On 22 June 2026, the Council of the European Union published a recommendation outlining the economic, social, employment, structural and budgetary policies for Spain. The Council recommends that Spain adhere to a maximum net expenditure growth of 3.5% in 2026, 3.2% in 2027, and 3.0% in 2028 (base year 2023), while implementing reforms and investments to address key economic and social challenges.
The recommendation notes that Spain's general government deficit fell from 3.2% of GDP in 2024 to 2.4% in 2025, and is projected at 2.4% in 2026 and 2.0% in 2027 according to the Commission Spring 2026 Forecast. General government debt decreased from 101.6% of GDP at end-2024 to 100.7% at end-2025, with projections of 99.6% by end-2026 and 98.9% by end-2027. However, net expenditure grew 4.8% in 2025, exceeding the recommended 3.5% maximum, though the cumulative deviation over 2024-2025 was within the national escape clause flexibility for defence spending. Defence expenditure stood at 1.0% of GDP in 2025 and is projected at 1.2% in 2026.
The Council also highlights several structural issues. Spain adopted untargeted VAT and excise duty reductions on energy, expected to expire by 30 June 2026 (some until early 2027), with a fiscal cost projected at 0.3% of GDP in 2026. Labour taxes rose from 48.7% of total tax revenue (2015-2019 average) to 51.8% (2020-2024), and Spain has the largest VAT policy gaps in the EU. Implementation of cohesion policy programmes (ERDF, JTF, ESF+) remains below the EU average, requiring accelerated delivery. Additional challenges include regulatory fragmentation, justice system staffing shortages, skills mismatches, child poverty, and water management.
The recommendation impacts several stakeholders. Spanish taxpayers may face continued fiscal consolidation, while businesses could benefit from reduced regulatory fragmentation and improved justice system efficiency. Workers may see shifts in taxation away from labour, potentially reducing the tax burden on employment. EU institutions will monitor Spain's compliance with the net expenditure ceilings and reform commitments. The Council's recommendation is non-binding but carries political weight as part of the European Semester framework. Spain is expected to incorporate these guidelines into its national budget and reform plans, with the Commission assessing progress in subsequent cycles.