Brussels urges Spain to rebalance spending and boost housing

A new approach to social spending

The European Commission has put a necessary and complex debate on the table for the Spanish economy: the urgency of rebalancing intergenerational public spending. In its latest report on economic recommendations, Brussels stresses that while pensions have ensured stability for the elderly, the current model neglects the urgent needs of new generations. The organization warns that it is imperative to direct resources toward education, employment, and, fundamentally, housing, a sector that has solidified as one of the country's greatest structural challenges.

The housing challenge and the social gap

The report is blunt regarding access to decent housing. With a social housing supply that accounts for less than 2% of the total stock—compared to a European average of 7%—Spain suffers from severe bottlenecks due to a shortage of buildable land and administrative sluggishness. This deficit puts pressure on both rental prices and the conditions for accessing a mortgage, perpetuating a cycle of social exclusion that particularly affects young people, who face worrying rates of child and youth poverty.

"Spain spends a great deal on items like pensions, which do not particularly benefit new generations. We must think about spending that is more oriented toward the youth," note sources from the European Commission.

Fiscal dependence on labor

Another critical point highlighted by Brussels is the growing dependence on labor taxation. Over the last decade, 90% of the increase in tax revenue has fallen on labor income, largely due to the lack of indexation of personal income tax (IRPF) brackets and the increase in Social Security contributions.

To correct this imbalance, the Commission suggests reviewing consumption taxes. Brussels specifically highlights the VAT on the hospitality sector, which maintains a reduced rate of 10% compared to the general 21%. According to the Commission's calculations, equalizing this tax could mean an additional 7 billion euros in revenue for public coffers, easing the pressure on wages.

Economic outlook and spending rules

Despite these warnings, Spain stands out as the only European country with an upward growth forecast, reaching 2.4% by 2026. However, compliance with fiscal rules will be key. While the Spanish Executive trusts in the flexibility of the escape clause and energy investments to adjust its accounts, Brussels insists on the need to respect maximum net spending growth rates to avoid budgetary deviations that could compromise long-term stability.

Conclusion

Brussels' message is clear: Spain must transition toward a model that not only ensures present well-being but also builds a safety net for the future. In the Commission's view, the combination of a reform in housing policy and a reconfiguration of the tax burden is the path to reducing persistent inequalities and improving the country's competitiveness.