Fiscal sustainability in Spain and Europe: Navigating a new landscape
Fecha: septiembre 2026
SEFO, Spanish and International Economic & Financial Outlook, V. 15 N.º5 (September 2026)
Index
Spain has operated under a rolled-over budget since 2023, and yet State and Social Security spending have climbed 14% and 20%, respectively, through a series of ad-hoc allocation adjustments which have helped meet one-off contingencies and investment targets funded from European funds. However, the lack of comprehensive budgetary planning has tended to weaken fiscal policy’s capacity to respond coherently to new priorities.
Spain comfortably outperformed its 2025 deficit and debt targets under the Medium-Term Fiscal-Structural Plan, supported by stronger-than-expected nominal growth; however, the fiscal adjustment linked to the committed expenditure path does not adjust to stronger economic performance, resulting in a structural consolidation effort that fell short of what would have been warranted by the improved macroeconomic environment. With spending pressures set to increase, a more ambitious adjustment will be needed in the years ahead.
Net primary expenditure grew 4.8% in 2025 and is on track for 4.7% in 2026, both well above the pathway Spain committed to under its Medium-Term Fiscal-Structural Plan. The defence and energy-crisis escape clauses keep Spain within its 2026 deficit limit by a narrow margin, but a 0.3% of GDP adjustment, worth around 5.3 billion euros, still remains for 2027.
The EU′s new fiscal rules, in force since 2024, are already being tested by the need to finance higher defence spending and by a sharp rise in interest rates. The National Escape Clause carries a modest fiscal cost, but the framework′s debt sustainability analysis still rests on interest-rate assumptions that market developments have already overtaken.
Recent crises have expanded the EU’s fiscal capacity through temporary instruments, while growing demands for defence, cross-border infrastructure and the green and digital transitions are increasing pressure for greater fiscal coordination. A more federal fiscal architecture would require stronger own resources and disciplined borrowing capacity, while overcoming significant legal, institutional and political obstacles.
Medium-sized enterprises hold a distinctive position in Spain′s corporate landscape, combining sufficient scale to shape economic activity with the flexibility to keep adapting and growing. Among Spain′s medium-sized enterprises, the 100 firms with the strongest cumulative growth since 2008 combined rising productivity, sustained investment and lower debt levels, allowing them to grow sustainably without compromising their financial resilience.
Cyber risk remains the top operational concern for European banks, cited by nearly three-quarters of institutions even as reported attack rates ease and realized losses continue to climb. Artificial intelligence now sits on both sides of this equation, sharpening banks′ detection and response capabilities, while equipping adversaries with faster, more convincing tools of their own.
The EBA’s revised SREP Guidelines bring ESG, emerging risks and operational resilience into the core of bank supervision, alongside new rules for third-country branches and other regulatory developments. The result is a more flexible framework that seeks to focus supervisory attention on the areas of greatest risk.