Spain

Iberian and island geography. The country occupies most of the Iberian Peninsula, the Balearic Islands in the western Mediterranean, the Canary Islands off northwest Africa, and the autonomous cities of Ceuta and Melilla on the North African coast. Total area is ≈ 505,990 square kilometers, the second-largest territory in the European Union after France. The land border with Portugal is the longest uninterrupted land border in the EU; the Pyrenees border with France runs along the country's north ^S5,S10.

Euro-area macro frame. Spain joined the euro in 1999 and adopted euro cash in 2002. Monetary policy is set by the European Central Bank, while the Banco de España conducts national supervisory and macroprudential functions. The single currency removed the peseta's exchange-rate channel, which means cyclical adjustment now runs through wages, fiscal policy, credit, and migration rather than through depreciation ^S6,S7.

Decentralized public sector. The 1978 Constitution created the Estado de las Autonomías, in which seventeen autonomous communities hold extensive competences in health, education, transport, language, and housing policy. Two of them, the País Vasco and Navarra, retain a foral fiscal regime and collect their own taxes. Catalonia has periodically pressed for greater fiscal autonomy. Public spending and revenue are split among the central state, the autonomous communities, and local governments ^S5,S11.

Services-led economy with a deep tourism specialization. Services produce the bulk of value added; tourism, professional services, finance, retail, transport, and a competitive hospitality sector together explain why services exports are unusually large. Manufacturing remains real, especially in Cataluña, the País Vasco, and the Comunidad Valenciana, while agriculture and food processing matter more in Andalucía, Murcia, and Castilla-La Mancha ^S1,S11.

Migration as the demographic engine. Natural change has turned negative: deaths exceed births in most years since 2015. Net international migration has therefore become the dominant component of recent population growth, and the foreign-born share of residents has climbed to ≈ 18 percent. Latin American, Romanian, Moroccan, and other inflows are now first-order labor-supply variables ^S4,S7.

Spain is the fourth-largest euro-area economy by GDP, behind Germany, France, and Italy. Real activity has outperformed those peers in 2024-2026, with growth driven by tourism receipts, EU NextGenerationEU disbursements, immigration-led labor-supply expansion, and a still-falling savings rate from the post-pandemic peak ^S1,S7,S10.

The structural weak spot is unemployment. The EPA recorded a 10.83 percent unemployment rate in the first quarter of 2026, more than double the euro-area median. Youth unemployment remains the most stubborn line: among 16-to-24-year-olds, the rate routinely runs above 25 percent. The compensating reading is that employment levels reached new highs in 2024-2025 and that the temporary-contract share has fallen sharply since the 2022 labor-market reform ^S3,S11.

Fiscal policy operates inside the EU's revised economic-governance framework. The 2024 Stability and Growth Pact reform replaced the old debt-and-deficit numerical rules with country-specific medium-term fiscal-structural plans. Spain submitted its plan in 2024, and execution of the plan now drives the conditionality of NextGenerationEU disbursements through the PRTR ^S12.