Spain

   
 

Key Challenges

 
Despite positive developments over the past two years, the economy has not yet overcome the various crises encountered in the last five years. As a result of tighter financial conditions and reduced levels of business and consumer confidence, GDP growth is now moderate.
 
Implementing the Recovery and Resilience Plan (RRP) will be a key challenge in the coming years. The RRP has the potential to create powerful crowding-in effects, significantly impact key reforms on potential growth, and continue reducing public debt. Given the substantial investments anticipated from the Next Generation EU program and the MFF 2021-2027, monitoring absorption capacity will be essential.
 
Traditional challenges must also be addressed to enhance competitiveness and resilience. First, economic competitiveness and resource efficiency must improve, and the economy’s dependence on tourism should be reduced.
 
Public policies should continue to prioritize climate-compatible public investment and innovation, while also fostering social and territorial cohesion and ensuring quality access to health and education. The minimum income scheme should be expanded.
 
The institutional framework promoting cooperation and shared decision-making across different government levels should be reinforced. Additionally, reducing tensions between central government framework legislation and the reality of heterogeneous regional systems is crucial. Maintaining territorial cohesion is becoming increasingly important; thus, the funding system for regional competencies needs an update and reform to ensure subnational governments have adequate resources.
 
The tax system should be expanded and tax competition reduced. New tax measures for 2022-2023 are important steps toward increasing government revenue and improving tax system efficiency. However, deeper changes are needed to enhance public efficiency and reduce post-tax social inequalities.
 
Labor market reform has shown positive results, but training capacities need improvement. Access to vocational training, including for immigrants, should be fostered. Greater continuity in education policies across different governments and better coordination across regions could help achieve this goal.
 
The welfare system’s clearest challenge is population aging, which pressures the sustainability of healthcare and the viability of pensions. While pension reform was crucial, efforts should now focus on the healthcare system.
 
To achieve these policy goals, specific reforms are needed to strengthen the government’s executive capacities without undermining the parliament. Regulatory impact assessment (RIA) processes should be enhanced. Evaluation agencies must be strengthened to ensure transparency and quality evaluation of action plans and laws. Additionally, societal consultation in policymaking should be fostered, improving citizen access to public policy information.
 
Strategies should be developed to address the conclusion of the limited temporary NextGenerationEU program. Forming a coalition with other EU member states could strengthen the negotiating position for the program’s continuation and redesign at the EU level.
 
The government, which took office in November 2023, and its supporting parties have initiatives requiring significant resources. Implementing these measures during economic downturns demands additional efforts, such as increased productivity or higher revenues. Agreements with nationalist regional parties may pressure social and territorial cohesion but could also enhance their legitimacy and social support.
 
The minority coalition government will need to change allies for most legislative initiatives, requiring political parties to compromise with others in parliament. In the current polarized political climate, this will be a significant challenge for governing with foresight and sustainable policymaking.
Back to Top