Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Spain
Date: 2024-06-19
Institutions: European Commission, Secretariat-General
Subjects: Spain, budget policy, climate change policy, economic policy, economic recovery, economic reform, employment policy, social policy, stability pact, water management

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   EUROPEAN COMMISSION  Brussels, 19.6.2024  COM(2024) 609 final  Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Spain {SWD(2024) 609 final}  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the economic, social, employment, structural and budgetary policies of Spain 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Articles 121(2) and 148(4) thereof, 

Having regard to Council Regulation (EC) 2024/1263 of the European Parliament and of the 
Council  of  29  April  2024  on  the  effective  coordination  of  economic  policies  and  on 
multilateral budgetary surveillance and repealing Council Regulation (EC) No 1466/971, and 
in particular Article 3(3) thereof, 

Having  regard  to  Regulation  (EU)  No  1176/2011  of  the  European  Parliament  and  of  the 
Council  of  16  November  2011  on  the  prevention  and  correction  of  macroeconomic 
imbalances2, and in particular Article 6(1) thereof, 

Having regard to the recommendation of the European Commission, 

Having regard to the resolutions of the European Parliament, 

Having regard to the conclusions of the European Council, 

Having regard to the opinion of the Employment Committee, 

Having regard to the opinion of the Economic and Financial Committee, 

Having regard to the opinion of the Social Protection Committee, 

Having regard to the opinion of the Economic Policy Committee, 

Whereas: 

(1) 

Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council3,  which 
established  the  Recovery  and  Resilience  Facility,  entered  into  force  on  19  February 
2021. The Recovery and Resilience Facility provides financial support to the Member 
States  for  the  implementation  of  reforms  and  investment,  entailing  a  fiscal  impulse 
financed by the EU. In line with the European Semester priorities, it helps achieve the 
economic  and  social  recovery  and  implement  sustainable  reforms  and  investment,  in 
particular  to  promote  the  green  and  digital  transitions  and  make  the  Member  States’ 
economies  more  resilient.  It  also  helps  strengthen  public  finances  and  boost  growth 
and job creation in the medium and long term, improve territorial cohesion within the 
EU and support the continued implementation of the European Pillar of Social Rights. 

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2 
3 

OJ L 2024/1263, 30.4.2024 ELI: http://data.europa.eu/eli/reg/2024/1263/oj 
OJ L 306, 23.11.2011, p. 25. ELI: http://data.europa.eu/eli/reg/2011/1176/oj 
Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council  of  12  February  2021 
(OJ  L  57,  18.2.2021,  p.  17)  ELI: 
establishing 
http://data.europa.eu/eli/reg/2021/241/oj 

the  Recovery  and  Resilience  Facility 

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(2) 

(3) 

(4) 

(5) 

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The  REPowerEU  Regulation4,  adopted  on  27  February  2023,  aims  to  phase  out  the 
EU’s  dependency  on  Russian  fossil  fuel  imports.  This  would  help  achieve  energy 
security  and  diversify  the  EU’s  energy  supply,  while  increasing  the  uptake  of 
renewables,  energy  storage  capacities  and  energy  efficiency.  Spain  added  a  new 
REPowerEU chapter to its national recovery and resilience plan in order to finance key 
reforms and investments that will help achieve the REPowerEU objectives. 

On  16  March  2023,  the  Commission  issued  a  Communication  on  the  ‘Long-term 
competitiveness of the EU: looking beyond 2030’5, in order to inform policy decisions 
and  create  the  framework  conditions  for  increasing  growth.  The  Communication 
frames competitiveness along nine mutually reinforcing drivers. Among these drivers, 
access to private capital, research and innovation, education and skills, and the single 
market  emerge  as  paramount  policy  priorities  for  reform  and  investment  to  address 
current productivity challenges as well as to build up the long-term competitiveness of 
the EU and its Member  States.  On 14 February  2024, the Commission  followed this 
Communication  with  the  Annual  Single  Market  and  Competitiveness  Report6.  The 
report  details  the  competitive  strengths  and  challenges  of  Europe's  Single  Market, 
tracking yearly developments according to the nine competitiveness drivers identified. 

On 21 November 2023, the Commission adopted the 2024 Annual Sustainable Growth 
Survey7, marking the start of the 2024 cycle of the European Semester for economic 
policy  coordination.  The  European  Council  endorsed  the  priorities  of  the  survey 
around  the  four  dimensions  of  competitive  sustainability  on  22  March  2024.  On  21 
November 2023, on the basis of Regulation (EU) No 1176/2011, the Commission also 
adopted the 2024 Alert Mechanism Report, in which it identified Spain as one of the 
Member States that may be affected or may be at risk of being affected by imbalances, 
and for which an in-depth review would be needed. On the same date the Commission 
also adopted an opinion on the 2024 draft budgetary plan of Spain. The Commission 
also adopted a recommendation for a Council recommendation on the economic policy 
of the euro area, which the Council adopted on 12 April 2024, as well as the proposal 
for  the  2024  Joint  Employment  Report  analysing  the  implementation  of  the 
Employment  Guidelines  and  the  principles  of  the  European  Pillar  of  Social  Rights, 
which the Council adopted on 11 March 2024. 

On  30  April  2024,  the  EU’s  new  economic  governance  framework  came  into  force. 
The  framework  includes  the  new  Regulation  of  the  European  Parliament  and  of  the 
Council  (EU)  2024/1263  on  the  effective  coordination  of  economic  policies  and 
multilateral  budgetary  surveillance  and  repealing  Council  Regulation  (EC)  No 
1466/97. It also includes amended Regulation (EC) No 1467/97 on the implementation 
of  the  excessive  deficit  procedure  and  the  amended  Directive  2011/85/EU  on  the 
budgetary  frameworks  of  Member  States8.  The  objectives  of  the  new  framework  are 

Regulation  (EU)  2023/435  of  the  European  Parliament  and  of  the  Council  of  27  February  2023 
amending Regulation (EU) 2021/241 as regards REPowerEU chapters in recovery and resilience plans 
and  amending  Regulations  (EU)  No  1303/2013,  (EU)  2021/1060  and  (EU)  2021/1755,  and  Directive 
2003/87/EC (OJ L 63, 28.2.2023, p. 1) ELI: http://data.europa.eu/eli/reg/2023/435/oj 
COM(2023) 168 final. 
COM(2024) 77 final.  
COM(2023) 901 final. 
Council  Regulation  (EU)  2024/1264  of  29  April  2024  amending  Regulation  (EC)  No  1467/97  on 
speeding  up  and  clarifying  the  implementation  of  the  excessive  deficit  procedure  (OJ  L,  2024/1264, 
30.4.2024,  ELI:  http://data.europa.eu/eli/reg/2024/1264/oj)  and  Council  Directive  (EU)  2024/1265  of 

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public debt sustainability and sustainable and inclusive growth through gradual fiscal 
consolidation as well as reforms and investments. It promotes national ownership and 
has  a  greater  medium-term  focus,  combined  with  more  effective  and  coherent 
enforcement. Each Member State should submit to the Council and to the Commission 
a national medium-term fiscal-structural plan. National medium-term fiscal-structural 
plans  contain  the  fiscal,  reform  and  investment  commitments  of  a  Member  State, 
covering a planning horizon of 4 years or 5 years depending on the regular length of 
the national legislature. The net expenditure9 path in the national medium-term fiscal-
structural plans should comply with the requirements of Regulation (EU) 2024/1263, 
including  the  requirements  to  put  or  keep  general  government  debt  on  a  plausibly 
downward path by the end of the adjustment period at the latest, or for it to remain at 
prudent  levels  below  60%  of  GDP,  and  to  bring  and/or  maintain  the  government 
deficit below the 3% of GDP reference value over the medium term. Where a Member 
State  commits  to  a  relevant  set  of  reforms  and  investments  in  accordance  with  the 
criteria set out in Regulation (EU) 2024/1263, the adjustment period may be extended 
by 3 years at most. For the purpose of supporting the preparation of those plans, on [21 
June]  2024,  the  Commission  is  set  to  provide  Member  States  with  guidance  on  the 
content of the plans and the subsequent annual progress reports that they will need to 
submit and, in accordance with Article 5 of Regulation (EU) 2024/1263, will transmit 
to  them  technical  guidance  on  the  fiscal  adjustments  (reference  trajectories  and 
technical information, where applicable). Member States should submit their medium-
term  fiscal-structural  plans  by  20  September  2024,  unless  the  Member  State  and  the 
Commission  agree  to  extend  the  deadline  by  a  reasonable  period  of  time.  Member 
States  should  ensure  the  involvement  of  their  national  parliaments,  and  the 
consultation  of  independent  fiscal  institutions,  of  social  partners  and  other  national 
stakeholders, as appropriate. 

In 2024, the European Semester for economic policy coordination continues to evolve 
in  line  with  the  implementation  of  the  Recovery  and  Resilience  Facility.  The  full 
implementation  of  the  recovery  and  resilience  plans  remains  essential  for  delivering 
the policy priorities under the European Semester, as the plans help effectively address 
all  or  a  significant  subset  of  challenges  identified  in  the  relevant  country-specific 
recommendations  issued  in  recent  years.  The  2019,  2020,  2022  and  2023  country-
specific  recommendations  remain  equally  relevant  also  for  recovery  and  resilience 
plans  revised,  updated  or  amended  in  accordance  with  Articles  14,  18  and  21  of 
Regulation (EU) 2021/241. 

On  30  April  2021,  Spain  submitted  its  national  recovery  and  resilience  plan  to  the 
Commission, in accordance with Article 18(1) of Regulation (EU) 2021/241. Pursuant 
to  Article  19  of  Regulation  (EU)  2021/241,  the  Commission  assessed  the  relevance, 
effectiveness,  efficiency  and  coherence  of  the  recovery  and  resilience  plan,  in 
accordance with the assessment guidelines of Annex V to that Regulation. On 13 July 
2021,  the  Council  adopted  its  Decision  on  the  approval  of  the  assessment  of  the 

29  April  2024  amending  Directive  2011/85/EU  on  requirements  for  budgetary  frameworks  of  the 
Member States (OJ L, 2024/1265, 30.4.2024, ELI: http://data.europa.eu/eli/dir/2024/1265/oj). 
Net expenditure as defined in Article 2 of Council Regulation (EU) 2024/1263 of 29 April 2024 (OJ L 
2024/1263,  30.4.2024.  ELI:  http://data.europa.eu/eli/reg/2024/1263/oj).  Net  expenditure  means 
government  expenditure  net  of  (i)  interest  expenditure,  (ii)  discretionary  revenue  measures,  (iii) 
expenditure  on  programmes  of  the  Union  fully  matched  by  Union  funds  revenue,  (iv)  national 
expenditure  on  co-financing  of  programmes  funded  by  the  Union,  (v)  cyclical  elements  of 
unemployment benefit expenditure, and (vi) one-offs and other temporary measures. 

(6) 

(7) 

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(8) 

(9) 

recovery  and  resilience  plan  for  Spain10,  which  was  amended  on  10  October  2023 
following Article 18(2) of Regulation (EU) 2021/241 to update the maximum financial 
contribution for non-repayable financial support, as well as to include the REPowerEU 
chapter11. The release of instalments is conditional on a decision by the Commission, 
taken  in  accordance  with  Article  24(5)  of  Regulation  (EU)  2021/241,  that  Spain  has 
satisfactorily  fulfilled  the  relevant  milestones  and  targets  set  out  in  the  Council 
Implementing  Decision.  Satisfactory  fulfilment  presupposes  that  the  achievement  of 
preceding milestones and targets has not been reversed. 
The  Commission  published  the  2024  country  report  for  Spain12  on  19  June  2024.  It 
assessed  Spain’s 
country-specific 
addressing 
recommendations  adopted by the Council  between 2019  and  2023 and  took stock of 
Spain’s implementation of the recovery and resilience plan. Based on this analysis, the 
country report identified gaps with respect to those challenges that are not addressed or 
only  partially  addressed  by  the  recovery  and  resilience  plan,  as  well  as  new  and 
emerging challenges. It also assessed Spain’s progress on implementing the European 
Pillar of Social Rights and on achieving the EU headline targets on employment, skills 
and  poverty  reduction,  as  well  as  progress  in  achieving  the  UN’s  Sustainable 
Development Goals. 

progress 

relevant 

the 

in 

The  Commission  carried  out  an  in-depth  review  under  Article  5  of  Regulation  (EU) 
No 1176/2011 for Spain and the main findings of the Commission’s staff assessment 
of macroeconomic vulnerabilities for  Spain for the purposes  of that Regulation  were 
published in March 202413. On 19 June 2024, the Commission concluded that Spain is 
no  longer  experiencing  macroeconomic  imbalances.  Significant  progress  has  been 
made  in  reducing  vulnerabilities,  which  had  cross-border  relevance,  related  to  high 
private and external debt, and there have been reductions in government debt. After an 
interruption  brought  about  by  the  COVID-19  pandemic,  private  sector  debt  and  the 
negative  net  international  investment  position  (NIIP)  ratios  resumed  their  decline  in 
2021,  helped  by  strong  nominal  GDP  growth.  Both  are  expected  to  continue 
improving in  the coming years,  albeit  more gradually than recently as nominal  GDP 
growth is expected to be less supportive. The current account has been in surplus for a 
decade and increased further in 2023 reflecting fast-growing exports as well as lower 
energy prices. The high government debt-to-GDP ratio has been declining, driven by 
strong nominal GDP growth, but more muted improvements are expected this year and 
next,  reflecting  still  significant  fiscal  deficits  and  the  less  supportive  nominal  GDP 
growth.  The  unemployment  rate  has  been  on  a  downward  trend  for  a  decade  and  is 
forecast  to  continue falling. The banking  sector  has remained resilient amidst  tighter 
financing  conditions  for  borrowers.  Significant  policy  progress  has  been  achieved  to 
address  the  identified  vulnerabilities,  including  in  recent  years  thanks  to  the 
implementation  of  the  recovery  and  resilience  plan,  but  more  effort  is  needed 
especially to reduce the high government debt.  

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Council Implementing Decision of 13 July 2021 on the approval of the assessment of the recovery and 
resilience  plan  for  Spain  (ST  10150/21;  ST  10150/21  ADD  1;  ST  10150/21  ADD  1  REV  1;  ST 
10150/21 ADD 1 REV 2; ST 10150/21 COR 1). 
Council Implementing Decision of 10 October 2023 amending the Implementing Decision of 13 July 
2021 on the approval of the assessment of the recovery and resilience plan for  Spain (ST 13695 2023 
INIT). 
SWD(2024) 609 final. 
SWD(2024) 80 final. 

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(10)  Based  on  data  validated  by  Eurostat14,  Spain’s  general  government  deficit  decreased 
from 4.7% of GDP in 2022 to 3.6% in 2023, while the general government debt fell 
from 111.6% of GDP at the end of 2022 to 107.7% at the end of 2023. As announced 
in the fiscal policy guidance for 202415, the Commission is taking the first step for the 
opening of deficit-based excessive deficit procedures on the basis of the outturn data 
for  2023,  in  line  with  existing  legal  provisions.  On  19  June  2024,  the  Commission 
adopted  a  report  under  Article  126(3)  of  the  TFEU16.  That  report  assessed  the 
budgetary  situation  of  Spain,  as  its  general  government  deficit  in  2023  exceeded  the 
reference  value  of  3%  of  GDP.  The  report  concluded  that  in  the  light  of  this 
assessment,  and  after  considering  the  opinion  of  the  Economic  and  Financial 
Committee  as  established  under  article  126(4)  TFEU,  the  Commission  will  not 
propose in July to open an excessive deficit procedure for Spain.  

(11)  On  12  July  2022,  the  Council  recommended17  that  Spain  ensure  in  2023  a  prudent 
fiscal  policy,  in  particular  by  limiting  the  growth  of  nationally  financed  primary 
current expenditure below medium-term potential output growth18, taking into account 
continued temporary and targeted support to households and firms most vulnerable to 
energy  price  hikes  and  to  people  fleeing  Ukraine.  At  the  same  time,  Spain  was 
recommended  to  stand  ready  to  adjust  current  spending  to  the  evolving  situation. 
Spain  was  also  recommended  to  expand  public  investment  for  the  green  and  digital 
transitions,  and  for  energy  security  taking  into  account  the  REPowerEU  initiative, 
including  by  making  use  of  the  Recovery  and  Resilience  Facility  and  other  Union 
funds. In 2023, according to the Commission estimates, the fiscal stance19 was broadly 
neutral,  at -0.2%  of  GDP.  The  growth  in  nationally  financed  primary  current 
expenditure (net of discretionary revenue measures) in 2023 provided a contractionary 
contribution  to  the  fiscal  stance  of  0.3%  of  GDP  and  was  in  line  with  the  Council 
recommendation.  The  contractionary  contribution  of  nationally  financed  primary 
current expenditure was due to the reduced  costs of the emergency support measures 
(targeted  and  untargeted)  to  households  and  firms  in  response  to  energy  price  hikes 
(by 0.6 percentage points of GDP). The main drivers of growth in nationally financed 
primary current expenditure (net of revenue measures) were social benefits other than 
in kind, driven by the revaluation of pensions, and intermediate consumption, driven 
by  spending  in  defence.  Expenditure  financed  by  Recovery  and  Resilience  Facility 
grants  and  other  EU  funds  amounted  to  1.3%  of  GDP  in  2023.  Nationally  financed 
investment  amounted  to  2.3%  of  GDP  in  2023,  with  an  annual  increase  of  0.1 

14 
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Eurostat-Euro Indicators, 22.4.2024. 
COM(2023) 141 final. 
Report  from  the  Commission,  prepared  in  accordance  with  Article  126(3)  of  the  Treaty  on  the 
Functioning of the European Union, 19.6.2024, COM(2024) 598 final. 
Council Recommendation of 12 July 2022 on the National Reform Programme of Spain and delivering 
a Council opinion on the 2022 Stability Programme of Spain, OJ C 334, 1.9.2022, p. 77.  
Based on the Commission 2024 spring forecast, the medium-term potential output growth of Spain in 
2023 is estimated at 7.2% in nominal terms, based on the 10-year average real potential growth rate and 
the 2023 GDP deflator. 
The fiscal stance is defined as a measure of the annual change in the underlying budgetary position of 
the  general  government.  It  aims  to  assess  the  economic  impulse  stemming  from  fiscal  policies,  both 
those  that  are  nationally  financed  and  those  that  are  financed  by  the  EU  budget.  The  fiscal  stance  is 
measured as the difference between (i) the medium-term potential growth and (ii) the change in primary 
expenditure  net  of  discretionary  revenue  measures  (and  excluding  temporary  emergency  measures 
related to the COVID-19 crisis) and including expenditure financed by non-repayable support (grants) 
from  the  Recovery  and  Resilience  Facility  and  other  Union  funds.  A  negative  (positive)  sign  of  the 
indicator indicates an expansionary (contractionary) fiscal policy. 

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percentage  points.  Spain  financed  additional  investment  through  the  Recovery  and 
Resilience Facility and other EU funds. It financed public investment for the green and 
digital transitions, and for energy security, such as the digital toolkit, the PERTE20 for 
electric  and  connected  vehicles,  new  vocational  education  and  training  places  and 
investments  in  the  area  of  green  hydrogen,  which  are  funded  by  the  Recovery  and 
Resilience Facility and other EU funds. 

(12)  The  Update  of  the  Macroeconomic  and  Fiscal  Projections  sent  by  Spain  to  the 
Commission on 30 April can be summarised as follows. The macroeconomic scenario 
underpinning  the  budgetary  projections  foresees  real  GDP  to  grow  by  2.0%  in  2024 
and  1.9%  in  2025,  while  it  projects  the  GDP  deflator  to  grow  at  3.5%  in  2024  and 
2.8% in 2025. The general government deficit is expected to decrease to 3.0% of GDP 
in 2024 and 2.5% of GDP in 2025, while the general government debt-to-GDP ratio is 
set  to  decrease  to  105.5%  by  the  end  of  2024  and  104.1%  by  the  end  of  2025.  The 
projections submitted by Spain do not include budgetary projections beyond 2025. 

(13)  The  Commission  Spring  2024  Forecast  projects  real  GDP  to  grow  by  2.1%  in  2024 
and 1.9% in 2025, and HICP inflation to stand at 3.1% in 2024 and 2.3% in 2025. 

(14)  The Commission Spring 2024 Forecast projects a government deficit of 3.0% of GDP 
in 2024, while the general government debt-to-GDP ratio is set to decrease to 105.5% 
by  the  end  of  2024.  The  decrease  of  the  deficit  in  2024  mainly  reflects  the  gradual 
phase out of measures to mitigate the social and economic impact of  the past energy 
crisis. Based on the Commission’s estimates, the fiscal stance is projected to be neutral 
at 0.0% of GDP in 2024. 

(15)  Expenditure  amounting  to  1.3%  of  GDP  will  be  financed  by  non-repayable  support 
(“grants”)  from  the  Recovery  and  Resilience  Facility  in  2024,  compared  to  0.7%  of 
GDP in 2023, according to  Commission Spring 2024 Forecast. Expenditure financed 
by  Recovery  and  Resilience  Facility  grants  will  enable  high-quality  investment  and 
productivity-enhancing  reforms  without  a  direct  impact  on  the  general  government 
balance  and  debt  of  Spain.  Expenditure  amounting  to  1.0%  of  GDP  in  2024  is 
expected to be backed by loans from the Recovery and Resilience Facility, compared 
to 0.0% of GDP in 2023, according to the Commission Spring 2024 Forecast. 
(16)  On  14  July  2023,  the  Council  recommended21  that  Spain  ensure  a  prudent  fiscal 
policy,  in  particular  by  limiting  the  nominal  increase  in  net  nationally  financed 
primary  expenditure22  in  2024  to  not  more  than  2.6%.  When  executing  their  2023 
budgets  and  preparing  their  Draft  Budgetary  Plans  for  2024,  Member  States  were 
invited  to  take  into  account  that  the  Commission  would  propose  to  the  Council  the 
opening  of  deficit-based  excessive  deficit  procedures  based  on  the  outturn  data  for 
2023.  According  to  the  Commission  Spring  2024  Forecast,  Spain’s  net  nationally 
financed  primary  expenditure  is  projected  to  increase by  3.8%  in  202423,  which  is 

20 

21 

22 

23 

Proyectos  estratégicos  para  la  recuperación  y  transformación  económica  (Strategic  projects  for 
economic recovery and transformation). 
Council Recommendation on the 2023 National Reform Programme of Spain and delivering a Council 
opinion on the 2023 Stability Programme of Spain, OJ C 312, 1.9.2023, p. 77. 
Net primary expenditure is defined as nationally financed expenditure net of  (i) discretionary revenue 
measures, (ii) interest expenditure, (iii) cyclical unemployment expenditure, and (iv) and one-offs and 
other temporary measures. 
This  takes  into  account  0.2%  of  GDP  one-off  measures  in  2024,  relating  to  court  rulings  for  the 
government to refund citizens and companies the excess of personal income and corporate income taxes 
in the past. 

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above  the  recommended  maximum  growth  rate.  This  excess  spending  over  the 
recommended  maximum  growth  rate  in  net  nationally  financed  primary  expenditure 
corresponds  to  0.5%  of  GDP  in  2024.  This  risks  being  not  in  line  with  what  was 
recommended by the Council. 

(17)  Moreover,  the  Council  recommended  that  Spain  take  action  to  wind  down  the 
emergency energy support measures in  force, using the related savings to  reduce the 
government  deficit,  as  soon  as  possible  in  2023  and  2024.  The  Council  further 
specified  that,  should  renewed  energy  price  increases  necessitate  new  or  continued 
support  measures,  Spain  should  ensure  that  these  were  targeted  at  protecting 
vulnerable  households  and  firms,  fiscally  affordable,  and  preserve  incentives  for 
energy savings. According to the Commission Spring 2024 Forecast, the net budgetary 
cost24 of emergency energy support measures is estimated at 0.9% of GDP in 2023 and 
projected at 0.2% in 2024, and -0.1% in 2025. Among others, the reduction of VAT on 
gas, the special tax on electricity, public transport subsidies and the compensation to 
the electricity providers to cover costs and avoid deficit are assumed to remain in force 
for part of 2024. If the related savings were used to reduce the government deficit, as 
recommended  by  the  Council,  these  projections  would  imply  a  fiscal  adjustment  of 
0.7% of GDP in 2024, whereas net nationally financed primary expenditure25 provides 
a  contractionary contribution  to  the  fiscal  stance  of  0.3%  of  GDP  in  that  year.  The 
emergency  energy  support  measures  are  projected  to  be  wound  down  as  soon  as 
possible in 2023 and 2024. This is in line with what was recommended by the Council. 
However,  the  related  savings  are  not  projected  to  be  fully  used  to  reduce  the 
government deficit. This risks being not in line with the Council recommendation. 

(18) 

In  addition,  the  Council  also  recommended  that  Spain  preserve  nationally  financed 
public  investment  and  ensure  the  effective  absorption  of  Recovery  and  Resilience 
Facility  grants  and  other  EU  funds,  in  particular  to  foster  the  green  and  digital 
transitions.  According  to  the  Commission  Spring  2024  Forecast,  nationally  financed 
public investment is projected to increase to 2.4% of GDP in 2024 from 2.3% of GDP 
in  2023.  This  is  in  line with  what  was  recommended  by  the  Council.  In  turn,  public 
expenditure  financed  from  revenues  from  EU  funds,  including  Recovery  and 
Resilience Facility grants, is expected to increase to 1.6% of GDP in 2024 (from 1.3% 
of GDP in 2023).  

(19)  Based on policy measures known at the cut-off date of the forecast and on a no-policy-
change  assumption,  the  Commission  Spring  2024  Forecast  projects  a  government 
deficit of 2.8% of GDP in 2025, with net expenditure growing by 4.0% in 2025. The 
general government debt-to-GDP ratio is set to decrease to 104.8% by the end of 2025.  

(20)  Within  the  EU’s  new  economic  governance  rules,  Spain  will  need  to  develop  a 
medium-term  fiscal-structural  plan  to  reduce  the  deficit  and  lower  government  debt. 
This  plan  could  combine  the  adoption  of  revenue  and  expenditure  measures  with 
investments  and  reforms  to  promote  more  robust  and  sustainable  economic  growth. 
Spain is a high debt country with a decentralised governance structure. In its national 

24 

25 

The figure represents the level of the annual budgetary cost of those measures, including revenue and 
expenditure and, where applicable, net of the revenue from taxes on windfall profits of energy suppliers. 
This contribution is measured as the change in general government primary expenditure, net of  (i) the 
incremental  budgetary  impact  of  discretionary  revenue  measures,  (ii)  one-offs,  (iii)  cyclical 
unemployment  expenditure  and  (iv)  expenditure  financed by  non-repayable  support  (grants)  from  the 
Recovery  and  Resilience  Facility  and  other  EU  funds,  relative  to  the  medium-term  (10-year)  average 
potential nominal GDP growth rate, expressed as a ratio to nominal GDP. 

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fiscal framework, the central government sets targets for regions in terms of structural 
balance and the debt-to-GDP ratio as well as in relation to the maximum growth rate 
of  nominal  expenditure  (expenditure  rule).  To  ensure  that  the  new  EU  economic 
governance  rules  are  complied  with,  the  national  fiscal  framework  may  need  to  be 
updated. Demographic developments are expected to lead to a significant increase in 
public  expenditure  related  to  healthcare,  long-term  care  and  pensions.  On  pensions, 
fiscal  sustainability  gaps  over  the  medium  and  long  term  can  be  addressed  by  fully 
implementing the ‘closure clause’ introduced by the 2023 reform. Tax reforms should 
be a central part of the fiscal consolidation strategy. In this regard, reforms included in 
the recovery and resilience plan, building on recommendations from experts provided 
in the meantime, aim to: (i) make the taxation system more effective and modern, and 
adapt it to new trends; (ii) support the green transition; and (iii) increase revenue and 
promote fairness.  Also, Spain  would have scope to  collect  more environment-related 
tax revenues (1.5% of GDP in 2022 against 2.0% for the EU aggregate), including by 
strengthening the application of the ‘polluter pays’ principle. Action to deliver on the 
objectives  of  the  recovery  and  resilience  plan  could  also  include  the  increase  of 
consumption taxes while protecting vulnerable individuals with targeted compensatory 
measures;  this  would  also  strengthen  the  capacity  of  social  transfers  to  reduce 
inequality  and  poverty,  which  remain  high  and  particularly  affect  children.  The 
implementation  of  recommendations  by  the  Spanish  independent  fiscal  authority 
(AIReF) remains key to improving the quality and efficiency of government spending, 
which  can  also  benefit  from  an  ambitious  implementation  of  the  framework  of 
expenditure  reviews.  This  is  particularly  relevant  for  healthcare,  to  improve  cost-
effectiveness  and  address  regional  access  and  quality  disparities,  as  well  as  the 
significant investment needs in primary care. 

(21)  Also, building on measures in the recovery and resilience plan, additional efforts could 
further  increase  economic  resilience  and  support  potential  growth,  helping  underpin 
the adoption of a more gradual fiscal path. This includes the area of regulatory burden 
and  business  climate.  In  particular,  the  reform  of  size-dependent  regulation  in  the 
fields of labour, auditing and taxation with the aim of improving efficiency in capital 
and  labour  allocation,  supporting  investment  and  helping  to  increase  productivity. 
Addressing  existing  shortfalls  in  judicial  efficiency  would  also  reduce  economic 
distortions.  The time to resolve civil  and commercial cases  continues  to  be  long  and 
the  prolonged  non-renewal  of  the  Council  of  the  Judiciary  causes  bottlenecks  for 
nominating  top  judges.  There  is  also  scope  for  further  supporting  innovation. 
Increasing R&D investment and stronger links with the scientific ecosystem can boost 
the  productivity  of  firms.  At  1.4%  of  GDP  in  2022,  Spain’s  R&D  intensity  has 
remained stagnant compared to 2021 and remains well below the EU average of 2.2%, 
mainly  due  to  the  gap  in  private  expenditure  (0.8%  of  GDP,  significantly  below  the 
EU average of 1.5%). Despite the measures in the revised recovery and resilience plan 
and  the  adopted  European  Regional  Development  Fund  programmes,  further  efforts 
seem  warranted  to  support  private  R&D  spending  and  knowledge  transfer  between 
private and public research bodies. Specific measures could include: (i) making public 
research  organisations  more  performance-based  and  professional;  and  (ii)  improving 
the  coordination  of  the  science,  technology  and  innovation  system  in  designing  and 
implementing research and innovation policies across different levels of government. 

(22) 

In accordance with Article 19(3), point (b), and Annex V, criterion 2.2 of Regulation 
(EU) 2021/241, the recovery and resilience plan includes an extensive set of mutually 
reinforcing reforms and investments to be implemented by 2026. These are expected 
to  help  effectively  address  all  or  a  significant  subset  of  challenges  identified  in  the 

EN 

8 

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relevant  country-specific  recommendations.  Within  this  tight  timeframe,  proceeding 
swiftly  with  the  effective  implementation  of  the  plan  including  the  REPowerEU 
chapter is essential to boost Spain’s long-term competitiveness through the green and 
digital transition, while ensuring social fairness. To deliver on the commitments of the 
plan  by  August  2026,  it  is  essential  for  Spain  to  continue  the  implementation  of 
reforms  and to  accelerate investments  by addressing emerging  delays while ensuring 
strong  administrative  capacity.  The  size  and  complexity  of  the  plan  call  for  specific 
actions  to  ensure  that  reforms  and  investments  can  be  fully  completed  on  time.  The 
same  goes  for  challenges  linked  to  absorption  capacity.  Investments  are  highly 
concentrated  towards  the  end  of  the  period  for  implementing  the  recovery  and 
resilience  plan  and  merit  special  attention.  There  is  also  scope  to  strengthen  the 
coordination  among  different  levels  of  the  administration,  while  streamlined 
procedures  would  accelerate  the  reception  of  funds  by  final  beneficiaries.  These 
elements  are  particularly  relevant  to  overcome  challenges  related  to  absorbing  the 
sizeable  amount  of  funds  managed  via  financial  instruments  set  in  the  modified 
recovery  and  resilience  plan.  The  systematic  involvement  of  local  and  regional 
authorities,  social  partners  and  other  relevant  stakeholders  remains  important  for  the 
successful  implementation  of  the  recovery  and  resilience  plan,  as  well  as  other 
economic and employment policies going beyond the plan, to ensure broad ownership 
of the overall policy agenda. 

(23)  As  part  of  the  mid-term  review  of  the  cohesion  policy  funds,  in  accordance  with 
Article 18 of Regulation (EU) 2021/1060, Spain is required to review each programme 
by March 2025, taking into account,  among other things, the challenges identified in 
the 2024 country-specific recommendations, as well as its national energy and climate 
plan.  This  review  forms  the  basis  for  the  definitive  allocation  of  the  EU  funding 
included  in  each  programme.  Spain  has  made  progress  in  implementing  cohesion 
policy and the European Pillar of Social Rights, but challenges remain. GDP per capita 
remains  below  75%  of  EU  average  in  eight  Spanish  regions.  Accelerating  the 
implementation  of  cohesion  policy  programmes  and  strengthening  administrative 
capacity across all levels is crucial. The priorities agreed in the programmes continue 
to be relevant. Beyond administrative capacity measures, it is particularly important to 
see fast implementation of investments into business innovation and R&D capabilities, 
especially  in  the  industries  identified  by  regional  smart  specialisation  strategies. 
Investments in the green transition, in line with the national energy and climate plan, 
particularly  those  in  water  management,  the  circular  economy,  climate  change 
adaptation and mitigation, remain key, especially in the territories most affected such 
as  Canarias  and  coastal  areas  in  the  east  and  south  of  Spain.  Investments  making 
regions facing  demographic decline  more  attractive and competitive  are instrumental 
for  convergence.  Furthermore,  it  is  still  necessary  to  promote  the  (re-)integration  of 
long-term  unemployed  people  and  older  workers  into  the  labour  market,  strengthen 
career  guidance,  address  skills  mismatches  and  implement  the  European  Child 
Guarantee.  These  measures  would  also  contribute  to  supporting  upward  social 
convergence, in line with the Commission services’ second-stage analysis based on the 
features  of  the  Social  Convergence  Framework26.  Spain  could  also  make  use  of  the 
industrial 
Strategic  Technologies  for  Europe  Platform 
transformation,  in  particular  by  investing  in  the  development  and  manufacturing  of 
strategic technologies and their respective value chains, especially in the areas of deep 

to  support 

initiative 

26 

SWD(2024)132 final. 

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tech  innovation,  clean  energy  and  resource  efficiency,  agriculture  and  health-related 
biotechnologies. 

(24)  Beyond the economic, social and environmental challenges addressed by the recovery 
and  resilience  plan  and  other  EU  funds,  Spain  faces  additional  challenges  related  to 
significant  and  increasing  water  scarcity  and  stress.  As  has  been  seen  in  2023  and 
2024,  emergency  drought  status  in  certain  regions  is  increasing  in  frequency  and  no 
longer  limited  to  summer  months.  Anticipating  and  managing  the  adverse  effects  of 
climate change, such as floods, coastal and soil erosion, desertification, droughts, heat 
waves and forest fires, remains a core challenge in Spain, which is one of the countries 
most  affected  in  the  EU.  Climate  change  is  expected  to  increase  the  frequency  and 
severity  of  droughts  and  floods,  negatively  affecting  people,  biodiversity,  public 
finances  and  competitiveness.  While  the  modified  recovery  and  resilience  plan  and 
other EU funds include measures to improve the situation of the water sector in Spain, 
further  efforts  are  needed,  especially  in  sustainable  water  management.  Further 
infrastructure  investment  would  help  improve  water  management,  including  in  the 
agricultural  sector,  which  is  the  main  consumer  of  water,  in  line  with  the  CAP 
Strategic  Plan  of  Spain27.  Measures  that  have  the  potential  to  be  scaled  up  include 
investments  in  collecting  and  treating  wastewater,  water  reuse,  reducing  leaks  in 
networks  and  the  general  water  supply,  increasing  the  use  of  climate  resilient  crops, 
improving  monitoring,  and  promoting  nature-based  solutions,  flood  prevention  and 
river restoration. In addition, mechanisms for better coordination among the different 
levels  of government, including on effective implementation  and enforcement would 
help the existing measures reach their full potential. 

(25) 

In view of the close interlinkages between the economies of euro area Member States 
and of their collective contribution to the functioning of the Economic and Monetary 
Union,  in  2024  the  Council  recommended  that  the  euro  area  Member  States  take 
action,  including  through  their  recovery  and  resilience  plans,  to  implement  the 
recommendation  on 
the  euro  area.  For  Spain, 
recommendations (1), (2) and (3) help implement the first, second and fourth euro area 
recommendations. 

the  economic  policy  of 

HEREBY RECOMMENDS that Spain take action in 2024 and 2025 to: 

1. 

27 
28 

Submit  the  medium-term  fiscal-structural  plan  in  a  timely  manner.  In  line  with  the 
requirements  of  the  reformed  Stability  and  Growth  Pact,  limit  the  growth  in  net 
expenditure28 in 2025 to a rate consistent with putting the general government  debt 
on a plausibly downward trajectory over the medium term and reducing the general 
government  deficit  below  the  3%  of  GDP  Treaty  reference  value.  Ensure  fiscal 
sustainability  including  by:  (i) reviewing and simplifying the tax system  to  support 
economic  growth  and  employment,  cohesion  and  the  green  transition;  and  (ii) 
improving the quality, efficiency and equity of public spending. 

C(2022) 6017 final.  
According  to  Article  2(2)  of  Regulation  (EU)  2024/1263,  ‘net  expenditure’  means  government 
expenditure net of interest expenditure, discretionary revenue measures, expenditure on programmes of 
the  Union  fully  matched  by  revenue  from  Union  funds,  national  expenditure  on  co-financing  of 
programmes funded by the Union, cyclical elements of unemployment benefit expenditure, and one-offs 
and other temporary measures. 

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2. 

3. 

Strengthen administrative capacity to manage EU funds, accelerate investments and 
maintain momentum in the implementation of reforms. Address emerging delays to 
allow  for  a  continued,  swift  and  effective  implementation  of  the  recovery  and 
resilience  plan,  including  the  REPowerEU  chapter,  ensuring  completion  of  reforms 
and investments by August 2026. Accelerate the implementation of cohesion policy 
programmes.  In  the  context  of  their  mid-term  review,  continue  focusing  on  the 
agreed  priorities,  while  considering  the  opportunities  provided  by  the  Strategic 
Technologies for Europe Platform initiative to improve competitiveness. 

Improve  water  management  to  better  address  the  adaptation  to  present  and  future 
effects of climate change and ensure long-term economic, social and environmental 
resilience,  by  improving  coordination  among  all  levels  of  government  and 
administration and scaling up existing solutions for sustainable water management in 
agriculture,  water  efficiency  and  infrastructure  investments,  and  by  supporting  the 
development of nature-based solutions. 

Done at Brussels, 

For the Council 
The President 

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