Brussels warns Spain that it is "at risk of breaching" fiscal rules due to excessive public spending

BarcelonaSpain has a deficit below the limits stipulated by the European Union and is reducing the debtHowever, it exceeds the limit agreed upon by the Spanish government and Brussels on net public spending. The European Commission, in its report on the fiscal situation of member states published this Tuesday, calculates that Spain will surpass the agreed rate of 3.5% for 2026. Therefore, the European Commission warns the Spanish government that it is at "risk of breaching" the fiscal rules agreed upon by both parties regarding the net public spending ceiling. Brussels acknowledges that these deviations from the public spending reduction path are significant enough to warrant breaching the fiscal rules and emphasizes that the maximum breach should be three-tenths of a percentage point by 2026 and 0.6% of gross domestic product (GDP) cumulatively. Thus, Spain has narrowly avoided non-compliance, as the maximum for all member states is 0.3% of the amount agreed upon with Brussels. In fact, in the case of Spain, the European Commission recommended that public spending be reduced by 2.8% next year. In economic reports over the past few years, Brussels had already warned that Spain would deviate from the agreed public spending reduction path. However, this Tuesday the European Commission went a step further. For the first time since the new European Union fiscal rules came into force, the Commission has stopped classifying Spain as one of the member states that generally comply with the fiscal plan and has instead placed it among the group of partners that are "at risk" of non-compliance, along with Croatia, Slovakia, and Lithuania. This change in tone from Brussels does not mean, for example, that Spain will be subject to disciplinary proceedings and forced to take measures to comply with the fiscal rules or, in the worst-case scenario, face sanctions. However, this represents an increase in pressure from the European Commission on Spain and calls for measures to reduce net public spending. It should be noted that the Brussels report does not evaluate Spain's budget as is customary because Spain did not approve a new budget last year, and this year the Moncloa Palace (the Spanish Prime Minister's office) has not yet presented any draft or proposal for the coming year. Only Spain and Belgium are in this situation among the 27 EU member states; Belgium, in fact, agreed this Monday to present a general accounts plan for the coming years.

However, it's not all bad news for Spain. Brussels emphasizes that the country can continue reducing its high debt, as it has in recent years, thanks to "solid economic growth" and "strong revenue growth." In fact, the economic forecasts presented by the European Commission last week estimate that Spain will bring its debt below 100% of GDP, largely due to economic growth and a deficit reduction to 2.5%—half a percentage point below the EU's target. Furthermore, Spain remains the fastest-growing major economy in the European bloc, and the Commission estimates that its GDP will increase by 2.9%, significantly outpacing Germany, France, and Italy.

In this context, the European Commission concludes that Spain is in a position to be removed from financial surveillance, under which it has been subject since requesting a bailout in 2012. Furthermore, the State has already repaid a significant portion of the approximately €41 billion loan it received 13 years ago to rescue the banks.

Alarm over child poverty

Brussels also addresses the situation in Spain in its social and labor report. The European Commission highlights that Spain has one of the highest rates of poverty and social exclusion risk in the EU. According to Brussels data, up to 25.8% of Spanish citizens were in this situation in 2024, and the figure is even higher for children: up to 34.6%. The Commission notes that these rates are well above the European average of 21% and 24.2%, respectively, and describes the situation as "critical."