Spain Explained 2026, How It Ranks in Europe

SPAIN · EXPLAINED

Spain is outgrowing Germany, France and Italy, yet it goes to the polls over homes its people cannot afford. Here is what is happening now, and how Spain compares with the rest of Europe.

Spain’s economy is growing faster than those of Germany, France and Italy, yet the country heads to a snap election on Sunday, 29 November 2026, over a housing crisis. Prime Minister Pedro Sánchez called the vote on Monday, 5 October, three days after Congress voted down his emergency housing decrees.

For Americans, Spain is a NATO ally whose bases at Rota and Morón host US forces. Yet President Donald Trump has twice this year threatened to cut off trade with Spain, in March after Madrid refused the use of those bases for strikes on Iran and in July at the NATO summit.

This guide explains what is happening in Spain this month and ranks it against Germany, France, Italy, Portugal, the Netherlands, Poland and Greece on eight measures. For the man private polls and prediction markets favour to replace Sánchez, read Who Is Alberto Núñez Feijóo?, and for the Latin American stakes, our analysis of the snap election.

Spain Right Now

A Snap Election Called Over Housing

On Friday, 2 October, Congress rejected two housing decree-laws by 172 votes to 178 and 166 to 184. The People’s Party, Vox and Junts, the Catalan separatist party of Carles Puigdemont that had backed Sánchez in office, were among those voting against.

Royal Decree 806/2026, published on 6 October, dissolved parliament and set the vote for 29 November. The official campaign runs from 13 to 27 November, and the new parliament meets on 23 December.

Sánchez leads the PSOE, the centre-left Spanish Socialist Workers’ Party, which has governed since 2018. He opened his campaign on 10 October in Dos Hermanas, near Seville, with housing as its central theme.

Feijóo leads the People’s Party (PP), the main centre-right opposition, and on 19 October promised at least one million new homes and a review of more than 100 tax rises. He also pledges tighter border control and no further mass regularisations of migrants.

Vox, led by Abascal, is a right-wing nationalist party that campaigns on what it calls “remigration” and national priority for Spaniards. To the Socialists’ left, an alliance of Sumar, United Left, Más Madrid and the Catalan Comuns has chosen former Barcelona mayor Ada Colau as its candidate, while Podemos runs separately in most regions, including Madrid and Catalonia.

Spain has not passed a national budget since the one for 2023, now in its third year of automatic extension. No rolled-over budget has lasted longer since the return of democracy, a sign of how fragile Sánchez’s majority had become.

Courts, Scandals and Catalonia

On 22 June the Supreme Court sentenced former transport minister José Luis Ábalos to 24 years and three months for corruption over pandemic-era contracts, and his former adviser Koldo García to 19 years and eight months. Ábalos calls the verdict predetermined and political, and an appeal to the Constitutional Court is still possible.

Former Socialist organisation secretary Santos Cerdán is under investigation at the National Court over alleged rigging of public works, and the prime minister’s wife, Begoña Gómez, was sent to a jury trial on 21 September on influence-peddling and embezzlement charges. Neither has been convicted, so both are presumed innocent, and the public prosecutor is seeking Gómez’s acquittal.

The prime minister’s brother, David Sánchez, was barred from public office for nine years by a Badajoz court in July over his hiring by the provincial council, and cleared of influence peddling, in a ruling under appeal. Former attorney general Álvaro García Ortiz was convicted on 20 November 2025 of revealing secrets, by five Supreme Court judges to two, and barred from the post for two years.

In Catalonia, the Constitutional Court ruled on 6 October that the 2024 amnesty for the 2017 independence bid also covers embezzlement. Supreme Court judge Pablo Llarena then lifted the arrest warrant for Puigdemont, who remains in Belgium for now.

An Economy Growing Through an Energy Shock

Spain’s economy grew 0.7% in the second quarter and 2.6% on a year earlier, the statistics office INE says, and the Bank of Spain expects 2.6% for 2026 as a whole. The first estimate for the third quarter is due on 30 October.

The war that began with US and Israeli strikes on Iran in late February and virtually closed the Strait of Hormuz pushed up oil and gas prices across Europe. Spanish energy prices were 22.1% higher in September than a year earlier, and inflation reached 4.9%, or 5.0% on the EU’s harmonised measure, with core inflation at 3.1%.

The government cut fuel and power taxes in March and has kept extending fuel-duty relief, and the Bank of Spain puts the cost of all its energy measures at 0.52% of GDP. The European Central Bank raised its deposit rate to 2.50% on 10 September and meets again on 29 October.

Housing, the Issue of the Campaign

House prices rose 12.2% in the year to the second quarter, INE says, and asking rents averaged €15.1 per square metre a month in September (about US$17), up 5.6% in a year, according to the property portal idealista. The Bank of Spain estimates the country built about 750,000 too few homes between 2021 and 2025.

On 3 October organisers claimed 500,000 marchers in Madrid while the central government’s delegation counted 70,000, and unions have registered a general strike over housing and wages for 11 November. The marches took up the name of Maricarmen, an 87-year-old evicted on 23 September from the Madrid flat where she had lived for some 70 years, who died on 7 October.

After calling the election, the government reissued its decrees with a €10 billion (about US$11.2 billion) state loan line for first-time buyers. Parliament’s standing committee, which sits while the chambers are dissolved, must still approve them.

Regions are acting too. On 20 October the Basque government agreed in principle to buy the rights to 510 protected rental homes in the Benta Berri district of San Sebastián from Testa Homes, a company controlled by the US investment firm Blackstone, to keep them affordable permanently.

Basque media put the price at about €100 million (about US$112 million), a figure not officially confirmed when we checked, and the contract is due by the end of the year. Around 40 tenants had received notices that their leases would not be renewed, the Basque daily Naiz reported.

Migration, Tourism and Energy

Spain’s population reached a record 49,801,559 on 1 July 2026, including 7,437,543 foreign nationals, INE says. An extraordinary regularisation that closed on 30 June drew 1,174,978 applications, as we reported in our analysis of the regularisation.

Inclusion and Migration Minister Elma Saiz said on 23 July that more than 70% of the files had been admitted for processing, giving about 822,000 people provisional permission to live and work, but no official count of final approvals has followed. The decree argues that a fast-ageing country needs more working-age contributors, while Feijóo rules out any repeat.

Tourism set another record, with 96.8 million international visitors in 2025 who spent €134.7 billion (about US$151 billion). Arrivals from January to August 2026 rose 5.4% to 70.4 million.

The nationwide blackout of 28 April 2025 still shapes energy policy, and ENTSO-E, the European grid operators’ association, blamed voltage-control gaps and cascading disconnections rather than a single cause. Renewables produced 55.5% of Spain’s electricity in 2025, and in August the government let the Almaraz nuclear plant run until June 2030.

How Spain Compares With Europe

We ranked Spain against Germany, France, Italy, Portugal, the Netherlands, Poland and Greece on eight measures, using the latest Eurostat data available on 21 October 2026. Each card also shows the averages for the 27-member European Union and the 21-country euro area, which Bulgaria joined in January.

Purchasing power standards strip out price differences between countries, so a euro buys roughly the same basket everywhere. Spain comes out ahead on two measures and behind on six, but the direction of travel matters as much as the rank.

Our overall verdict: Spain is doing well and improving fast, with joblessness at its lowest since April 2008, debt falling and the fastest growth of the euro area’s four biggest economies. It is still poorer, less productive and more exposed to poverty than the European average, so the catch-up is real but unfinished.

Housing is the measure that does not fit in a single card, because it hurts residents while it flatters the statistics. On Eurostat’s comparable measure, Spanish house prices rose 12.1% in the year to the second quarter of 2026, against 4.7% across the EU, and of the six peers with Eurostat data, only Portugal saw a faster rise, at 16.5%.

Daily life is still cheaper than in the north. Eurostat puts Spain’s price level for what people consume, including public services such as health and schooling, at 91 in 2025, against 109 in Germany, 106 in France and 120 in the Netherlands, with the EU average at 100.

The Good

Growth has held up through an energy shock that has knocked much of Europe off course. The IMF expects Spain to grow 2.5% in 2026, against 1.3% for Germany, 0.8% for Italy, 0.4% for France and 1.1% for the euro area.

Jobs keep coming. Social Security gained 92,327 registered workers in September and almost 740,000 over the year, which the ministry calls the best September on record, and the national Labour Force Survey put unemployment at 9.87% in the second quarter.

The public finances are moving the right way. The deficit fell to 2.4% of GDP in 2025, inside the EU’s 3% limit, and debt dropped from 105.3% of GDP in 2023 to 100.5%.

Investors have noticed: S&P rates Spain A+, Fitch A and Moody’s A3, all with stable outlooks, the Treasury says. Spain’s 10-year government bond yielded 4.01% at the close on 20 October, only about 0.6 percentage points more than Germany’s.

The Bad

Spain had the EU’s highest unemployment rate in August, and more than one in five under-25s who want work cannot find it. The employment rate for people aged 20 to 64 was 72.4% in 2025, against 76.1% in the EU and 81.1% in Germany.

Inflation is back. Consumer prices rose 4.9% in the year to September on Spain’s national measure, the highest since February 2023, driven by fuel and power after the Middle East war pushed up oil and gas.

Productivity is the long-term weakness. An hour of work produced 95.3% of the EU average in 2025, down from 96.2% in 2023, which means growth has come mostly from more people working rather than each worker producing more.

One in four Spaniards, 25.7%, was at risk of poverty or social exclusion in 2025. Among our eight countries, only Greece was worse.

The Big Questions

The first question is whether anyone can form a stable government. Spain’s Congress has 350 seats, so a prime minister needs 176 votes in a first investiture ballot, or more yes than no votes in a second.

The second is whether growth survives dearer energy and a central bank that has started raising rates again. The European Commission’s autumn forecast, expected in November, and the 30 October growth figures will give the first answers.

The third is housing. The Socialists offer rent controls, longer leases and cheap state loans, while the People’s Party promises to build at least a million homes, and either would need years to close a gap the Bank of Spain puts at about 750,000 homes.

The fourth is productivity, the slow-moving number that decides whether Spaniards eventually earn as much as Germans. Output per hour has slipped from 96.2% of the EU average in 2023 to 95.3% in 2025.

The Election and the Markets

Private polls agree that the People’s Party is ahead but short of a majority on its own. GAD3 for the newspaper ABC gave it 31.4% and 133 seats on 12 October, and Sigma Dos for El Mundo put it at 31.5% on 19 October, with the Socialists at 25.3% and Vox at 19.5%.

Sigma Dos projects 197 to 205 seats for the PP and Vox together, above the 176 needed for a majority. The state-run Centre for Sociological Research (CIS) is the outlier, putting the Socialists first with 34.0% against 22.2% for the PP in a poll published on 14 October.

On those numbers, Feijóo’s path to power most likely runs through Vox, which would give Abascal’s party leverage over migration policy. A Socialist government would need the left-wing alliance, Podemos and the Basque and Catalan parties, including the Junts deputies who brought down the housing decrees.

This guide will be updated as the campaign moves and on election night. Day-by-day coverage is on our Spain election 2026 page, and the cases around the prime minister are explained in our Pedro Sánchez scandal guide.

What Prediction Markets Say

Polymarket, a prediction market where users bet real money on outcomes, gives Feijóo an 82.5% chance of becoming Spain’s next prime minister, Sánchez 14.4% and Abascal 2.5%, on about US$2.0 million of bets (21 October, 5:55 a.m. ET). A second contract, with about US$485,000 traded, gives only a 14% chance that Sánchez leaves office by 31 December, because forming a government after parliament meets on 23 December can take weeks.

Kalshi, which is regulated in the US by the Commodity Futures Trading Commission (CFTC), prices Feijóo at 81% and Sánchez at 17%, after about 19,800 contracts traded across its three candidate markets. Both markets lean the same way as the private polls, not the CIS.

What It Means for US Readers

Trade, Tariffs and Ships

Trade is the most direct link. The United States exported US$26.6 billion of goods to Spain in 2025 and imported US$21.3 billion, a US surplus of US$5.2 billion, Census Bureau data show.

On 15 October the Federal Maritime Commission published a proposal for a US$200,000 fee on every voyage by a Spanish-flagged ship and limits on Spanish imports ranging from cosmetics and olive oil to ceramics, stone and sugar. The proposal, open for comment for 60 days and not yet in force, stems from Spain’s refusal in November 2024 to let three US-flagged cargo ships into its ports, reportedly because they carried goods to or from Israel.

Tariffs have shifted too. After the Supreme Court struck down tariffs imposed under emergency powers on 20 February 2026, Washington used a 1974 trade law to impose new duties from 24 July, under which many EU goods now pay at least 10%.

Defence and Investment

Defence is the other flashpoint. NATO estimates that Spain will spend 2.00% of GDP on core defence in 2026, the lowest of the eight countries compared here, against 2.10% in Italy, 2.22% in France, 2.69% in Germany and 4.68% in Poland.

Allies agreed in The Hague in June 2025 to reach 3.5% by 2035, and Sánchez called the alliance’s overall 5% goal “unreasonable and counterproductive”. The US Navy still based a sixth destroyer at Rota, near Cádiz, when USS John Basilone arrived on 14 October.

Investment flows mostly from Spain to the United States, where Spanish companies held US$106 billion of direct investment at the end of 2025, Commerce Department data show. Banco Santander won Federal Reserve approval on 4 August for its takeover of Webster Financial, a US lender with more than US$80 billion in assets, in a deal due to close on 20 August.

Travel and Migration

Americans keep visiting, with almost 4.5 million arrivals in 2025 and an 11.6% rise in the first eight months of 2026. A general strike is called for 11 November, so travellers should check transport plans for that day.

Migration from Latin America is one of the campaign’s sharpest dividing lines, a debate that will sound familiar to the 70.1 million Hispanics, 21% of the US population, estimated by the Census Bureau for 2025. Spain’s trade with South America now also runs partly through the EU-Mercosur interim agreement, applied provisionally since 1 May 2026.

What Is Not Known

Nobody knows yet whether the PP and Vox would agree a coalition or a looser pact, or whether the CIS or the private pollsters are closer to the truth. The Basque government had not officially confirmed the price of its Blackstone deal when we checked, and the number of approved regularisation files has not been published.

It is not known how long the Middle East energy shock will last, which makes every 2026 inflation forecast fragile. The European Commission’s autumn forecast, the next big outside verdict on Spain’s economy, has no confirmed publication date.

Several court cases remain open, including the jury trial of Begoña Gómez, the appeal of David Sánchez and the investigation of Santos Cerdán. Whether Puigdemont returns to Spain before or after the vote is also unclear.

Frequently Asked Questions

Is Spain’s economy doing well?

Yes, by European standards: it grew 2.6% in 2025, almost twice the EU average, and the IMF expects 2.5% in 2026. Unemployment, inflation and housing costs remain the weak spots.

How does Spain compare with Germany?

Spain grows much faster, 2.6% against 0.2% in 2025, but Germany is richer, with income per person at 115% of the EU average against 92% in Spain. German unemployment is 4.0%, against 10.0% in Spain.

Is Spain cheap to live in?

Everyday prices are about 9% below the EU average and far below Germany, France or the Netherlands. Housing is the exception, with asking rents up 5.6% in a year and Madrid city averaging €23.4 per square metre a month (about US$26).

What is Spain’s unemployment rate?

Eurostat put it at 10.0% in August 2026, the highest in the EU that month and the lowest in Spain since April 2008. The national Labour Force Survey measured 9.87% in the second quarter, with new figures due on 27 October.

When is Spain’s election?

Spain holds a general election for both chambers of parliament on Sunday, 29 November 2026. The official campaign runs from 13 to 27 November, and the new parliament meets on 23 December.

What is happening in Spain right now?

Spain is in a snap election campaign triggered by a housing crisis, with mass protests and a general strike called for 11 November. Inflation has jumped to 4.9% because of the Middle East energy shock, while the economy keeps growing faster than most of Europe.

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