Luxembourg 

Eurofound, (2019b), The future of manufacturing in Europe, Publications Office of the European Union, 
Luxembourg 

European  Banking  Authority  (2019),  “Basel  III  Reforms:  Impact  Study  and  Key  Recommendations”, 
December 2019. https://eba.europa.eu/file/362841/download?token=050iTyEx 

European  Commission  (2020a),  EU  Justice  Scoreboard,  Communication  from  the  Commission  to  the 
European  Parliament,  the  Council,  the  European  Central  Bank,  the  European  Economic  and  Social 
Committee and the Committee of the Regions (forthcoming) 

European Commission (2020b), “Fiscal Sustainability Monitor 2019”, Directorate-General for Economic 
and Financial Affairs, European Economy, Institutional Paper xxx/2020. 

European  Commission  (2020c),  Digital  Scoreboard,  https://ec.europa.eu/digital-single-market/en/digital-
scoreboard [Forthcoming update] 

European  Commission  (2020d),  “Taxation  Trends  in  the  European  Union  –Data  for  the  EU  Member 
States, Iceland and Norway”, 2020 Edition (forthcoming). 

European  Commission  (2019a),  “Country  Report  Spain  2019,  SWD(2019)1008  final,  February  2019. 
https://ec.europa.eu/info/sites/info/files/file_import/2019-european-semester-country-report-spain_en.pdf 

European Commission (2019b), “Alert Mechanism Report 2020”, COM(2019) 651 final, 17.12.2019 

109 

 
 
 
References 

European Commission (2019c), “Employment and Social Developments in Europe 2019”, Chapter 3 by 
Jörg  Peschner,  Giuseppe  Piroli  and  D’Artis  Kancs,  “Economic  and  social  fundamentals:  from 
productivity to fair and sustainable growth” 

European Commission (2019d), “Regional Innovation Scoreboard”. 
https://ec.europa.eu/growth/industry/innovation/facts-figures/regional_en 

European Commission (2019e), “Study on Broadband Coverage in Europe 2018”. 
https://ec.europa.eu/digital-single-market/en/news/study-broadband-coverage-europe-2018 

European Commission (2019f), Flash Eurobarometer 482 on “Businesses’ attitudes towards corruption”, 
https://ec.europa.eu/commfrontoffice/publicopinion/index.cfm/survey/getsurveydetail/instruments/flash/s
urveyky/  

European Commission (2019g), Environmental Implementation Review, Spain Country Report. 
https://ec.europa.eu/environment/eir/pdf/report_es_en.pdf 

European  Commission 
https://ec.europa.eu/transport/sites/transport/files/studies/internalisation-handbook-isbn-978-92-79-
96917-1.pdf 

(2019h),  Handbook  on 

costs  of 

external 

the 

transport,  2019. 

European  Commission  (2019i),  “Debt  Sustainability  Monitor  2019”,  Directorate-General  for  Economic 
and  Financial  Affairs,  European  Economy,  Institutional  Paper  120.  January  2020.  Brussels. 
https://ec.europa.eu/info/publications/debt-sustainability-monitor-2019_en 

European Commission (2019j), Digital Economy and Society Index, 2019 

European  Commission  (2019k),  European  Semester  Country  Report  Communication,  COM(2019)  150 
https://ec.europa.eu/info/sites/info/files/file_import/2019-european-semester-communication-
final, 
country-reports_en_0.pdf 

European Commission (2019l), Education and Training Monitor 2019 – Country Analysis, Volume 2, p. 
https://ec.europa.eu/education/resources-and-tools/document-library/education-and-training-
263-272. 
monitor-country-analysis-volume-2-2019_en 

European Commission (2019m),  PISA 2018 and the EU. Striving for social fairness through education. 
European  Commission,  Directorate  General 
and  Culture. 
https://ec.europa.eu/education/resources-and-tools/document-library/pisa-2018-and-the-eu-striving-for-
social-fairness-through-education_en 

for  Education,  Youth,  Sport 

European Commission (2018a), “Country Report Spain 2018”, SWD(2018)207 final, March 2018.  
https://ec.europa.eu/info/files/2018-european-semester-country-report-spain_en 

European Commission (2018b), Commission Opinion on the Draft Budgetary Plan of Spain, COM (2018) 
8015 final, November 2018 
https://ec.europa.eu/info/sites/info/files/economy-finance/c_2018_8015_es_en.pdf 

European  Commission  (2018c),  The  Adaptation  Preparedness  Scoreboard,  Commission  Staff  Working 
Document SWD(2018) 460 

European Commission (2018d), "The 2018 Ageing Report. Economic and budgetary projections for the 
28 EU Member States (2016-2070)", European Economy, Institutional Paper 079, May 2018 

110 

 
 
 
 
 
References 

European Commission (2018e) and Centre for Social and Economic Research “Study and reports on the 
VAT gap in the EU-28 Member States: 2018 Final Report", Centre for Social and Economic Research, 
TAXUD/2015/CC/131 (2018) 

European  Commission  (2018f),  Commission  Communication  “A  European  retail  sector  fit  for  the  21st 
century” COM(2018) 219 final, and its Annex and accompanying Staff Working Document  

European Commission (2018g), The 2018 Pension Adequacy Report: current and future income adequacy 
in old age in the EU. Volume II, 
http://ec.europa.eu/social/main.jsp?catId=738&langId=en&pubId=8085&furtherPubs=yes 

European Commission (2018j), The 2018 EU Industrial R&D Investment Scoreboard (IRI). 
https://iri.jrc.ec.europa.eu/publications/2018-eu-industrial-rd-investment-scoreboard#field_report 

European  Commission  (2018k),  Report  on  the  implementation  of  waste  legislation,  including  the  early 
warning report for Member States at risk of missing the 2020 preparation  for re-use/recycling target on 
municipal waste, SWD(2018)425 accompanying COM(2018)656. 
https://ec.europa.eu/transparency/regdoc/rep/1/2018/EN/COM-2018-656-F1-EN-MAIN-PART-1.PDF 

European  Commission  (2017a),  “Country  Report  Spain  2017”,  SWD(2017)74  final,  February  2017 
https://ec.europa.eu/info/sites/info/files/2017-european-semester-country-report-spain-en.pdf 

European Commission (2017b), RIO Country Report for Spain,  
https://rio.jrc.ec.europa.eu/en/library/rio-country-report-spain-2017 

European  Commission  (2017c),  “Empirical  current  account  benchmarks:  modelling  the  impact  of 
demographic variables”, LIME Working Group 

European  Commission  (2016a),  “Country  Report  Spain  2016”,  SWD(2016)78  final,  February  2016, 
https://ec.europa.eu/info/sites/info/files/cr_spain_2016_en.pdf 

European  Commission  and  European  Central  Bank  (2018),  Survey  on  the  Access  to  Finance  of 
Enterprises (SAFE), https://ec.europa.eu/growth/access-to-finance/data-surveys_en 

European  Council  2016,  Council  Recommendation  of  20  September  2016  on  the  establishment  of 
National Productivity Boards,  
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32016H0924(01)  

European  Environmental  Agency,  (2019a),  Economic  losses  from  climate-related  extremes  in  Europe. 
https://www.eea.europa.eu/data-and-maps/indicators/direct-losses-from-weather-disasters-3/assessment-
2) 

European Environment Agency, (2019b), Air quality in Europe, pp. 68-69. 
https://www.eea.europa.eu/publications/air-quality-in-europe-2019 

European Investment Bank, (2019), Investment Survey, Spain.  
https://www.eib.org/en/publications/econ-eibis-2019-spain 

European Innovation Scoreboard 2019. 
http://ec.europa.eu/growth/industry/innovation/facts-figures/scoreboards_en 

Final report from the High-Level Expert Group on Sustainable Finance (2018),    
https://ec.europa.eu/info/sites/info/files/180131-sustainable-finance-final-report_en.pdf 

111 

 
 
 
 
 
 
 
 
References 

Flachenecker,  F.,  Gavigan,  J.,  P.,  Goenaga,  X.,  Pasi,  G.,  Preziosi,  N.,  Stamenov,  B.,  Testa,  G.,  (2020). 
High  Growth  Enterprises:  demographics,  financing  &  policy  measures.  JRC  Technical  Report.  Joint 
Research Centre. Brussels, Belgium.  

FEDEA, Policy Papers - 2018/09, “¿Hacia una nueva reforma de las pensiones?”, Notas para el Pacto de 
Toledo,  Angel  de  la  Fuente  (FEDEA  e  Instituto  de  Análisis  Económico,  CSIC),  Miguel  Ángel  García 
Díaz (Universidad Rey Juan Carlos y FEDEA) and Alfonso R. Sánchez (CUNEF y FEDEA) 

Felgueroso,  F.,  &  Jansen,  M.  (2018),  Aumento  del  salario  mínimo:  datos  para  el  debate,  No. 2018-02, 
FEDEA. 

Fundae, (2018), Cedefop Opinion survey on vocational education and training in Europe: Spain. Cedefop 
ReferNet thematic perspectives series. 
http://libserver.cedefop.europa.eu/vetelib/2018/opinion_survey_VET_Spain_Cedefop_ReferNet.pdf 

Fundamental  Rights  Agency  (FRA),  2016,  Survey  on  minorities  and  discrimination 
https://fra.europa.eu/en/publications-and-resources/data-and-maps/survey-data-explorer-second-eu-
minorities-discrimination-survey  

in  EU, 

Fundación  Secretariado  Gitano  (2019),  Estudio  comparado  sobre  la  situación  de  la  población  gitana  en 
España en relación al empleo y la pobreza 2018 

GeSi and Deloitte (2019), “Digital with Purpose: Delivering a SMARTer2030”,  

González Vázquez, I, Jonkers, K, Goos M, Arntz, M, Zierahn, U, Gregory T, Carretero Gómez, S, The 
impact of technological innovation on the future of work, JRC Technical Report, European Commission. 
https://ec.europa.eu/jrc/sites/jrcsh/files/jrc117212.pdf 

Gonzalez Vazquez, I., Milasi, S., Carretero Gomez, S., Napierala, J., Robledo Bottcher, N., Jonkers, K., 
Goenaga,  X.  (eds.),  Arregui  Pabollet,  E.,  Bacigalupo,  M.,  Biagi,  F.,  Cabrera  Giraldez,  M.,  Caena,  F., 
Castano  Munoz,  J.,  Centeno  Mediavilla,  C.,  Edwards,  J.,  Fernandez  Macias,  E.,  Gomez  Gutierrez,  E., 
Gomez Herrera, E., Inamorato Dos Santos, A., Kampylis, P., Klenert, D., López Cobo, M., Marschinski, 
R., Pesole, A., Punie, Y., Tolan, S., Torrejon Perez, S., Urzi Brancati, C., Vuorikari,  R. “The changing 
nature of work and skills in the digital age”, EUR 29823 EN, Publications Office of the European Union, 
Luxembourg, 2019, ISBN 978-92-76-09206-3, doi:10.2760/679150, JRC 117505. 

Government of Spain (2019). Council of Ministers. Transcript  
https://www.lamoncloa.gob.es/consejodeministros/referencias/documents/2019/refc20190412.pdf 

INE  (2019),  Encuesta  de  centros  y  servicios  de  atención  a  las  personas  sin  hogar.  Año  2018. 
https://www.ine.es/prensa/ecapsh_2018.pdf 

Jimeno, J.F., Martínez-Matute, M., Mora-Sanguinetti, J.S. (2015), Employment protection legislation and 
labor court activity in Spain, Working Papers 1507, Bank of Spain. 
https://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/1
5/Fich/dt1507e.pdf 

Matsaganis,  M.,  Medgyesi,  M.,  and  Karakitsios,  A.  (2015),  The  interaction  between  minimum  wages, 
income support, and poverty, European Commission, Research note 10/2015. 

McGowan, Adalat, and Andrews, Dan, (2015), “Skill  mismatch and public policy in OECD countries”, 
Economics Department Working Papers Number 1210, OECD. 
http://www.oecd.org/economy/growth/Skill-mismatch-and-public-policy-in-OECD-countries.pdf 

112 

 
 
 
 
References 

Ministry  of  Education  and  Vocational  Training  (2019a),  Inserción  laboral  de  los  egresados 
universitarios. Curso 2013-14 (análisis hasta 2018). http://www.educacionyfp.gob.es/dam/jcr:7bab0a21-
a06f-489f-8e65-d64ada43dc0e/informe-insercion-2013-14.pdf 

Ministry  of  Education  and  Vocational  Training  (2019b),  Fact  and  figures  2018/2019  School  Year. 
Ministerio  de  Educación  y  Formación  Profesional,  https://sede.educacion.gob.es/publiventa/facts-and-
figures-20182019-school-year--datos-y-cifras-curso-escolar-20182019/educacion-estadisticas/22528 

Ministry for the Ecological Transition and the Demographic Challenge (2019), draft National Energy and 
Climate Plan. 
mentodealcance_tcm30-498916.pdf 

 https://www.miteco.gob.es/es/cambio-climatico/planes-y-estrategias/2019p004docu 

Ministry for Science, Innovation and Universities (2019), Estrategia Española de I+D+I en Inteligencia 
Artificial. 
http://www.ciencia.gob.es/stfls/MICINN/Ciencia/Ficheros/Estrategia_Inteligencia_Artificial_IDI.pdf 

Ministerio de Comercio, Industria y Turismo (2019), Estudio de las restricciones en el sector minorista 
español por Comunidades Autónomas, Price Waterhouse for the Secretaría de Estado de Comercio.  

Ministry for the Ecological Transition and the Demographic Challenge (2019), Gestión de los riesgos de 
inundación. https://www.miteco.gob.es/es/agua/temas/gestion-de-los-riesgos-de-inundacion/ 

Ministry for the Ecological Transition and the Demographic Challenge, (2011), Plan sectorial de turismo 
de naturaleza y biodiversidad 2014-2020”. 
https://www.miteco.gob.es/es/biodiversidad/temas/conservacion-de-la-biodiversidad/conservacion-de-la-
biodiversidad-en-espana/cb_esp_plan_sect_turismo_nza_y_biodiversidad.aspx 

Ministry  of  Industry  Trade  and  Tourism,  (2019),  “Directrices  Generales  de  la  nueva  Política  Industrial 
Española 2030”.   
https://industria.gob.es/eses/Documents/Directrices%20Generales%20de%20la%20Política%20industrial
%20española%2025.02.19%20FINAL.pdf 

Ministry of the Presidency (2019). https://www.boe.es/eli/es/o/2019/02/21/pci161/dof/spa/pdf  

Mora-Sanguinetti,  J.S.,  and  Pérez-Valls,  R.,  “¿Cómo  afecta  la  complejidad  de  la  regulación  a  la 
demografía  empresarial?  Evidencia  para  España”,  Bank  of  Spain,  Working  Paper  n.  2002,  2020, 
https://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/2
0/Fich/dt2002.pdf 

Observatorio  de 
multiservicios. Un balance crítico. Lefebvre –El Derecho. 

la  Negociación  Colectiva,  2018;  La  negociación  colectiva  en 

las  empresas 

OECD (2020- forthcoming). Investment needs of and financing options for the EU water sector 

OECD (2019a), Economic Policy Reforms: Going for growth.  
http://www.oecd.org/economy/going-for-growth/ 

OECD (2019b), Financing SMEs and entrepreneurs 2019: an OECD Scoreboard.  

OECD  (2019c),  TALIS  2018  Results  (Volume  I):  Teachers  and  School  Leaders  as  Lifelong  Learners, 
TALIS www.oecd.org/education/talis/talis-2018-results-volume-i-1d0bc92a-en.htm 

OECD (2019d), Employment Outlook 2019 

113 

 
 
References 

OECD (2019e), State of Health 2019, Spain 

OECD  (2019f),  2018  PISA  Report  PISA  2018  results,  where  all  students  can  succeed.  Volume  II 
https://www.oecd-ilibrary.org/education/pisa-2018-results-volume-ii_b5fd1b8f-en 

OECD (2018a), Economic Surveys: Spain. https://doi.org/10.1787/888933871711 

OECD (2018b), R&D Tax Incentives: Spain. http://www.oecd.org/sti/rd-tax-stats-spain.pdf 

OECD (2018c), Spain: Country Profile, Education GPS,  
http://gpseducation.oecd.org/Helpers/GenerateHTML 

OECD (2018d), Product Market Regulation Indicator, https://www.oecd.org/economy/reform/indicators-
of-product-market-regulation/ 

OECD, 
taxadministration/publications-and-products/tax-administration-2017-summary.pdf  

(2017),  Ageing  staff  –  Tax  Administration  2017.  http://www.oecd.org/tax/forum-on-

OECD  (2016),  PISA  2015  Results  (Volume  1):  Excellence  and  equity  in  education,  PISA,  OECD, 
Publishing, Paris http://www.oecd.org/publications/pisa-2015-results-volume-i-9789264266490-en.htm 

OECD,  (2014),  TALIS  2013  Results:  an  international  perspective  on  teaching  and  learning,  TALIS, 
OECD Publishing. http://www.oecd.org/education/school/talis-2013-results.htm 

Ministry  of  Finance  (2015),  Plan  de Transformación  digital  de  la  Administración  General  del  Estado  y 
sus Organismos Públicos,   
http://administracionelectronica.gob.es/pae_Home/pae_Estrategias/Estrategia-TIC-AGE.html 

Red Eléctrica de España (2018), Informe del Sistema Eléctrico. 
https://www.ree.es/es/datos/publicaciones/informe-anual-sistema/informe-del-sistema-electrico-espanol-
2018 

RED IDI (2019), "Orientaciones para el Seguimiento y Evaluación de las Estrategias de Especialización 
Inteligente",  Spanish  Ministry  of  Finance.  https://www.dgfc.sepg.hacienda.gob.es/sitios/dgfc/es-
ES/ipr/fcp1420/e/ep/epec/Documents/Orientaciones_Seguimiento_y_Evaluacion_RIS3.pdf 

Saia A., D. Andrews and S. Albrizio (2015), “Productivity spillovers from the global  frontier and public 
policy: industry-level evidence”, OECD Economics Department WP n. 1238. 

Salazar-Elena J.C. and Sanchez-Martinez, M., (2020). RIO Country Report 2019: Spain, Joint Research 
Centre, Brussels, Belgium, 2020. Available at JRC Scientific Knowledge Portal 

the  Children, 

Save 
https://www.savethechildren.es/sites/default/files/imce/dossier_pisa2018_espanadatos.pdf 

lo  que  debes  saber  de  PISA  2018  sobre  equidad”, 

(2019),  “Todo 

Schivardi  F.  and  T.  Schmitz  (2019),  “The  IT  revolution  and  Southern  Europe’s  two  lost  decades”, 
https://voxeu.org/article/it-revolution-and-southern-europes-two-lost-decades 

Souto-Otero (2019), Labour market policy thematic review 2019: Skills imbalances, European Centre of 
Expertise. 

114 

 
 
 
References 

State  School  Council  (2019).  Informe  2019  sobre  el  estado  del  sistema  educativo.  Curso  2017-2018. 
Ministerio 
del  Estado. 
http://www.educacionyfp.gob.es/dam/jcr:4f35ae94-f996-4ceb-b3f0-21b2e421ec26/i19cee-informe.pdf 

y  Formación  Profesional,  Consejo  Escolar 

de  Educación 

Stepanyan,  A  and  Salas,  J.,  “Distributional  Implications  of  Labour  Market  Reforms:  Learning  from 
Spain's Experience”, IMF Working Paper No. 20/29, 13 February 2020 

Turrini,  A.,  Zeugner,  S.  (2018),  “Benchmarks  for  net  international  investment  positions”,  European 
Commission Discussion Paper, forthcoming.  

UGT, (2019), Análisis de las empresas multiservicios. 

Vandeplas,  Anneleen  and  Thum-Thysen,  Anna  (2019),  “Skills  mismatch  &  productivity  in  the  EU”, 
Discussion Paper 100, European Economy, European Commission. 
https://ec.europa.eu/info/sites/info/files/economy-finance/dp100_en.pdf 

Vtyurina, S., “Effectiveness and Equity in Social Spending: The Case of Spain”, IMF Working Paper No. 
20/16, 30 January 2020 

WIFO (2019), Austrian Institute of Economic Research, 2019, “The performance of the Single Market for 
goods after 25 years”. 

World Bank, Doing Business project, http://www.doingbusiness.org/en/doingbusiness  

Zachmann,  G.  et  al.  (2018),  The  distributional  effects  of  climate  policies,  Blueprint  Series  28,  Bruegel. 
http://bruegel.org/wp-content/uploads/2018/11/Bruegel_Blueprint_28_final1.pdf 

115