Spain

In the past two years, Spain’s key economic data compared favorably with other EU member states. Economic growth and job creation were solid and stronger than expected in 2022 and 2023. Spain exhibited resilience in the face of economic challenges, with energy costs and inflation rates remaining below the EU average. Spain could also reduce its public debt after reaching a historic high of 120% of GDP in 2020.

During the period under review, despite concerns about the stability of the left-wing coalition government and its status as a caretaker government from July to November 2023, the government pushed an ambitious legislative reform agenda through parliament while fending off a wave of hostility from the political right.

Most reforms were part of the Recovery and Resilience Plan (RRP) and agreed upon with the European Commission, establishing conditions for the reimbursement of funding from the NextGenerationEU program (Government of Spain, 2021). The RRP will mobilize up to €163 billion from 2021 – 2026, in addition to €36.7 billion from the Structural Funds of the multiannual financial framework 2021 – 2027 (MFF 2021 – 2027). The RRP addresses critical structural problems and aims to ensure long-term sustainable development through investments and reforms focused on ecological transition and digital transformation. Each payment is linked to the achievement of several milestones (qualitative goals) and targets (quantitative goals). According to the European Commission, which approved the amendment of the plan in October 2023 (Government of Spain, 2023), the RRP is currently on track. However, absorption capacity remains a challenge (European Commission, 2023).

The implementation had a significant impact on public administration. Several administrative departments have been strengthened, and new governance structures have been created to increase the government’s executive capacity and accountability. Both ex ante and ex post evaluations have been enhanced, which will also have long-term positive effects. In particular, the strategic design of policies evolved substantially over 2022.

The fragmentation of the party system and polarization have significantly obstructed cross-party agreement. Increasing polarization has eroded the effectiveness of parliamentary institutions in a way that affects the quality of democracy, even though it did not prevent the government from pushing most of its legislative agenda until spring 2023. Although Spain overall remained one of the countries with strong democratic quality in electoral and liberal terms, the government made extensive – and for some, excessive – use of royal decree-laws. Despite the period 2022 – 2023 seeing the second-lowest proportion of such decrees since 2010, this practice prevented deliberation in the legislative chambers. This had an important impact on the balance between legislative and executive powers, raising questions of input legitimacy.

The structural weaknesses and cyclical problems, including the financing model, of the Spanish territorial system could not be addressed. However, intergovernmental coordination could be improved, and representatives of the autonomous communities met frequently to exchange information and to reach, to a certain extent, common agreements.

The electoral cycle, including local and regional elections in May 2023, which produced several government alternations in different autonomous communities, and the general early election in July, reduced institutional activity in most of the policies under review. The national elections of July 23, 2023, ended in a stalemate. Following weeks of political tensions, the PSOE reached a minority coalition agreement with the far-left Sumar coalition. However, the PSOE had to make further painful compromises that might have a long-lasting impact on the territorial organization of the state. These include an amnesty law for Catalan separatist politicians convicted or investigated for events related to the political crisis in Catalonia, the transfer of full tax autonomy to Catalonia, and further transfers of competencies to the Basque Country. Pedro Sanchez was re-elected as prime minister on November 16, 2023. However, a stable government that can govern with foresight is not guaranteed for the legislature.

Government of Spain. 2021. “Recovery and Resilience Plan.” https://www.lamoncloa.gob.es/temas/fondos-recuperacion/Documents/160621-Plan_Recuperacion_Transformacion_Resiliencia.pdf

Government of Spain. 2023. “Addendum to the Recovery, Transformation and Resilience Plan.” https://planderecuperacion.gob.es/sites/default/files/2023-06/06062023_adenda_plan_de_recuperacion.pdf

European Commission. 2023. “Proposal for a Council Implementing Decision Amending Implementing Decision (EU) of 13 July 2021 on the Approval of the Assessment of the Recovery and Resilience Plan for Spain.” https://commission.europa.eu/system/files/2023-10/COM_2023_576_1_EN_ACT_part1_v4.pdf

European Commission. 2023. “Country Specific Recommendations, Spain.” https://commission.europa.eu/publications/2023-europeansemester-country-specific-recommendations-commission-recommendations_en