In a recent address at the Conference of Presidents in Barcelona, Spanish Prime Minister Pedro Sánchez asserted that Spain is experiencing one of its strongest economic periods in decades, emphasizing the "extraordinary dynamism" of the Spanish economy.

This sentiment is a cornerstone of Sánchez's rhetoric as he aims to alleviate public concerns amid various political scandals, asserting that Spain's growth is outpacing that of its European neighbors.

Contrarily, the European Commission, led by President Ursula von der Leyen, unveiled an extensive 113-page annual report assessing the health of Spain's economy, painting a markedly less favorable picture than that presented by the Prime Minister.

The report identifies over twenty economic disparities, most of which have persisted for years, undermining productivity and threatening future growth.

Issues highlighted include challenges in the labor market, innovation, business environment, and social inclusion, beginning with the high levels of deficit and debt.

The report indicates that Spain requires fiscal space to finance policies aimed at enhancing productivity, addressing high levels of child poverty, and bridging the innovation gap.

The sustainability of Spain's fiscal position is at risk, primarily due to anticipated rising costs associated with an aging population and unfavorable starting levels of debt and deficit.

Access to affordable housing is noted as a critical impediment to social inclusion and mobility, with significant implications for sustainable growth.

As the demand for affordable housing escalates, particularly among vulnerable groups and youth, this challenge continues to grow.

The implementation of Spain’s Recovery, Transformation, and Resilience Plan faces considerable obstacles.

To date, Spain has met only 30% of the specified milestones and objectives, with a deadline for completion set for August 31, 2026.

Business burdens are exacerbated by bureaucratic hurdles, with Spain identified as one of the European Union states with the highest percentage of businesses citing regulation as a major barrier to investment—60.4% in 2024 compared to an EU average of 24.5%.

Furthermore, differences in regulations across regions deter businesses from expanding into other areas, limiting innovation and growth potential.

While reforms under the recovery plan have aimed to enhance judicial efficiency, the resolution of civil and commercial cases remains sluggish, leading to several economic inefficiencies, including less functional real estate markets and reduced credit availability.

Spain's performance in innovation lags behind the EU average, with research and development expenditure particularly low, standing at 0.84% of GDP compared to the EU average of 1.49%.

Investment growth also remains subdued, trailing the EU average for the 2019-2024 period.

The Spanish automotive industry, which is the second-largest vehicle producer in Europe and contributes 10% to the national GDP, is under threat due to diminishing demand and supply chain disruptions, threatening competitiveness.

Dependency on imports for essential raw materials, critical for ecological and digital transitions, poses risks concerning sustainability and supply chain resilience.

A notable electric supply cut in April 2025 affecting Spain and Portugal highlights the need for enhanced cross-border electricity interconnection capacity for better integration of renewable energy production.

Despite significant decreases in unemployment, Spain still reports one of the highest jobless rates in the EU. Recent labor market reforms have curtailed temporary contracts in the private sector, although this remains prevalent within the public sector.

Young people continue to face barriers to employment, attributed to mismatches between skill supply and labor market demands.

The levels of basic skills among youth are concerning, with a significant portion of 15-year-olds struggling in mathematics, reading, and science, posing risks to future productivity and competitiveness.

Limited participation in adult continuous training further diminishes capacity to meet evolving job market needs, with current participation rates falling short of the national target for 2030.

Child poverty remains a pressing structural challenge, undermining social convergence and future competitiveness.

Over one in three children is at risk of poverty or social exclusion, with marginalized groups particularly affected.

The effectiveness of social protection policies is limited, especially concerning poverty reduction and income inequality, which persists above the EU average.

The healthcare system confronts challenges from labor shortages, impairing access to services, particularly in primary care and rural areas.

Disparities in resource allocation and increasing waiting times compound these access constraints.

Sustainable development initiatives are hindered by ineffective waste management practices; Spain has failed to meet the EU target of recycling 50% of municipal waste by 2020. Efforts to improve water management resilience are paramount, with extensive areas facing water stress due to agricultural, tourism, and energy demands.

Nature degradation poses significant risks to the economy and competitiveness, as various sectors depend heavily on ecosystem services.

Spain grapples with the dual challenge of safeguarding its natural resources while promoting economic growth.