Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Spain
Date: 2025-06-04
Institutions: European Commission, Reform and Investment Task Force
Subjects: Spain, budget policy, economic policy, economic recovery, economic reform, employment policy, housing policy, management of resources, social policy, stability pact

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   EUROPEAN COMMISSION  Brussels, 4.6.2025  COM(2025) 209 final  Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Spain {SWD(2025) 209 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 
Article 121(2) and Article 148(4) thereof, 

Having regard to Regulation (EU) 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 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: 

General considerations 

(1) 

Regulation (EU) 2024/1263, which entered into force on 30 April 2024, specifies the 
objectives  of  the  economic  governance  framework,  which  aims  at  promoting  sound 
and  sustainable  public  finances  and  sustainable  and  inclusive  growth  and  resilience 
through reforms and investments, and preventing excessive government deficits. The 
Regulation  stipulates  that  the  Council  and  the  Commission  conduct  multilateral 
surveillance in the context of the European Semester in accordance with the objectives 
and requirements set out in the TFEU. The European Semester includes, in particular, 
the  formulation,  and  the  surveillance  of  the  implementation  of  country-specific 
recommendations.  The  Regulation  also  promotes  national  ownership  of  fiscal  policy 
and  emphasises  its  medium-term  focus,  combined  with  more  effective  and  coherent 
enforcement. Each Member State must submit to  the Council and the Commission  a 
national  medium-term  fiscal-structural  plan,  containing  its  fiscal,  reform  and 
investment  commitments,  over  4  or  5  years,  depending  on  the  length  of the  national 
legislative  term.  The  net  expenditure2  path  in  these  plans  has  to  comply  with  the 

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2 

OJ L, 2024/1263, 30.4.2024, ELI: http://data.europa.eu/eli/reg/2024/1263/oj. 
Net  expenditure  as  defined  in  Article  2,  point  (2),  of  Regulation  (EU)  2024/1263:  ‘net  expenditure’ 
means government expenditure net of (i) interest expenditure; (ii) discretionary revenue measures; (iii) 
expenditure  on  programmes  of  the  Union  fully  matched  by  revenue  from  Union  funds;  (iv)  national 

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Regulation’s  requirements,  including  the  requirements  to  put  or  keep  general 
government debt on a plausibly downward path by the end of the adjustment period, or 
for it to remain at prudent levels below 60% of gross domestic product (GDP), and to 
bring  and/or  maintain  the  general  government  deficit  below  the  3%-of-GDP  Treaty 
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  the 
Regulation, the adjustment period may be extended by up to three years.  
Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council3,  which 
established  the  Recovery  and  Resilience  Facility  (the  ‘RRF’),  entered  into  force  on 
19 February 2021.  The  RRF  provides  financial  support  to  Member  States  for 
implementing  reforms  and  investments,  delivering  a  fiscal  impulse  financed  by  the 
Union.  In  line  with  the  priorities  of  the  European  Semester  for  economic  policy 
coordination, the RRF fosters economic and social recovery while driving sustainable 
reforms and investments, in particular promoting the green and digital transitions and 
making  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 Union and support the continued implementation of the 
European Pillar of Social Rights. 
Regulation  (EU)  2023/435  of  the  European  Parliament  and  of  the  Council4  (the 
‘REPowerEU  Regulation’),  which  was  adopted  on  27 February 2023,  aims  to  phase 
out the Union’s dependence on Russian fossil-fuel imports. This helps achieve energy 
security  and  diversify  the  Union’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  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 that Regulation, the Commission assessed the relevance, effectiveness, 
efficiency  and  coherence  of  the  recovery  and  resilience  plan,  in  accordance  with  the 
assessment guidelines set  out  in  Annex V.  On  13 July  2021, the Council adopted its 
Implementing Decision approving the assessment of the recovery and resilience plan 
for Spain5, which was amended under Article 18(2) on 17 October 2023 to update the 
maximum  financial  contribution  for  non-repayable  financial  support,  as  well  as  to 
include  the  REPowerEU  chapter6.  The  release  of  instalments  is  conditional  on  the 
adoption  of  a  decision  by  the  Commission,  in  accordance  with  Article 24(5),  stating 
that Spain has satisfactorily achieved the relevant milestones and targets set out in the 

the  Recovery  and  Resilience  Facility 

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. 
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). 
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). 
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 REV 1). 
Council  Implementing  Decision  of  17 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 13695/23 REV 
1; ST 13695/23 ADD 1 REV 1). 

(2) 

(3) 

(4) 

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Implementing  Decision.  Satisfactory  achievement 

Council 
the 
achievement  of  preceding  milestones  and  targets  for  the  same  reform  or  investment 
has not been reversed. 

requires 

that 

(5) 

(6) 

(7) 

On  21 January  2025,  the  Council,  upon  the  recommendation  of  the  Commission, 
adopted a recommendation endorsing the national medium-term fiscal-structural plan 
of  Spain7.  The  plan  was  submitted  in  accordance  with  Article  11  and  Article  36(1), 
point (a), of Regulation (EU) 2024/1263, covers the period from 2025 until 2031 and 
presents a fiscal adjustment spread over seven years. 

On  26 November  2024,  on  the  basis  of  Regulation  (EU)  No 1176/2011,  the 
Commission  adopted  the  2025  Alert  Mechanism Report,  in  which  it  did  not  identify 
Spain as one of the Member States for which an in-depth review would be needed. The 
Commission  also  adopted  a  recommendation  for  a  Council  recommendation  on  the 
economic  policy  of  the  euro  area  and  a  proposal  for  the  2025  Joint  Employment 
Report,  which  analyses  the  implementation  of  the  Employment  Guidelines  and  the 
principles  of  the  European  Pillar  of  Social  Rights.  The  Council  adopted  the 
Recommendation on the economic policy of the euro area8 on 13 May 2025 and the 
Joint Employment Report on 10 March 2025. 

On  29 January 2025,  the  Commission  published  the  Competitiveness  Compass,  a 
strategic framework that aims to boost the EU’s global competitiveness over the next 
five  years.  It  identifies  the  three  transformative  imperatives  of  sustainable  economic 
growth: (i) innovation; (ii) decarbonisation and competitiveness; and (iii) security. To 
close  the  innovation  gap,  the  EU  aims  to  foster  industrial  innovation,  support  the 
growth of start-ups through initiatives like the EU Start-up and Scale-up Strategy, and 
promote the adoption of advanced technologies like artificial intelligence and quantum 
computing.  In  pursuit  of  a  greener  economy,  the  Commission  has  outlined  a 
comprehensive Affordable Energy Action Plan and a Clean Industrial Deal, ensuring 
that  the  shift  to  clean  energy  remains  cost-effective,  competitiveness-friendly, 
particularly  for  energy-intensive  sectors,  and  is  a  driver  for  growth.  To  reduce 
excessive dependencies and increase security, the Union is committed to strengthening 
global  trade  partnerships,  diversifying  supply  chains  and  securing  access  to  critical 
raw materials and clean energy sources. These priorities are underpinned by horizontal 
enablers, namely regulatory simplification, deepening of the single market, financing 
competitiveness and a Savings and Investments Union, promotion of skills and quality 
jobs, and better coordination of EU policies. The Competitiveness Compass is aligned 
with  the  European  Semester,  ensuring  that  Member  States’  economic  policies  are 
consistent with the Commission’s strategic objectives, creating a unified approach to 
economic governance that fosters sustainable growth, innovation and resilience across 
the Union. 

(8) 

In  2025,  the  European  Semester  for  economic  policy  coordination  continues  to 
develop  alongside  the  implementation  of  the  RRF.  The  full  implementation  of  the 
recovery and resilience plans remains essential for delivering on 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 

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8 

Council  Recommendation  of  21 January  2025  endorsing  the  medium-term  fiscal-structural  plan  of 
Spain, OJ C/2025/643, 10.2.2025. 
Council  Recommendation  of  13  May  2025  on  the  economic  policy  of  the  euro  area  (OJ  C, 
C/2025/2782, 22.5.2025, ELI: http://data.europa.eu/eli/C/2025/2782/oj). 

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issued  in  recent  years.  These  country-specific  recommendations  remain  equally 
relevant  for  the  assessment  of  amended  recovery  and  resilience  plans  in  accordance 
with Article 21 of Regulation (EU) 2021/241. 

(9) 

The  2025  country-specific  recommendations  cover 
the  key  economic  policy 
challenges that are not sufficiently addressed by measures included in the recovery and 
resilience  plans,  taking  into  account  the  relevant  challenges  identified  in  the  2019-
2024 country-specific recommendations. 

in 

progress 

(10)  On  4  June  2025,  the  Commission  published  the  2025  country  report  for  Spain.  It 
assessed  Spain’s 
country-specific 
addressing 
recommendations  and  took  stock  of  Spain’s  implementation  of  the  recovery  and 
resilience plan. Based on this analysis, the country report identified the most pressing 
challenges  Spain  is  facing.  It  also  assessed  Spain’s  progress  in  implementing  the 
European  Pillar  of  Social  Rights  and  in  achieving  the  Union  headline  targets  on 
employment, skills and poverty reduction, as well as progress in achieving the United 
Nations Sustainable Development Goals. 

relevant 

the 

Assessment of the Annual Progress Report 

(11)  On 21 January 2025 the Council recommended the following maximum growth rates 
of net expenditure for Spain: 3.7% in 2025, 3.5% in 2026, 3.2% in 2027, and 3.0% in 
2028,  which  correspond  to  the  maximum  cumulative  growth  rates  calculated  by 
reference to 2023 of 9.2% in 2025, 13.0% in 2026, 16.6% in 2027, and 20.1% in 2028. 
On 30 April 2025 Spain submitted its Annual  Progress  Report9, on adherence to the 
recommended  maximum  growth  rates  of  net  expenditure,  the  implementation  of  the 
set  of  reforms  and  investments  underpinning  the  extension  of  the  adjustment  period 
and the implementation of reforms and investments responding to the main challenges 
identified  in  the  European  Semester  country-specific  recommendations.  The  Annual 
Progress  Report  also  reflects  Spain’s  biannual  reporting  on  the  progress  made  in 
achieving its recovery and resilience plan in accordance with Article 27 of Regulation 
(EU) 2021/241. 

(12)  Russia’s  war  of  aggression  against  Ukraine  and  its  repercussions  constitute  an 
existential  challenge  for  the  European  Union.  The  Commission  recommended  to 
activate the national  escape clause of the Stability and Growth Pact  in  a coordinated 
manner to support the EU efforts to achieve a rapid and significant increase in defence 
spending and this proposal was welcomed by the European Council of 6 March 2025.  
(13)  Based on data validated by Eurostat  10, Spain’s general government deficit decreased 
from 3.5% of GDP in 2023 to 3.2% in 2024, while the general government debt fell 
from 105.1% of GDP at the end of 2023 to 101.8% at the end of 2024. According to 
the  Commission’s  calculations,  these  developments  correspond  to  a  net  expenditure 
growth rate of 3.5% in 2024. In the Annual Progress Report, Spain estimates the net 
expenditure  growth  in  2024  at  4.1%.  The  Commission  estimates  that  the  net 
expenditure  growth  was  lower  than  in  the  Annual  Progress  Report.  The  difference 
between the Commission’s calculations and the estimates of national authorities is due 
to  a  different  estimate  of  the  change  (from  2023)  in  national  co-financing  of  EU 
programmes.  The  Commission  uses  figures  reported  by  IGAE  to,  and  validated  by, 

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10 

The  2025  Annual  Progress  Reports  are  available  on:  https://economy-finance.ec.europa.eu/economic-
and-fiscal-governance/stability-and-growth-pact/preventive-arm/annual-progress-reports_en 
Eurostat-Euro Indicators, 22.4.2025. 

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Eurostat  whereas  Spain  uses  the  Ministry  of  Finance’s  own  estimates.  Based  on  the 
Commission’s  estimates,  the  fiscal  stance11,  which  includes  both  nationally  and  EU 
financed expenditure, was contractionary, by 0.3% of GDP, in 2024. On 4 June 2025, 
the  Commission  adopted  a  report  under  Article  126(3)  of  the  TFEU12.  That  report 
assessed  the  budgetary  situation  of  Spain,  as  its  general  government  deficit  in  2024 
exceeded  the  reference  value  of  3%  of  GDP.  The  report  concluded  that,  taking  into 
account all the relevant factors as appropriate, the deficit criterion is assessed as being 
fulfilled.  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  does  not  at  this  stage  intend  to  propose  in  June  to  open  an  excessive 
deficit procedure.  

(14)  According to the Annual Progress Report, the macroeconomic scenario underpinning 
the  budgetary  projections  by  Spain  expects  real  GDP  growth  at  2.6%  in  2025  and 
2.2% in 2026. The Annual Progress Report does not include HICP projections13. The 
Commission  Spring  2025  Forecast  projects  real  GDP  to  grow  by  2.6%  in  2025  and 
2.0% in 2026, and HICP inflation to stand at 2.3% in 2025 and 1.9% in 2026.  

(15) 

In the Annual Progress Report, the general government deficit is expected to decrease 
to  2.8%  of  GDP  in  2025,  while  the  general  government  debt-to-GDP  ratio  is  set  to 
decrease  to  101.7%  by  the  end  of  2025.  These  developments  correspond  to  net 
expenditure growth of 4.1% in 2025. The Commission Spring 2025 Forecast projects a 
general  government  deficit  of  2.8%  of  GDP  in  2025.  The  decrease  of  the  deficit  in 
2025  mainly  reflects  the  complete  phase-out  of  energy  support  measures  and  the 
impact  of  newly  adopted  tax  reforms.  According  to  the  Commission’s  calculations, 
these developments correspond to net expenditure growth of 4.2% in 2025. Based on 
the Commission’s estimates, the fiscal stance, which includes both nationally and EU 
financed expenditure, is projected to be expansionary, by 0.3% of GDP, in 2025. The 
general government debt-to-GDP ratio is set to decrease to 100.9% by the end of 2025. 
The decrease of the debt-to-GDP ratio in  2025 mainly  reflects  nominal  GDP  growth 
outpacing the cost of servicing debt. 

(16)  General  government  expenditure  amounting  to  1.1%  of  GDP  is  expected  to  be 
financed  by  non-repayable  support  (“grants”)  from  the  Recovery  and  Resilience 
Facility  in  2025,  compared  to  0.8%  of  GDP  in  2024,  according  to  the  Commission 
Spring 2025 Forecast. Expenditure financed by Recovery and Resilience Facility non-
repayable support enables high-quality investment and productivity-enhancing reforms 
without a direct impact on the general government balance and debt of Spain.   

(17)  General government defence expenditure in Spain amounted to 1.0% of GDP in 2021, 
1.1%  of  GDP  in  2022  and  0.9%  of  GDP  in  202314.  According  to  the  Commission 
Spring  2025  Forecast,  expenditure  on  defence  is  projected  at  1.0%  of  GDP  in  2024 

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13 

14 

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 including expenditure financed by non-repayable 
support (grants) from the Recovery and Resilience Facility and other Union funds. 
Report  from  the  Commission,  prepared  in  accordance  with  Article  126(3)  of  the  Treaty  on  the 
Functioning of the European Union, 4.6.2025, COM(2025) 615 final. 
In the Annual Progress Report,  the Spanish authorities include only figures for the deflator of private 
consumption, which is projected at 2.7% in 2025 and 2.4% in 2026. 
Eurostat, government expenditure by classification of functions of government (COFOG).  

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and 1.3% of GDP in 2025. This corresponds to an increase of 0.3 percentage points of 
GDP compared to 2021.  

(18)  According  to  the  Commission  Spring  2025  Forecast,  net  expenditure  in  Spain  is 
projected to grow by 4.2% in 2025 and 7.9% cumulatively in 2024 and 2025. Based on 
the Commission Spring 2025 Forecast, the net expenditure growth of Spain in 2025 is 
projected  to  be  above  the  recommended  maximum  growth  rate,  corresponding  to  a 
deviation15 of 0.2% of GDP in annual terms. The projected deviation does not exceed 
the 0.3% of GDP threshold for the annual deviation. When considering 2024 and 2025 
together,  the  cumulative  growth  rate  of  net  expenditure  is  projected  to  be  below  the 
recommended maximum growth rate.  

(19)  The  Annual  Progress  Report  does  not  include  budgetary  projections  beyond  2025. 
Based on policy measures known at the cut-off date of the forecast, the Commission 
Spring 2025 Forecast projects a general government deficit of 2.5% of GDP in 2026. 
The decrease of the deficit in  2026 mainly reflects  the expected expiry  of the flood-
related  emergency  measures.  These  developments  correspond  to  net  expenditure 
growth  of  3.9%  in  2026.  Based  on  the  Commission’s  estimates,  the  fiscal  stance, 
which  includes  both  nationally  and  EU  financed  expenditure,  is  projected  to  be 
broadly neutral in 2026. The general government debt-to-GDP ratio is projected by the 
Commission to decrease to 100.8% by the end of 2026. 

(20)  The  recommendation  endorsing  the  medium-term  plan  of  Spain  specifies  the  set  of 
reforms and investments underpinning the extension of the adjustment period, together 
with  a  timeline  for  their  implementation.  They  include  existing  and  stepped-up 
measures from the recovery and resilience plan, such as reforms in the area of taxation 
and fight against tax fraud, reforms to improve the quality of public expenditure, and 
investments in the areas of digital transformation, green transition and productivity, as 
well as additional reforms and investments such as deployment of a common business 
regulation  framework,  the  introduction  of  mandatory  electronic  invoice,  and 
investments  in  human  capital,  physical  capital.  Taking  into  account  the  information 
provided  by  Spain  in  its  Annual  Progress  Report,  the  Commission  finds  that  the 
implementation of the set of reforms and investments underpinning an extension of the 
adjustment period that were due by the 30 April 2025 have been implemented with the 
exception  of  certain  elements  of  Spain’s  Recovery  and  Resilience  Plan’s  measure 
C28.R3 and the related milestone on the entry into force of tax reforms derived from 
the expert group recommendations or other analyses by the Ministry of Finance.                                                            

Key policy challenges 

(21)  Demographic  developments  are  expected  to  lead  to  a  significant  increase  in  public 
expenditure  related  to  healthcare,  long-term  care  and  pensions.  The  overall  fiscal 
consolidation needs call for further reforms to modernise and adapt the tax system in 
areas such as consumption taxes, personal income taxation and environmental taxation 
in accordance with the tax reforms under the RRP and MTP. The main source of tax 
revenues  in  Spain  in  2022  were  labour  taxes  (50.5%  of  tax  revenues  in  2022).  The 
labour tax revenue amounted 19.1% of the GDP in 2022 (EU average 17.3% and euro-
area  average 17.7%). Spain is one of the EU countries with the lowest revenue from 
consumption taxes (9.7% of GDP vs. 10.9% in the EU in 2022). Environmental taxes 
are also below the EU average: 1.52% of GDP vs. 2.02% of GDP in the EU in 2022. 

15 

From  2026  these  figures  will  appear  in  the  control  account  that  is  established  in  Article  22  of  the 
Regulation (EU) 2024/1263. 

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(22) 

The  Spanish  tax  system  does  not  internalize  sufficiently  environmental  costs 
associated with the use of water and diesel. The reforms aimed at increasing the role of 
indirect taxes (consumption and environmental) would secure fiscal revenues, support 
job creation and economic activity going forward while reducing economic distortions 
caused by the large weight of labour taxes. The rationalisation of tax benefits would be 
a tool to simplify the consumption taxation and reduce the VAT policy gap. The tax 
and benefit system reduced the Gini coefficient in 2022 by 7.6 pps, which was close to 
the  EU  average  of  7.9  pps.  Still,  Spain  ranks  18th  in  the  GINI  index  for  the 
distribution of income before social transfers and ranks 21st in the distribution of total 
disposable  income.  Social  cohesion  would  be  further  improved  by  additional 
adjustments to the progressivity of personal income taxation and wealth taxes.   

In accordance with Article 19(3), point (b), of Regulation (EU) 2021/241 and criterion 
2.2  of  Annex  V  to  that  Regulation,  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  relevant  country-specific  recommendations.  Within  this 
tight timeframe, finalising the effective implementation of the recovery and resilience 
plan,  including  the  REPowerEU  chapter,  is  essential  to  boost  Spain’s  long-term 
competitiveness  through  the  green  and  digital  transitions,  while  ensuring  social 
fairness. To deliver on the commitments of the recovery and resilience plan by August 
2026,  it  is  essential  for  Spain  to  accelerate  the  implementation  of  reforms  and 
investments  by  addressing  relevant  challenges.  The  size  and  complexity  of  the  plan 
call  for  specific  targeted  action  to  ensure  timely  completion  of  reforms  and 
investments. Particular attention is needed to address challenges related to absorption 
capacity,  especially  given  the  concentration  of  investments  towards  the  end  of  the 
implementation  period.  These  challenges  are  further  compounded  by  the  sizeable 
volume of funds channelled through financial instruments under the amended recovery 
and 
levels  of 
administration,  along  with  streamlining  procedures,  would  help  accelerate  fund 
absorption  and  ensure  that  support  reaches  the  final  beneficiaries  promptly.  The 
systematic involvement of local and regional authorities, social partners, civil society 
and other relevant  stakeholders remains essential  in  order to  ensure broad ownership 
for the successful implementation of the recovery and resilience plan. 

resilience  plan.  Strengthening  coordination  among  different 

(23)  The implementation  of cohesion  policy programmes,  which encompass support from 
the  European  Regional  Development  Fund  (ERDF),  the  Just  Transition  Fund  (JTF) 
and the European Social Fund Plus (ESF+), has accelerated in Spain. It is important to 
continue  efforts  to  ensure  the  swift  implementation  of  these  programmes,  while 
maximising  their  impact  on  the  ground.  Spain  is  already  taking  action  under  its 
cohesion policy programmes to boost competitiveness and growth. At the same time, 
Spain  continues  to  face  challenges,  including  those  relating  to  enhancing  innovation 
and competitiveness  in  the context of industrial  transition,  upskilling  of workers  and 
fostering STEM in VET, as well as  improving access to affordable housing in major 
cities  and  tourism  intensive  areas,  and  increasing  water  resilience,  especially  in 
Mediterranean regions and on the Canary Islands. It is also key to ensure the effective 
implementation  of the Child Guarantee.  In  accordance with  Article 18 of Regulation 
(EU)  2021/1060,  Spain  is  required  –  as  part  of  the  mid-term  review  of  the  cohesion 
policy funds – to review each programme taking into account, among other things, the 
challenges identified in the 2024 country-specific recommendations. The Commission 

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proposals adopted on 1 April 202516 extend the deadline for submitting an assessment 
–  for  each  programme  –  of  the  outcome  of  the  mid-term  review  beyond  31  March 
2025.  It  also  provides  flexibilities  to  help  speed  up  programme  implementation  and 
incentives  for  Member  States  to  allocate  cohesion  policy  resources  to  five  strategic 
priority areas of the Union, namely competitiveness in strategic technologies, defence, 
housing, water resilience and energy transition. 

(24)  The  Strategic  Technologies  for  Europe  Platform  (STEP)  provides  the  opportunity  to 
invest in a key EU strategic priority by strengthening the EU’s competitiveness. STEP 
is channelled through 11 existing EU funds.  Member States can also contribute to the 
InvestEU programme supporting investments in  priority areas. Spain could use these 
initiatives  to  support  the  development  or  manufacturing  of  critical  technologies, 
including clean and resource-efficient technologies. 

(25)  Beyond the economic and social challenges addressed by the recovery and resilience 
plan  and  other  EU  funds,  Spain  faces  several  additional  challenges  related  to  the 
business  environment,  judicial  efficiency,  cross-border  energy  infrastructure,  water 
management  and  water  resilience,  scarcity  of  housing  supply,  availability  of  social 
housing, social fairness (particularly regarding child poverty), skill shortages and early 
school leaving. 

(26)  As  set  in  the  Competitiveness  Compass,  all  the  EU,  national,  and  local  institutions 
must  make  a  major  effort  to  produce  simpler  rules  and  to  accelerate  the  speed  of 
administrative  procedures.  The  Commission  has  set  ambitious  goals  for  reducing 
administrative burden: by at least 25% and by at least 35% for SMEs; and has created 
new  tools  to  achieve  these  goals,  including  systematic  stress  test  of  the  stock  of  EU 
legislation  and  enhanced  stakeholders’  dialogue.  To  match  this  ambition,  Spain  also 
needs  to  take  action.  71%  of  businesses  consider  the  complexity  of  administrative 
procedures to be a problem for their company when doing business in Spain17. There 
is scope for Spain to simplify regulation and reduce administrative burden on business. 
The volume of regulations in Spain has increased in recent years, with a sizeable rise 
due  to  the  impact  of  COVID-19.  In  2022  only,  the  Spanish  administration  adopted 
11 775 new norms. A significant majority of firms in Spain see regulation as a major 
obstacle  to  investment.  Spain  needs  to  improve  the  business  environment  by 
enhancing  coordination  between  territories  and  government  levels,  by  removing 
regulatory barriers at all levels, and by easing the administrative burden on day-to-day 
business.  Spain’s  ‘20th  regime’  proposal  has  the  potential  to  improve  the  business 
environment for companies. 

(27)  Spain  has  taken  important  steps  to  improve  efficiency  in  the  justice  system  but 
challenges  persist.  Although  the  reforms  planned  in  Spain’s  RRP  contribute  to 
enhancing  judicial  efficiency,  it  still  takes  a  long  time  to  resolve  cases  in  civil  and 
commercial courts. This can result in numerous economic inefficiencies, such as less 
functional  real  estate  markets,  less  entrepreneurship  and  lower  credit  availability, 
among others. It would be beneficial to improve the efficiency of the justice system, 
for example by increasing human and material resources and achieving an even level 
of digitalisation between territories. 

16 

17 

Proposal  for  a  REGULATION  OF  THE  EUROPEAN  PARLIAMENT  AND  OF  THE  COUNCIL 
amending  Regulations  (EU)  2021/1058  and  (EU)  2021/1056  as  regards  specific  measures  to  address 
strategic challenges in the context of the mid-term review - COM(2025) 123 final. 
‘Businesses' attitudes towards corruption in the EU’ Flash Report, Eurobarometer Report (April 2024). 

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(28)  To boost the competitiveness of businesses in Spain, it is key to tackle the barriers that 
hinder  business  growth  and  operations,  especially  for  smaller  and  newer  businesses. 
Beyond  reforms  adopted  by  Spain  in  the  context  of  the  RRP,  such  as  the  Law  on 
Business Creation and Growth and the Law on Start-ups, further action is required to 
reduce  financial  and  administrative  barriers  to  business  growth.  There  is  significant 
potential  to  improve  inter-administrative  cooperation,  particularly  on  regulatory  and 
administrative  procedures  that  have  a  direct  impact  on  business  operations.  In 
particular,  regulatory  differences  between  territories  discourage  companies  from 
expanding  across  regions  simultaneously,  limiting  the  scope  for  innovation,  growth, 
specialisation  and  efficiency  gains.  Although  Spain  performs  well  in  terms  of 
scientific excellence and has a research system that attracts both domestic and foreign 
talent, the country continues to perform below the EU average on overall innovation. 
Spain also continues to underperform on science-business linkages. Specifically, R&D 
spending, especially private R&D investment, remains well below the EU average and 
unevenly  spread  across  regions.  Recent  public  support  schemes  to  support  private 
R&D  investment  have  a  limited  uptake  due  to  their  complexity  and  the  excessive 
administrative burden they put on potential beneficiaries. 

(29)  Large  areas  of  the  country  are  water-stressed,  with  water  demand  in  particular  from 
agriculture,  tourism  and  energy  exceeding  the  water  resources  available  under 
sustainable conditions. Beyond the investments and reforms addressed by the RRP and 
other  EU  funds  in  Spain,  improving  water  management  remains  a  major  issue  in 
Spain, particularly in terms of water governance, water body rehabilitation and water 
efficiency.  In  addition,  mechanisms  to  improve  coordination  among  the  different 
levels  of  government,  including  measures  to  aid  effective  implementation  and 
enforcement, would help the existing measures reach their full potential. 

(30)  Climate  risks  directly  affect  Spain’s  economy  and  society,  with  a  high  number  of 
fatalities  and  economic  losses  resulting  from  weather  and  climate-related  extreme 
events. Further investment in infrastructure is needed to make the water system more 
resilient.  Anticipating  and  adapting  to  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.  Doubling down on this work would also improve 
the country’s water resilience. 

(31)  Nature degradation presents significant risks to Spain’s economy and competitiveness. 
Spain has the highest level of supply chain dependency on ecosystem services  in the 
EU, with several sectors such as agriculture, fisheries, construction and water utilities 
fully dependent on ecosystem services. Failure to maintain the capacity of ecosystems 
to  deliver  services  could  entail  significant  costs  or  even  halt  production  in  these 
sectors.  Protecting  and  restoring  key  ecosystems  would  ensure  the  long-term 
competitiveness  of  these  economic  sectors.  Specifically,  the  agri-food  system 
continues to have significant climate and environmental impacts, warranting additional 
action to support the uptake of sustainable agriculture practices. 

(32)  Spain  is  making  progress  on  the  roll-out  of  renewables  and  has  one  of  the  highest 
installed capacity of wind and solar power in the EU. Spain’s cross-border electricity 
interconnection  level  in  2025  (at  less  than  5%)  is  still  significantly  below  the 
interconnection targets for 2030 (15%). Continuing the development of networks and 
storage solutions  would help  supporting  the integration of renewables in  the Spanish 
energy mix. 

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(33)  The scarcity of housing and its effect on house prices impacts the disposable income 
of  households  and  represents  a  challenge,  especially  for  low-income  families  and 
young people. Data from the Bank of Spain shows that nearly 40% of Spanish tenants 
spend 40% of their income on rent and utilities, against the EU average of 27%, and 
the Spanish economy has a housing deficit of approximately 600 000 units. The land 
law  reform  is  pending  and  would  facilitate  new  housing  development  by  reducing 
processing 
times,  promoting  regulatory  stability  and  eliminating  unnecessary 
administrative  bottlenecks.  Addressing  labour  shortages  in  the  construction  sector  is 
fundamental, as over 50% of employers in the sector report significant difficulties in 
finding workers. 

(34)  There  is  short  supply  of  affordable  and  social  housing,  significantly  below  the  EU 
average. It is essential to reverse the factors that constrain supply to boost residential 
construction and expand the rental market. The focus should be on the swift provision 
of  affordable  housing,  especially  for  young  people  and  low-income  households. 
According to the Bank of Spain, the stock of social rental housing is only 1.5% of the 
total  housing  stock,  well  below  the  EU  average  of  9%.  Freeing  up  public  land, 
expanding  the  stock  of  social  rental  housing  and  increasing  financing  for  affordable 
and social housing would boost the availability of housing. 

(35) 

In a context of  high  poverty and social exclusion risks, child poverty is a significant 
structural  challenge  to  social  fairness  and  future  competitiveness.  More  than  one  in 
three children are at risk of poverty or social exclusion. The most affected are children 
from  migrant  and  Roma  backgrounds,  children  in  single-parent  households,  children 
whose parents have a low or medium level of education and children from low work-
intensity households. Severe material and social deprivation is also high and above the 
EU average. There is potential to improve child welfare by ensuring more even access 
to,  as  well  as  more  efficient  and  targeted  provision  of,  social  support  and  income 
protection measures.  Strengthening and  accelerating the implementation  of the Child 
Guarantee,  as  well  as  ensuring  access  to  basic  services  such  as  school  meals  and 
housing,  could  help  mitigate  the  impact  of  child  poverty  and  prevent  the 
intergenerational  transmission  of  disadvantages.  The  minimum  income  scheme 
(Ingreso  Mínimo  Vital  –  IMV)  and  the  child  support  supplement  (Complemento  de 
Ayuda  para  la  Infancia  –  CAPI)  are  crucial  tools  to  reduce  poverty  and  continued 
efforts  have  been  undertaken  in  the  last  years  to  strengthen  their  implementation. 
Nonetheless, improving awareness and reducing administrative barriers could increase 
still  low  take-up  rates  and  address  inefficiencies.  The  impact  of  social  transfers 
(excluding  pensions)  on  poverty  reduction,  including  on  child  poverty,  is  among  the 
lowest  in  the  EU.  Despite  some  improvements,  income  inequality  remains  high  and 
above  the  EU  average,  and  the  redistributive  effect  of  taxes  and  benefits  is  also 
limited.  Refining  the  design  of  current  child-related  tax  deductions  offers  an 
opportunity to strengthen support for the most vulnerable. Increasing targeted support 
for  families  and  children,  and  decreasing  persisting  regional  differences,  could  help 
improve  social  outcomes.  Addressing  these  challenges  would  also  contribute  to 
supporting upward social convergence, in line with the Commission services’ second-
stage country analysis based on the Social Convergence Framework18. 

(36)  Persistent obstacles affect the transition from education to work in both vocational and 
educational training (VET) and higher education. Low levels of basic skills and high 

18 

SWD(2025)95  –  Second-stage  country  analysis  on  social  convergence  in  line  with  the  Social 
Convergence Framework (SCF), 2025. 

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rates of students leaving school early remain pressing issues. A significant share of 15-
year-olds underperform in mathematics, reading and science. Few students achieve top 
performance,  jeopardising  future  productivity  and  competitiveness.  Despite  rising 
VET enrolment, enrolment in upper-secondary and dual programmes remains limited. 
The  low  employment  rates  of  medium-skilled  VET  graduates  and  the  low  share  of 
adults  with  intermediate  qualifications  point  to  underlying  skills  mismatches. 
Enrolment  in  VET  declines  with  higher  age  and  lower  educational  attainment, 
exacerbating inequalities, particularly for older adults, men and people with low levels 
of skills. The low take-up of adult learning reduces opportunities to adapt to changing 
job market needs, thereby also undermining productivity and competitiveness. 

(37)  The  rate  of  children  enrolled  in  early  childhood  education  and  care  continues  to 
increase, but regional disparities persist. Regional differences in achieving basic skills 
are  also  significant.  Students  leaving  school  early  also  remains  a  challenge,  with 
persistent differences at regional level and between genders. 

(38) 

In view of the close interlinkages between the economies of euro-area Member States 
and  their  collective  contribution  to  the  functioning  of  the  economic  and  monetary 
union,  in  2025,  the  Council  recommended  that  the  euro-area  Member  States  take 
action,  including  through  their  recovery  and  resilience  plans,  to  implement  the  2025 
the  euro  area.  For  Spain, 
Recommendation  on 
recommendations  (2),  (3),  (4)  and  (6)  help 
the  first  euro-area 
recommendation  on  competitiveness,  while  recommendations  (4),  (5)  and  (6)  help 
implement  the  second euro-area recommendation on resilience,  and  recommendation 
(1)  helps  implement  the  third  euro-area  recommendation  on  macroeconomic  and 
financial stability set out in the 2025 Recommendation. 

the  economic  policy  of 

implement 

HEREBY RECOMMENDS that Spain take action in 2025 and 2026 to: 

1. 

2. 

3. 

investments  underpinning 

Reinforce overall defence spending and readiness in line with the European Council 
conclusions  of  6  March  2025.  Adhere  to  the  maximum  growth  rates  of  net 
expenditure recommended by the Council on 21 January 2025. Implement the set of 
the  extended  adjustment  period  as 
reforms  and 
recommended  by  the  Council  on  21  January  2025.  Further  strengthen  fiscal 
sustainability by reviewing and simplifying the tax system, including by shifting part 
of the tax burden from labour towards environmental, consumption and immovable 
property  taxation,  to  support  economic  growth  and  employment,  cohesion  and  the 
green and digital transition. 

In  view  of  the  applicable  deadlines  for  the  timely  completion  of  reforms  and 
investments  under  Regulation  (EU)  2021/241,  accelerate  implementation  of  the 
recovery  and  resilience  plan,  including  the  REPowerEU  chapter.  Accelerate  the 
implementation of cohesion policy programmes (ERDF, JTF, ESF+), building, where 
appropriate, on the opportunities offered by the mid-term review. Make optimal use 
of EU instruments, including the scope provided by  the InvestEU and the Strategic 
Technologies for Europe Platform, to improve competitiveness. 

Simplify  regulation,  improve  regulatory  tools  and  reduce  administrative  burden  as 
well  as  regulatory  fragmentation  across  regions.  Increase  judicial  efficiency  by 
streamlining judicial proceedings and by further digitalising the justice system in all 
regions.  Facilitate  business  creation,  innovation  and  expansion,  supporting  R&I 
investments and stronger science-business linkages. 

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4. 

5. 

6. 

Improve water management to better manage adaptation to current and future effects 
of climate change by strengthening coordination across all levels of government and 
administrative  bodies  and  by  scaling  up  solutions  for  drought  and  flood  risk 
reduction  and  sustainable  water  management  in  agriculture,  by  increasing  water 
efficiency  and  expanding  infrastructure  investments,  and  by  supporting  the 
in  energy  storage,  electricity 
application  of  nature-based  solutions.  Invest 
transmission and distribution and in cross-border electricity interconnections. 

Increase  the  housing  supply  by  completing  the  reform  of  the  land  law,  reducing 
permitting  processing  times,  eliminating  administrative  bottlenecks,  and  addressing 
labour  shortages  in  the  construction  sector.  Strengthen  the  provision  of  social  and 
affordable housing. 

Address child poverty, while also improving the efficiency, coverage and adequacy 
of social transfers and social assistance. Reduce skills shortages and mismatches by 
strengthening  dual  vocational  education  and  training,  and  by  increasing  lifelong 
learning,  in  particular  for  the  low-skilled.  Improve  basic  skills  and  address  early 
school leaving, taking into account regional disparities. 

Done at Brussels, 

For the Council 
The President 

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