Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Spain
Date: 2026-06-03
Institutions: European Commission, Reform and Investment Task Force
Subjects: Spain, budget policy, defence expenditure, economic policy, economic recovery, economic reform, employment policy, housing policy, social policy, stability pact

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   EUROPEAN COMMISSION  Brussels, 3.6.2026  COM(2026) 209 final  Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Spain   {SWD(2026) 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 
Articles 121(2) and 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  1466/97  (1),  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: 

(1) 

(2) 

1 

2 

at 

and 

promoting sound 

Regulation  (EU)  2024/1263  specifies  the objectives of  the  economic governance 
public 
framework,  which aims 
finances, sustainable  and  inclusive  growth  and  resilience  through  reforms  and 
investments, as  well 
deficits.  The 
Regulation stipulates  that the  Council  and  the  Commission  conduct  multilateral 
surveillance 
accordance 
with the objectives and  requirements  set  out  in  the  Treaty  on  the  Functioning  of  the 
European  Union  (TFEU). The  European  Semester  includes,  in  particular,  the 
implementation of  country-specific 
formulation,  and 
recommendations. 

the  European  Semester in 

the  surveillance  of 

as preventing 

context  of 

government 

sustainable 

excessive 

the 

the 

in 

On  16 July 2025,  the  Commission  adopted  its  proposal  for  a  regulation  establishing 
the European Fund for economic, social and territorial cohesion, agriculture and rural, 
fisheries and maritime, prosperity and security for the period 2028-2034 and amending 
Regulation (EU) 2023/955 and Regulation (EU, Euratom) 2024/2509 (2). The proposal 

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 
ELI: 
http://data.europa.eu/eli/reg/2024/1263/oj).  
Proposal  for  a  Regulation  of  the  European  Parliament  and  of  the  Council  establishing  the  European 
Fund  for  economic,  social  and  territorial  cohesion,  agriculture  and  rural,  fisheries  and  maritime, 

30 April 2024, 

(EC)  No 

2024/1263, 

1466/97 

(OJ 

L, 

EN 

1 

  EN 

 
 
 
(3) 

(4) 

(5) 

(6) 

aims to increase the effectiveness of Union funding by reducing the fragmentation of 
the  financial  architecture  and  to  support  Member  States  in  the  coordination  of  their 
economic policy in line with Article 175 TFEU.  

On  25 November 2025,  on  the  basis  of  Regulation  (EU)  No  1176/2011,  the 
Commission  adopted  the  2026  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, a recommendation for a Council recommendation on 
human capital in the European Union, and a proposal for the 2026 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 area (3) on 21 April 2026 and the 
Joint  Employment  Report  and 
the  Recommendation  on  human  capital  on 
9 March 2026.  

On  29 January 2025,  the  Commission  published  the  Competitiveness  Compass,  a 
strategic  framework  that  aims  to  boost  the  Union’s  global  competitiveness  over  the 
next  five  years.  It  identifies  the  three  transformational  imperatives  of  innovation, 
decarbonisation  and  competitiveness,  and  security  as  critical  pillars  for  sustainable 
economic  growth.  The  European  Semester  is  aligned  with  the  Competitiveness 
Compass,  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. 

In  2026,  the  European  Semester  for  economic  policy  coordination  continues  to 
develop  alongside  the  final  stage  of  the  Recovery  and  Resilience  Facility  (RRF) 
implementation (4). Recovery and resilience plans (RRPs), along with cohesion policy 
funding, have been essential for delivering on the policy priorities under the European 
Semester, as the plans were required to effectively address all or a significant subset of 
challenges identified in the relevant country-specific recommendations issued in recent 
cycles, and programmes funded by the European cohesion policy were required to take 
country-specific recommendations into account. As the RRF approaches the end of its 
lifetime,  it  remains  essential  to  sustain  the  reforms  and  investments  supported  and 
implemented  under  the  RRF,  in  particular  those  that  contribute  to  addressing 
challenges identified in the country-specific recommendations. 

in 

progress 

On  3 June 2026,  the  Commission  published  the  2026  country  report  for  Spain.  It 
assessed  Spain’s 
country-specific 
addressing 
recommendations and took stock of Spain’s implementation of the RRP. On the basis 
of  that  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 

3 
4 

prosperity  and  security  for  the  period  2028-2034  and  amending  Regulation  (EU)  2023/955  and 
Regulation (EU, Euratom) 2024/2509 - COM(2025) 565 final. The proposed Regulation is currently the 
subject of negotiations with the co-legislators.  
OJ C, C/2026/2434, 28 April 2026, ELI: http://data.europa.eu/eli/C/2026/2434/oj . 
Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council  of  12 February 2021 
establishing  the  Recovery  and  Resilience  Facility  (OJ  L  57,  18 February 2021,  p.  17,  ELI: 
http://data.europa.eu/eli/reg/2021/241/oj). 

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(7) 

(8) 

(9) 

On  21 January 2025,  the  Council,  upon  the  assessment  and  recommendation  of  the 
Commission, adopted a Recommendation endorsing the national medium-term fiscal-
structural  plan  of  Spain  (5).  The  plan  covers  the  period  from  2025  until  2028  and 
presents  a  fiscal  adjustment  spread  over  seven  years.  The  Council  recommended  the 
following  maximum  growth  rates  of  net  expenditure:  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 the base year of 2023 of 9.2% in 2025, 13.0% 
in 2026, 16.6% in 2027 and 20.1% in 2028. 

Russia’s  war  of  aggression  against  Ukraine  and  its  repercussions  constitute  an 
existential  challenge  for  the  European  Union.  The  Commission  has  invited  Member 
States  to  request  the  activation  of  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  (6)  and  this  proposal  was  welcomed  by  the 
European  Council  of  6 March 2025.  Following  the  request  of  Spain,  on  [date]  the 
Council, upon a recommendation from  the Commission,  adopted a Recommendation 
allowing  Spain  to  deviate  from  the  recommended  maximum  growth  rates  of  net 
expenditure (7). The period when the national escape clause is activated (2025-2028) 
allows  Spain  to  reprioritise  government  expenditure  or  increase  government  revenue 
so that lastingly higher defence expenditure would not endanger fiscal sustainability in 
the medium term. 
On 30 April 2026, Spain submitted its 2026 Annual Progress Report (8) 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 implementing its recovery and resilience plan in accordance with Article 27 of 
Regulation (EU) 2021/241.  

(10)  Real  GDP  growth  in  2025  was  2.8%  and  HICP  inflation  stood  at  2.7%.  The 
Commission  Spring  2026  Forecast  projects  real  GDP  to  grow  by  2.4%  in  2026  and 
1.9% in 2027, and HICP inflation to stand at 3.0% in 2026 and 2.5% in 2027. 
(11)  Based on data provided by Eurostat (9), Spain’s general government deficit decreased 
from  3.2%  of  GDP  in  2024  to  2.4%  of  GDP  in  2025.  The  decrease  of  the  deficit  in 
2025 mainly reflects the strong revenue performance and phase-out of energy-related 
measures.  Based  on  policy  measures  known  by  the  cut-off  date  of  the  forecast,  the 
Commission Spring 2026 Forecast projects a deficit of 2.4% of GDP in 2026 and 2.0% 
of  GDP  in  2027.  The  stabilisation  in  2026  mainly  reflects  the  positive revenue 
developments compensating the different sets of measures to ease the consequences of 

Council Recommendation of 21 January 2025 endorsing the national medium-term fiscal-structural plan 

Communication  from  the  Commission,  'Accommodating  increased  defence  expenditure  within  the 

5 
of Spain (OJ C, C/2025/643, 10 February 2025, ELI: http://data.europa.eu/eli/C/2025/643/oj). 
6 
Stability and Growth Pact’, Brussels, 19.3.2025, C(2025) 2000 final. 
7 
Council  Recommendation  of  [date]  allowing  Spain  to  deviate  from  the  maximum growth  rates of net 
expenditure as set by the Council under Regulation (EU) 2024/1263  (Activation of the national escape clause), 
(OJ [OJ: please insert relevant OJ references]). 
8 
and-fiscal-governance/stability-and-growth-pact/preventive-arm/annual-progress-reports_en   
9 

The  2026  Annual  Progress  Reports  are  available  on:  https://economy-finance.ec.europa.eu/economic-

Eurostat-Euro Indicators, 22 April 2026. 

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the floods in some regions and the crisis in the Middle East. The decrease of the deficit 
in 2027 mainly reflects the lower cost of the flood-related emergency measures and the 
expiry of the energy-related measures.  

(12)  Based  on  the  Commission’s  estimates,  the  fiscal  stance  (10),  which  includes  both 
nationally and EU financed expenditure, was broadly neutral in 2025. It is projected to 
be expansionary, by 0.3% of GDP, in 2026, and contractionary, by 0.5% of GDP, in 
2027. 

(13)  Based on data provided  by Eurostat (11), Spain’s general government  debt  decreased 
from 101.6% of GDP at the end of 2024 to 100.7% of GDP at the end of 2025. The 
decrease in the debt ratio in 2025 mainly reflects the strong nominal GDP growth and 
the  deficit  reduction.  Based  on  policy  measures  known  at  the  cut-off  date  of  the 
forecast,  the  Commission  Spring  2026  Forecast  projects  the  debt-to-GDP  ratio  to 
decrease to 99.6% by the end of 2026 and to further decrease to 98.9% by the end of 
2027.  The  decrease  in  2026  mainly  reflects  the  nominal  GDP  growth  outpacing the 
cost  of  debt  servicing.  The  decrease  in  the  debt  ratio  in  2027  mainly  reflects  the 
nominal output growth and the deficit reduction. 

(14)  Based on the Commission’s Spring 2026 Forecast,  total  general  government defence 
expenditure in Spain amounted to 1.0% of GDP in 2025, corresponding to an increase 
of 0.1 percentage points  of GDP compared to  the reference year 2024.  According to 
the  Commission  Spring  2026  Forecast,  it  is  projected  at  1.2%  of  GDP  in  2026, 
corresponding to an increase of 0.3 percentage points of GDP compared to 2024. 

(15)  The  Union  continues  to  face  risks  of  energy  supply  disruptions  and  elevated  price 
volatility,  exacerbated  by  geopolitical  tensions  which  affect  global  oil  and  gas 
markets.  Experience  from  the  2022–2023  energy  crisis  has  shown  that  broad  and 
untargeted  measures  entail  large  fiscal  costs  and  are  socially  and  economically 
inefficient. Since the outbreak of the war in the Middle East in February 2026, Spain 
adopted  fiscal  policy  measures  to  mitigate  the  impact  of  high  energy  prices  on 
households  and  firms12.  These  include  untargeted  reductions  in  VAT  rates  on  fuels, 
electricity  and  natural  gas,  as  well  as  untargeted  reductions  in  excise  duties  on 
electricity and fuels. In addition, the authorities introduced targeted support measures, 
such as subsidies for professional transport operators and farmers, direct aid to electro-
intensive industries, reductions in electricity network charges, and support for thermal 
social  bonus  schemes  and  underground  fuel  storage.  Most  of  these  measures  are 
expected  to  expire  by  30  June  2026,  although  some  are  set  to  remain  in  place  until 
early  2027.  According  to  the  Commission  Spring  2026  Forecast,  the  fiscal  cost  of 
these  measures  is  projected  to  amount  to  approximately  0.3%  of  GDP  in  2026. 
According to Commission estimates, if all these measures were to remain in force until 
end-2026, their fiscal cost would amount to 0.6% of GDP in 2026. 

(16)  Based  on  the  Commission’s  calculations,  net  expenditure  in  Spain  grew  by  4.8%  in 
2025, and 9.3% cumulatively over 2024 and 2025. The net expenditure growth in 2025 

10 
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. 
11 
Eurostat-Euro Indicators, 22 April 2026. 
12 
This reflects the situation at the cut-off date of the Commission’s Spring 2026 Forecast (4 May 2026). 

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is  above  the  recommended  maximum  growth  rate,  corresponding  to  a  deviation  of 
0.4%  of  GDP  in  annual  terms.  When  considering  2024  and  2025  together,  the 
cumulative growth rate of net expenditure is also above the recommended maximum 
growth  rate,  corresponding  to  a  deviation  of  0.1%  of  GDP  in  cumulative  terms. 
However, the projected deviation is within the flexibility of the national escape clause 
based on current estimates for defence spending. 

(17)  Based on the Commission’s calculations, net expenditure in Spain is projected to grow 
by 5.1% in  2026, and 14.9% cumulatively  over 2024, 2025 and 2026. The projected 
net  expenditure  growth  in  2026  is  above  the  recommended  maximum  growth  rate, 
corresponding  to  a  deviation  of  0.6%  of  GDP  in  annual  terms.  When  considering 
2024, 2025 and 2026 together, the projected cumulative growth rate of net expenditure 
is also above the recommended maximum growth rate, corresponding to a deviation of 
0.7%  of  GDP  in  cumulative  terms.  Taking  into  account  the  flexibility  for  higher 
defence spending provided for by the national escape clause, considering 2024, 2025 
and 2026 together, the projected cumulative deviation of net  expenditure  amounts to 
0.4% of GDP. 

(18)  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. Taking into account the information provided 
by Spain in its Annual Progress Report, the Commission finds that the implementation 
of  the  key  steps  of  these  reforms  and  investments  that  were  due  by  30  April  2026 
seems  to  be  broadly  on  track.    The  tax  reform  is  still  being  assessed  and  the  tax 
benefits reform, along with two steps related to the digital transformation of education 
will  be  assessed  under  the  last  payment  of  the  RRP.  As  regards  the  measures  to 
improve  the  management  of  temporary  disability,  partnership  agreements  with  the 
National Social Security Institute were signed by most regions whereas the agreements 
with mutual societies have only been signed by three regions and the two autonomous 
cities. Regarding the homologation of diplomas, a ministerial order has been adopted 
and  put  in  place,  setting  instructions  as  regards  the  homologation  and  equivalence 
procedures  for  foreign  university  qualifications.  The  Commission  considers  that, 
overall, Spain has complied with its commitments in a satisfactory manner (13).  

(19)  The average share of labour taxes in Spain's total tax revenue increased from 48.7% on 
average in the 2015-2019 subperiod to 51.8% in the 2020-2024 subperiod, while the 
EU average remained unchanged at 51.4% over the same timeframe. Higher revenues 
from  labour  taxes  explains  90%  of  the  increase  in  Spain's  tax  burden  over  the  last 
decade, reflecting  a growing reliance on labour  taxation. Non-indexation of personal 
income  tax  (PIT)  brackets  and  rises  in  social  security  rates  have  accelerated  Spain’s 
shift towards labour taxation. Labour tax revenues as a share of GDP (19.0% in 2024) 
remain,  however,  below  the  EU  average  (20.3%).  By  contrast,  revenues  from 
consumption  and  environmental  taxes  are  below  the  EU  average,  both  as  a  share  of 
GDP  and  as  a  share  of  total  tax  revenues.  Environmental  tax  revenues  amounted  to 
1.6%  of  GDP  in  Spain,  compared  with  2.1%  in  the  EU.  Spain  has  the  largest  VAT 
policy gaps in the EU, resulting from one of the highest VAT rate gaps and the highest 
national  policy-driven  VAT  exemption  gap.  Among  categories  where  preferential 
VAT  rates  apply,  restaurants  and  accommodation  services  stand  out  for  their  large 

13  

Communication from the Commission to the European Parliament, the Council, the European Central 
Bank,  the  European  Economic  and  Social  Committee,  the  Committee  of  Regions  and  the  European 
Investment Bank, 2026 European Semester – Spring Package, COM(2026)200 final. 

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budgetary  impact  amid  very  limited  redistributive  effect.  A  more  limited  use  of 
preferential VAT rates would contribute to simplifying the tax system. Despite some 
recent evaluations (notably, from the Independent Fiscal Institution, AIReF), there is 
no systematic approach to assessing the effectiveness of  tax expenditures. Quality of 
public finances could benefit from an enhanced consolidated reporting and systematic 
assessment of all tax expenditures at all territorial levels. 

(20)  The systematic, meaningful and timely 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 Union’s funding 
instruments, as well as in the context of the European Semester  

(21)  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+) in Spain, remains below EU average, both 
in  terms  of  project  selection  and  payments.  It  is  important  to  step  up  and  accelerate 
efforts to ensure the swift delivery of investments, while maximising their impact on 
the  ground.  Spain  is  already  acting  under  its  cohesion  policy  programmes  to  boost 
competitiveness and growth. At the same time, Spain continues to face challenges in 
effectively  implementing  cohesion  policy  in  the  areas  of  research  and  innovation 
(R&I),  skills  mismatches,  social  inclusion,  climate  change  risk  management  and 
prevention,  and  support  to  a  just  transition.  It  is  essential  to  ensure  that  the  new 
investments  identified by Spain  in  its  mid-term  review of the cohesion  policy funds, 
notably  those  linked  to  the  five  priorities  identified  in  the  Mid-Term  Review 
Regulation (14), are deployed rapidly and effectively.  

(22)  Spain  faces  several  challenges  related  to  fiscal  sustainability,  productivity,  effective 
and  sustained  investment  in  innovation,  regulatory  and  administrative  burden, 
performance  of  the  justice  system,  science-business  linkages,  access  to  finance, 
climate  adaptation  and  resilience  of  infrastructure,  water  management,  the  electricity 
network, supply of social and affordable housing, child poverty, skills mismatches and 
the efficiency of the healthcare system.  

(23)  Spain  has  initiated  a  collaboration  framework  to  identify  and  address  regulatory 
bottlenecks, and reduce regulatory fragmentation across regions; however efforts need 
to  increase  and  accelerate.  "Regime  20”  enables  collaboration  among  the  national, 
regional,  and  local  levels  of  Spanish  administration.  Throughout  2025,  progress  was 
made  in  areas  such  as  business  opening  licenses,  digital  labelling,  the  installation  of 
charging  points,  energy  efficiency  certificates,  low-voltage  installations,  and  the 
reduction of regulatory dispersion. This approach serves to coordinate reforms in areas 
of agreement; however, additional efforts are needed to tackle barriers at a larger scale. 
Spain would benefit from a mechanism to identify these barriers and use "Regime 20” 
to  implement  more  structural  changes.  Moreover,  regulatory  restrictiveness  is 
in  retail.  This  administrative  complexity  affects  business 
particularly  high 
establishment  due  to  burdensome  licensing  and  authorisation  procedures,  creating 
additional  obstacles  for  market  entry  and  investment,  and  leading  to  consumer 
detriment.  Spain  would  benefit  from  further  convergence  of  retail  regulations  to 
improve the business environment and support competition, especially in the retail sale 

14 

Regulation  (EU)  2025/1914  of  the  European  Parliament  and  of  the  Council  of  18 September 2025 
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. 

EN 

6 

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of medicines. Barriers to intra-EEA trade in goods persist, such as for packaging and 
increase 
labelling.  Differences 
compliance  costs  and  create  barriers  for  businesses  operating  between  regions  and 
from other EU countries, reducing choice and increasing prices for consumers.   

in  regulations  across  Spanish  regions  further 

its 

justice  system;  however, 

(24)  Spain  has  introduced  a  series  of  legal  reforms  to  enhance  the  organisational,  digital, 
and  procedural  efficiency  of 
their  effective 
implementation depends on the provision of adequate and sustained investment and its 
equitable  allocation  across  regions.  The  justice  sector  faces  staffing  shortages,  with 
relatively  few  judges  compared  to  the  size  of  the  population,  alongside  increasing 
early  retirements  and  rising  litigation.  This  places  a  significant  burden  on  serving 
judges  and  contributes  to  persistent  judicial  delays  that  adversely  affect  legal 
professionals,  businesses  and  citizens.  In  addition,  disparities  in  the  level  of 
digitalisation  across  regions,  together  with  limited  interoperability  between  case 
management systems, continue to hamper the overall quality and efficiency of judicial 
processes.  Improving  the  performance  of  the  justice  system  by  ensuring  adequate 
staffing, while maintaining recruitment standards, and harmonised digitalisation across 
regions and full interoperability of case management systems is therefore essential to 
strengthen the institutional framework and boost the business environment. 

(25)  Low private R&D investment remains a major constraint. Business development and 
innovation  is  hampered  by  a  fragmented  business  structure  dominated  by  low  value 
micro-enterprises. Spain has introduced pertinent reforms as part of the RRP, such as 
the  Law  on  Business  Creation  and  Growth  and  the  Law  on  Start-ups.  Yet,  further 
action  is  required  to  remove  the  financial  and  administrative  hurdles  that  impede 
business innovation and to reduce the productivity gap.  

(26)  Spain’s  limited  and  unevenly  distributed  R&D  spending  is  heavily  concentrated  in 
some  regions,  and  as  a  result,  it  is  insufficient  to  stimulate  overall  business  R&D 
expenditure across the whole country. There is scope to increase public R&D spending 
(with a view to reach 1.25% of GDP by 2030) and reduce its dependence on EU funds 
while ensuring a more balanced territorial distribution. Combining an increased public 
investment  with  targeted  tax  incentives  and  streamlined  grants  would  help  crowd  in 
private investment  and support  high-value sectors.  Regular ex-post policy evaluation 
of the innovation policy mix in the national territory would help translate research into 
commercial outcomes and leverage private R&D investment while ensuring efforts are 
focused to achieve the overall policy goals.  

(27)  Weak  collaboration  between  academia  and  industry  limits  business  innovation  and 
productivity gains, despite the amended Science, Technology and Innovation Act and 
University  Act.  Moreover,  public  schemes  established  to  incentivise  private  R&D 
investment have had a muted impact, largely due to their complex nature and the lack 
of  incentives  for  business  and  academia.  Reinforcing  knowledge  intermediaries, 
adjusting  incentives  in  universities  and  public  research  organisations  toward  applied 
innovation,  and 
the  performance-based  funding  would  encourage 
specialized, collaborative research and innovation outputs in universities and research 
institutions. 

improving 

(28)  Access  to  growth  financing  remains  an  important  constraint  to  firms’  expansion. 
Venture  and  equity  capital  markets  are  still  underdeveloped,  as  Spanish  firms 
financing still heavily rely on bank loans. At the same time, the allocation of private 
savings  does  not  sufficiently  support  innovative  business  expansion.  Equity  and 
venture  capital  investments  via  supplementary  pension  schemes  could  be  further 

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encouraged  by  introducing  auto-enrolment  and  easing  portfolio  investment  limits. 
Additionally,  there  is  need  to  improve  startups’  knowledge  transfer  capabilities, 
networks,  cooperation  and  conversion  of  research  into  commercial  innovation. 
Together, these factors continue to inhibit the reallocation of resources towards more 
productive activities. The IMF15 points at insufficient market size and lack of access to 
equity financing among  the key factors underlying young firms’ inability to scale up 
rapidly.  Promoting  a  greater  use  of  market-based  financing  and  enhancing  the 
connection  between  businesses  and  capital  market  participants  can  expand  access  to 
financing for firms. Moreover, the lack of effective diversification of financing sources 
weighs on the dynamism of private investment. According to the OECD (16), the lack 
of available financing is reported by a large share of Spanish firms, notably SMEs, as 
a considerable long-term barrier to investment in 2023. 

(29)  Spain’s multi-level governance presents challenges for delivering a coherent response 
to  rising  climate  risks.  Insufficient  coordination  across  national,  regional  and  local 
authorities reduces the effectiveness of measures to address natural hazards, including 
floods  and  wildfires.  Strengthening  both  vertical  coordination  (between  national  and 
regional  authorities)  and  horizontal  coordination  (across  regions)  is  essential.  This 
should  include  further  clarifying  responsibilities  and  reducing  overlaps  across  the 
phases  of  prevention,  preparedness,  response  and  recovery,  as  well  as  strengthening 
monitoring and evaluation mechanisms. 

(30)  Spain’s water resources  remain under increasing  pressure from long-term declines in 
rainfall and snowpack, rising temperatures and growing soil aridity. Large areas of the 
country – especially drier southern, inland and island areas – experience water stress, 
with demand – particularly from industry, agriculture, tourism and energy production 
– exceeding sustainably available resources. Further efforts towards a more sustainable 
approach to water management are still needed. This should include stronger pricing 
incentives  to  promote  a  more  efficient  water  use,  improved  coordination  and 
implementation  of  water  policies  across  all  levels  of  the  administration  and 
streamlined  decision-making  procedures. 
involve  effective 
implementation of the Urban Wastewater Treatment Directive, scaling up water reuse 
and investing in infrastructure to enhance the performance and resilience of the water 
management  system.  For  this  purpose,  it  is  also  key  to  support  the  development  of 
nature-based solutions, including river restoration and water body rehabilitation. 

should  also 

It 

(31)  While Spain has leveraged substantial support for its climate adaptation and mitigation 
efforts, including through EU Funds, additional measures and investments are needed 
to safeguard critical infrastructure, particularly railways and roads. Addressing climate 
risks  requires  systematic  screening  of  major  assets,  alongside  the  implementation  of 
high-impact  upgrade  measures.  Beyond  infrastructure  improvements,  investing  in 
nature-based  solutions,  including  sustainable,  climate  resilient  forests  and  soils,  is 
essential. This  would also enhance carbon sequestration  through  wildfire  prevention, 
restoration  of  degraded  forests,  and  protection  of  carbon-rich  ecosystems.  Nature-
based  solutions  should  strengthen  resilience  to  climate  extremes  through  measures 

15 

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IMF 

Staff 

International  Monetary  Fund  (2025),  Spain:  2025  Article  IV  Consultation—Press  Release;  and  Staff 
Report, 
at: 
Reports, 
https://doi.org/10.5089/9798229012782.002.  
Organisation  for  Economic  Co-operation  and  Development.  (2025).  OECD  Economic  Surveys:  Spain 
2025  (Vol.  2025/22,  November).  Paris:  OECD  Publishing.  https://doi.org/10.1787/eco_surveys-esp-
2025-en.  

2025/121. 

Available 

Country 

No. 

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such as wetland restoration for flood control and soil  management to reduce drought 
impacts.  

(32)  Climate-related  hazards  pose  significant  risks  to  Spain’s  economy  and  society. 
Between  1980  and  2024,  extreme  weather  events  resulted  in  substantial  human  and 
economic  losses,  amounting  to  EUR  119.6  billion.  Despite  these  increasing  risks, 
climate  insurance  coverage  remains  relatively  low  in  this  area,  leaving  gaps  in 
financial  protection.  To  strengthen  resilience,  Spain  should  reinforce  its  disaster  risk 
financing framework to ensure long-term financial sustainability, while also expanding 
the use and uptake of climate insurance mechanisms.   

(33)  While  Spain  is  making  progress  on  the  roll-out  of  renewables  and  has  one  of  the 
highest installed capacities of wind and solar power in the EU, further development of 
networks  and  storage  solutions  is  needed  to  support  the  integration  of  renewables  in 
the Spanish energy mix. Challenges remain in accessing the grid but also in translating 
access  into  operation,  slowing  down  the  clean  energy  transition.  For  instance, 
additional  projects  currently  in  the  pipeline  are  foreseen  to  bring  the  total  storage 
capacity up from 7.7GW to 14.2GW, below the 2030 target of 22.5 GW. Spain needs 
to  take  the  necessary  steps  to  improve  the  resilience  and  flexibility  of  its  electricity 
grids,  also  to  exit  its  ‘reinforced  operation  mode’.  To  ensure  grid  stability,  the 
transmission  system  operator  is  actively  using  gas  power  plants  to  maintain  voltage 
stability  pending  further  reforms  and  investments  being  implemented  to  reinforce 
voltage control. The country also requires further investments to increase cross-border 
electricity interconnection, which currently at 3.11% remains far lower than the 2030 
target of 15%. Complex permitting processes for industrial facilities and the need for 
additional  demand-side  measures  can  hinder 
in  decarbonising 
manufacturing production in  the country. Persistently high  greenhouse gas emissions 
from  road  transport  remain  a  key  challenge,  accounting  for  almost  half  of  Spain’s 
effort-sharing emissions. Further efforts are also needed for Spain to achieve its 2030 
energy efficiency targets. Notably, additional investments would be needed to improve 
the  energy  efficiency  ratio  in  public  and  private  buildings,  while  addressing  at  the 
same  time  the  energy  poverty  challenge,  affecting  15.9%  of  the  total  population, 
among the highest in the EU, and notably more acute on households at risk of poverty. 
Emissions from buildings increased by 2.6% in 2024 and accounted for around 19% of 
total  emissions in  the effort sharing sectors. This  reflects  persistent  challenges in  the 
energy  performance  of  the  building  stock  and  underscores  the  need  to  reduce  the 
reliance on fossil fuel-based heating and cooling.  

investments 

(34)  The  Spanish  housing  market  remains  under  severe  pressure  due  to  persistent  supply 
bottlenecks, particularly in high-demand areas. Combined with rising housing demand, 
this is driving upward pressure on prices. Housing shortages are most pronounced in 
urban  and  metropolitan  areas,  as  well  as  in  tourism-intensive  coastal  areas.  The 
urgently needed development of new housing is currently constrained by a number of 
supply-side factors including limited availability of buildable land, slow administrative 
procedures  and  permitting  processing.  Addressing  these  obstacles  to  development, 
while  safeguarding  environmental  goals  can  help  overcome  some  of  the  constraints 
that have slowed down housing development. Moreover, homelessness is on the rise. 

(35)  Spain has one of the lowest stocks of social housing across the EU, representing less 
than 2% of the total housing supply compared to an EU average of roughly 7%. This 
exacerbates pressure on  the rental market  and  contributes to  housing price increases. 
Moreover,  the  existing  stock  of  social  housing  is  distributed  unevenly  across  the 
country  and  does  not  reflect  territorial  needs  where  demand  is  more  pronounced. 

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Depopulation  affects  much  of  the  country,  with  population  growth  concentrated 
mainly in coastal areas and in around the capital region. Addressing the sizeable social 
housing deficit by expanding the number of social housing units, notably in areas more 
affected by affordability constraints, is pivotal to promoting social welfare policy and 
affordable  housing  provision.  At  the  same  time,  promoting  social  rental  housing  is 
important  to  provide  tenure  flexibility  across  the  life  cycle  and  accommodating 
changing  household  needs.  Moreover,  it  provides  direct  and  timely  access  to 
affordable dwellings  without requiring  long  term commitment, additional  entry costs 
and eligibility constraints compared to social housing purchasing schemes. Finally, the 
social housing system still relies heavily on government financing. Ensuring its long-
term sustainability also requires setting up predictable financing mechanisms, such as 
through the reinvestment of returns or through revolving funds schemes, contributing 
to reduce its dependence from the national budget. 

(36)  Child  poverty  in  Spain  remains  a  significant  challenge,  in  a  context  of  overall  high 
poverty  levels  and  persistently  high-income  inequalities.  In  2024,  more  than  one  in 
four children in Spain were at risk of poverty or social exclusion – placing the country 
among the weakest performers in the EU. Certain groups are particularly vulnerable, 
notably  children  in  single-parent  or  large  households,  those  whose  parents  have  low 
levels  of  education,  as  well  as  Roma  children  and  those  with  migrant  backgrounds.  
Although  recent  measures  have  contributed  to  some  improvements,  the  situation 
reflects broader weaknesses in the social protection and benefits systems, including in 
terms of the distribution of social expenditures across generations amidst limited fiscal 
resources. Social transfers have only a limited capacity to reduce poverty, particularly 
among  children.  Regional  differences  in  poverty  rates  and  in  the  impact  of  social 
transfers  persist,  pointing  to  uneven  coverage  and  access  to  benefits  and  services 
across  territories,  particularly  in  rural  areas,  despite  some  progress  in  recent  years. 
Coordination  between  national  and  regional  social,  health  and  employment  services 
and  benefits  continue  to  be  constrained  by  fragmented  competences,  heterogeneous 
eligibility  criteria  and  overlapping  instruments.  Further  coordination  could  ensure 
more  comprehensive  and  continuous  support.  The  take-up  of  the  national  minimum 
income scheme (Ingreso Mínimo Vital - IMV) and its related child support supplement 
(Complemento  de  Ayuda  para  la  Infancia  -  CAPI),  has  increased  but  remains  below 
potential, with a significant share of eligible households still not receiving support due 
to  administrative  burdens,  complex  eligibility  procedures  and  limited  awareness. 
Further  increasing  take-up  and  adequacy,  as  well  as  related  activation  policies  and 
improving the adaptability of the IMV to changes in household circumstances would 
strengthen the impact of the benefit. While recent adjustments have aimed to enhance 
work incentives, their effectiveness remains to be seen. Moreover, strengthening social 
inclusion  pathways  by  more  systematically  combining  income  support  with  tailored 
social  services  would  further  improve  outcomes  for  vulnerable  groups,  including 
children at risk of poverty or social exclusion. It is also necessary to rebalance public 
expenditure towards policies supporting children and young people such as education, 
access  to  housing,  and  employment.  Addressing  all  these  challenges  requires  further 
improving the efficiency, adequacy and coverage of social assistance, while ensuring 
greater coherence between cash  transfers, in-kind support, activation support and tax 
benefits,  which  would  contribute  to  supporting  upward  social  convergence,  in  line 

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with  the  Commission  services’  second-stage  country  analysis  based  on  the  Social 
Convergence Framework. (17). 

(37) 

In light of the crucial role of human capital in enhancing the Union’s competitiveness 
and  strategic  autonomy,  in  2026  the  Council  recommended  that  Member  States  take 
action  to  urgently  address  human  capital-related  structural  challenges  in  the  areas  of 
skills  and  education,  which  hamper  competitiveness.  The  2026  country-specific 
recommendations  addressed  to  Spain  can  contribute  to  the  implementation  of  the 
Council Recommendation on human capital in the Union. 

(38)  While  the  vocational  education  and  training  (VET)  system  continues  to  develop  and 
VET enrolment has improved across all levels, persistent skills mismatches stemming 
from structural misalignments between both VET and higher education and the needs 
of  the  labour  market  remain.  A  lack  of  intermediary  qualifications  due  to  low 
enrolment  in  medium-level  VET,  particularly  in  STEM  fields,  coexists  with  acute 
skills  shortages  in  certain  technical  sectors,  such  as  construction  and  manufacturing. 
VET enrolment is also highly uneven across regions. Despite all VET formally being 
dual  since  the  recent  system  reform,  full  deployment  of  dual  VET  did  not  yet  take 
place.  In  higher  education,  Spain  exhibits  high  levels  of  tertiary  educational 
attainment,  yet  shortages  in  high-demand  fields  such  as  ICT,  engineering  and 
healthcare  persist.  While  graduates  from  STEM-related  VET  and  higher  education 
programmes display strong employment outcomes – indicating high demand for these 
specialisations – low participation rates, gender imbalances and dropouts from STEM 
programmes risk constraining Spain’s capacity to foster innovation and deliver on the 
green  and  digital  transitions.  Moreover,  adult  learning  participation  remains  low  and 
uneven, limiting reskilling opportunities and perpetuating early disadvantages. 

(39)  Spain has made notable progress in reducing early leaving from education and training 
(ELET), but the rate remains high. Although it has declined in recent years, it is still 
well above both the EU average and the EU 2030 target. Regional differences persist 
and early leaving is particularly concentrated among vulnerable groups. Foreign-born 
youth are nearly three times more likely to leave education early than their native-born 
peers, Roma youth have significantly lower levels of upper-secondary attainment than 
the  general  population,  and  young  people  with  disabilities  are  disproportionally 
affected.  Gender  gaps  persist  as  well  with  higher  rates  among  men  than  women. 
Underachievement in basic skills has gradually increased since 2012, widening the gap 
between Spain’s performance and the EU target of reducing the share of low achievers 
in  reading,  mathematics  and science to below 15% by 2030. Regional differences in 
basic  skills  also  remain  significant,  with  some  regions  consistently  recording  lower 
scores than the national average. 

(40)  Despite  achieving  relatively  good  health  outcomes,  challenges  in  the  access  to 
healthcare and long-term care (LTC) services persist in Spain, negatively affecting the 
health of its population, social fairness, and productivity. Increasing the capacities of 
primary care and LTC is essential to improve access and ensure adequacy as an ageing 
population  increases  the  demand  for  these  services.  While  the  2025–27  Primary  and 
Community Care Action Plan aims to expand primary care capacity, and despite recent 
reforms aiming at the deinstitutionalisation of LTC, further efforts are still needed to 

17 
Convergence Framework (SCF), 2026. 

SWD(2026)122 5 – Second-stage country analysis on social convergence in line with the Social  

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reduce  workforce  shortages,  regional  differences,  and  waiting  times,  and  to  address 
persistent investment gaps. 

(41)  Spain  faces  significant  healthcare  and  LTC  workforce  challenges.  They  include  the 
age  structure,  unequal  distribution  of  professionals,  and  forecasted  shortfalls  of 
General  Practitioners  (GPs),  nurses  and  other  specialists.  Working  conditions  also 
remain  challenging,  undermining  job  quality  and  attractiveness.  To  address  these 
imbalances,  Spain  could adopt  measures  to  improve the  recruitment  and  retention  of 
talent  and  improve  working  conditions,  including  through  rebalanced  training,  the 
expansion  of  new  professional  roles,  including  for  nurses,  increased  flexibility, 
digitalisation, gender balancing, a reduction of informality in care professions, and by 
reviewing the shifts system. Regional differences in access and the quality of services, 
exacerbated  by  staff  shortages,  also  remain  a  significant  challenge.  The  reform  of 
primary care and its regional impact require further assessment, with care integration 
progressing  differently  across  regions.  Spain  should  adopt  best  practices  models, 
establish  appropriate  monitoring  and  use  regional  indicators.  Services  would  also 
benefit from improved national-regional and cross-service coordination (among health, 
social,  employment  and  education).  Access  to  services  is  further  hindered  by 
increasing waiting times. Spain set up a Working Group on Waiting Lists in 2024 to 
bring  together  management  and  data  across  Autonomous  Communities,  however 
further  action  is  required  to  address  these  shortfalls  through  targeted  staffing,  digital 
triage, and the harmonisation of waiting list management.  

(42)  While Spain’s health system delivers generally strong health outcomes at a relatively 
low cost, healthcare expenditures are projected to increase significantly over the next 
decades  as  demographic  changes  place  increasing  pressures  on  public  finances.  To 
ensure  sustainability  while  preserving  the  adequacy  of  services,  measures  could  be 
directed  at  maximising  existing  resources  through  efficiency  gains.  These  could  be 
achieved  in  LTC  services  through  a  better  allocation  of  resources,  through  an 
improved  triage  of  the  dependence  grade  and  the  associated  care  of  recipients.  In 
addition,  efforts  could  be  directed 
towards  further  deinstitutionalisation  and 
community  care.  An  increased  coordination  of  LTC  with  healthcare  services  would 
also  contribute  to  more  efficient  systems.  As  regards  primary  care,  investments  in 
interoperable  digitalisation,  telemedicine  and  prevention  would  result  in  a  more 
efficient  delivery.  Within  the  scope  of  its  Spending  Review  2018-2020,  AIReF  has 
proposed actions to strengthen efficiency in the pharmaceutical and hospital spending 
areas,  resulting  in  concrete  saving  opportunities.  Spain  has  room  to  improve  generic 
medicines  and  biosimilar  adoption  rates  across  some 
therapeutic  categories. 
Addressing  disparities  and  improving  evaluation  in  pharmaceutical  spending  and 
unjustified  regional  differences  in  the  costs  of  medical  procedures  and  prescriptions 
can  also  improve  efficiency.  In  this  regard,  Spain  would  benefit  from  implementing 
AIReF’s  recommendations 
through  enhanced 
monitoring  of  tax  expenditures  to  create  the  necessary  fiscal  space  to  address 
increasing healthcare spending pressures.   

increase  spending  efficiency 

to 

(43) 

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  2026  the  Council  recommended  that  the  euro-area  Member  States  take 
action, including through their RRPs, to implement the 2026 Recommendation on the 
economic policy of the euro area. For Spain, the recommendation (1) helps implement 
the first, the second and the third recommendations on the euro area, recommendation 
(2)  helps implement the fourth recommendation on the euro area, recommendation (3) 

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helps  implement  the  seventh,  the  eighth  and  the  ninth  recommendations  on  the  euro 
area,  recommendation  (4)  helps  implement  the  seventh  recommendation  on  the  euro 
area, the recommendation (5) helps implement the fifth  recommendation on the euro 
area,  and  the  recommendations  (6)  helps  implement  the  second  and  the  fifth 
recommendations of the euro area. 

HEREBY RECOMMENDS that Spain take action in 2026 and 2027 to:  

1. 

2. 

3. 

4. 

5. 

In  view  of  the  deviation  projected  for  2026  by  the  Commission  vis-à-vis  the 
recommended  net  expenditure  path,  ensure  that  net  expenditure  respects  the 
maximum  growth  rates  recommended  by  the  Council  on  21 January 2025,  while 
making  use  of  the  flexibility  under  the  national  escape  clause  for  higher  defence 
expenditure.  Reinforce  defence  spending  and  readiness  while  ensuring  spending 
efficiency  and  gradually  adapting  the  budget  to  sustain  structurally  higher  defence 
spending. Ensure that any measures taken to mitigate the impact of the hike in energy 
prices  are  temporary,  targeted  at  protecting  vulnerable  households  or  at  addressing 
the  needs  of  energy-intensive  firms,  preserve  incentives  for  energy  savings  while 
ensuring  that  their  fiscal  cost  is  compatible  with  the  commitments  under  the  EU 
fiscal  framework.  Implement  the  set  of  reforms  and  investments  underpinning  the 
extended  adjustment  period  as  recommended  by  the  Council  on  21 January 2025. 
Strengthen  fiscal  sustainability  in  particular  by  limiting  tax  expenditures,  while 
protecting  growth  and  supporting  low-income  households.  Increase  spending 
efficiency  through  enhanced  monitoring  of  tax  expenditures  and  implementing 
spending reviews at national and regional level.   

Ensure continuity of reforms and investments implemented under the Recovery and 
Resilience  Facility.  Accelerate  efforts  to  implement  cohesion  policy  programmes, 
building, where appropriate, on the reallocation to strategic priorities and flexibilities 
in the mid-term review of the cohesion policy framework. 

Foster productivity and innovation by reducing administrative burden and regulatory 
fragmentation  among  regions,  including  removing  barriers  to  retail  and  free 
movement  of  goods.  Improve  the  performance  of  the  justice  system  by  ensuring 
adequate  staffing, harmonised digitalisation and full interoperability  across regions. 
Facilitate  business  innovation,  expansion  and  scale  up  targeting  high  value  sectors, 
including  by  supporting  stable  R&I  investments,  implementing  stronger  industry-
academia  collaboration  and  improving  access  to  finance,  especially  to  venture 
capital.  

Step up coordination on climate resilience across national, regional, and local levels. 
Improve  water  management  and  governance,  and  scale  up  urban  wastewater 
recycling.  Adapt  critical  infrastructure  to  climate  change,  including  railways  and 
roads, and promote nature-based solutions to mitigate related risks. Further develop 
the  disaster  financing  framework.  Invest  in  energy  storage,  electricity  transmission 
the 
and  distribution  and  cross-border  electricity 
decarbonisation of industry and the electrification of transport. 

interconnections.  Foster 

Expand  the  housing  stock,  including  by  reviewing  the  regulatory  framework, 
streamlining  permitting  processes,  facilitating  land  availability  and  repurposing  the 
underutilised building stock. Increase the provision of affordable and social housing, 
favouring rental options, better aligned with territorial and regional needs and based 
on sustainable financing systems that are less dependent on government financing. 

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6. 

Address  child  poverty,  including  by  rebalancing  social  expenditures  across 
generations and improving the coverage and adequacy of social transfers and social 
assistance and their link to activation, further reducing income inequalities. Reduce 
skills mismatches by further strengthening dual VET, the labour market relevance of 
higher education and adult learning with a focus on STEM. Improve basic skills and 
address  early  school  leaving.  Improve  access  to  healthcare  by  increasing  the 
capacities  of  primary  care  and  long-term  care,  addressing  workforce  shortages  and 
reducing  waiting  times.  Address  regional  disparities  in  access  to  opportunities  and 
services, especially in areas facing rapid depopulation, while increasing efficiencies 
that create fiscal space to address increasing spending pressures. 

Done at Brussels, 

For the Council 
The President 

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