On 3 July 2026, the Council of the European Union adopted a recommendation outlining specific economic, social, employment, structural, and budgetary policies for Spain under the 2026 European Semester. The recommendation calls on Spain to adhere to its medium-term fiscal-structural plan (2025-2028) net expenditure growth path, shift taxation from labour to consumption and environmental taxes, reduce regulatory fragmentation across regions, address justice system staffing shortages, and accelerate EU-funded investments.
The recommendation is based on Spain's 2026 National Reform Programme and Stability Programme, and follows the European Commission's 2026 country report and draft recommendation. The Council's fiscal guidance centres on the net expenditure growth path from Spain's medium-term fiscal-structural plan: 3.7% in 2025, 3.5% in 2026, 3.2% in 2027, and 3.0% in 2028. The national escape clause is activated for 2025-2028 to allow higher defence spending. The Council notes that Spain's net expenditure grew 4.8% in 2025, above the 3.7% recommended, but considers this deviation within the flexibility provided by the escape clause. For 2026, net expenditure is projected to grow 5.1%, above the 3.5% recommended, with a cumulative deviation of 0.4% of GDP after accounting for defence flexibility.
On tax reform, the Council recommends shifting taxation away from labour towards consumption and environmental taxes, and reducing the VAT policy gap and preferential VAT rates, such as those for restaurants and accommodation. To cut regulatory burden, the recommendation urges Spain to use the so-called "Regime 20" to reduce fragmentation across regions, particularly in retail licensing and medicines. In the justice system, the Council calls for addressing staffing shortages — Spain has few judges per population — and improving digitalisation and interoperability across regions. On cohesion policy, the recommendation asks Spain to accelerate implementation of ERDF, JTF, and ESF+ programmes, focusing on research and innovation, skills, social inclusion, climate adaptation, and just transition. Finally, the Council stresses the need for timely implementation of key reforms in the medium-term plan, including tax benefits reform, digital education, temporary disability management, and diploma homologation.
The recommendation is non-binding but carries political weight as part of the European Semester coordination cycle. The Council will monitor Spain's progress in subsequent semesters. The European Parliament has no formal role in adopting country-specific recommendations but is consulted on the overall semester framework.