Spain

Robust growth driven by household consumption

After a radiant 2024 driven by services, Spanish growth will moderate in 2025, while still remaining vigorous and well ahead of the main European economies (Coface forecasts 1.1% for the euro zone). The economy will be driven by robust private domestic demand. Household consumption (representing about 55% of GDP) will be sustained by a gain in purchasing power thanks to moderate inflation, a dynamic labour market and, consequently, high growth in real gross disposable income. Wage negotiations should remain strong in 2025, in line with the fifth agreement on employment and collective bargaining (V AENC) of 2023, which calls for a 3% increase in 2025, thereby outperforming inflation forecasts. In addition, the buoyant labour market is being accompanied by an increase in the working population, driven by the arrival of immigrants. Between 2022 and the third quarter of 2024, the foreign population accounted for over 70% of the increase in the working population. Nevertheless, although resilient, private consumption has so far grown more modestly than real incomes. In the first half of 2024, household spending rose by an average of 2.4% compared with 2023, while gross disposable income increased by 10%. Hence, as is the case with many European countries, Spaniards are saving more than before the pandemic. In the fourth quarter of 2024, the household savings rate stood at 14.2% of disposable income, a historically high level well above pre-pandemic levels (the 2015-2019 average was 7.3%). This precautionary saving could therefore represent both a brake and an additional lever on the recovery in consumption in 2025.

That said, the net contribution of foreign trade is likely to lose momentum due to an acceleration in imports. While Spain will have once again enjoyed a record tourist year in 2024 driven by a foreign clientele (94 million arrivals, +10% compared with 2023), the normalisation of the sector's recovery should result in more limited growth. Services, however, will continue to benefit from the robustness of tourism, which will remain a fundamental pillar of the country's growth. Moreover, the Spanish economy will continue to be exposed to the fragile demand and recovery of its neighbours, since almost 65% of its goods exports (mainly cars, machinery, refined petroleum, pharmaceuticals, plastics and food) are destined for the rest of the European Union (71% when including the UK).

The recovery in private investment (representing around 20% of GDP) should be confirmed by the continued gradual improvement in financial conditions over the course of 2025. It could, however, be held back by corporate risk aversion in the face of persistent uncertainty in the international economic and geopolitical context. Investment will also be supported by the accelerated disbursement of European funds under the National Recovery Plan, with almost EUR 80 billion in grants and EUR 83 billion in loans for the period 2021-2026 (for a total equivalent to 13% of its GDP in 2019). Almost a third of this amount has already been disbursed. Disbursements should therefore accelerate significantly between 2025 and 2026, while Spain sent its fifth payment request in December 2024 for a total of almost EUR 25 billion. However, a more modest contribution from public spending is expected as part of the reintroduction of European budgetary rules.

Gradual consolidation of public accounts

Although there is a high risk that the 2025 Budget will not be passed – meaning that the 2023 Budget would be renewed for a second consecutive year – the consolidation of public accounts should be confirmed. However, these will still be largely in deficit after having deteriorated sharply during the health and energy crises. The reduction in the deficit will mainly result from the removal of VAT reductions on basic foodstuffs and electricity, which had been extended until the end of 2024. However, the government has extended public transport subsidies in force since 2022 until June 2025. Second, the positive trend in the deficit will also be supported by a tight labor market, which is fuelled in particular by strong migratory flows and increased labour force participation. At the same time, Royal decree-legislation provides for the extension of taxes on the windfall profits of banking institutions for the next three years and of energy companies until the end of 2025 (which, together, brought in almost EUR 3 billion euro in revenues in 2024), but this will have to be confirmed in Parliament in early 2025 as it is currently being debated by the government. Although Spain escaped the excessive deficit procedure last summer following the restoration of European budgetary rules, the sustainability of its very high public debt remains one of the country's medium-term challenges. Despite a downward trend in recent years, the country's net external public debt remains among the highest in the European Union (50.2% of GDP in Q3 2024).

Moreover, the current account surplus posted by the country since 2013 recovered rapidly after the health, and later, energy crisis and should stabilise by 2025. This clear improvement is due, in particular, to the substantial surplus on the services balance (over 6% of GDP in 2023), which has been revitalised by international tourism, which continued to post record levels in 2024, with an extension of the trend expected for 2025. This will help offset the structural deficit in the balance of goods, largely attributable to the country's energy dependence (although the energy bill has been falling since 2022), and in the balance of income (remittances from the Latin American and Moroccan diasporas to their countries of origin).

Fragmented coalition will continue to fuel risk of government instability

Following the snap parliamentary elections in July 2023, and in the absence of a viable alternative on the right, Socialist incumbent Prime Minister Pedro Sánchez (PSOE) managed to hold onto power despite coming second. Without an absolute majority (121 seats out of 350), the left-wing party was still in a better position to form a government than the rivalling right-wing Popular Party led by Alberto Núñez Feijóo. As a result, Sánchez was again forced to form a coalition with 179 votes, including those of his main left-wing ally Sumar (31), EH Bildu (6), ERC (7), Junts (7), PNV (5), BNG (1) and the Coalition Canarienne (1).

This multi-party coalition, which includes Catalan and Basque pro-independence parties, is a challenge to governance despite prior negotiations and previously granted controversial concessions, one notable example was the passing of an amnesty law pardoning Catalan separatists involved in the 2017 independence attempt, though it excluded Junts leader Carles Puigdemont who is still exiled in Belgium. The risk of political instability will therefore persist in 2025 as the head of government wrestles with the divergent opinions and interests of his partners. Hence, although Sánchez's coalition government was fairly stable during his previous term, its current dependence on regional pro-independence parties may result in political deadlock, as demonstrated by the delay in passing the 2025 Budget due to the lack of support from Catalan pro-independence Junts. The government's inability to pass the budget for a second consecutive year would again jeopardise its ability to govern due to the difficulty in obtaining parliamentary support. The complexity and fragility of Pedro Sánchez's coalition could also slow down the implementation of structural reforms required to receive European funds.

Payment

Cheques are widely used for corporate transactions in Spain. They offer similar legal safeguards under the juicio cambiario (Civil Prodecures Code) in the event of default. The same is true of promissory notes (pagaré), which, like bills of exchange and cheques, are instruments enforceable by law. If unpaid, they are recorded in the registry of unpaid acceptances (RAI, Registro de Aceptationes Impagadas). Attached to the Centre for Interbank Cooperation, the RAI is the country’s most important registry. It records all commercial payment defaults of over €300, thus allowing banks and other deposit institutions to verify a company’s payment record before extending?credit.

In contrast, bills of exchange are rarely used commercially. In the event of defaults, they offer creditors certain safeguards, including access to special collection proceedings with instruments for negotiation under the civil procedures code (juicio cambiario). Bills of exchange that have been guaranteed by a bank can be somewhat difficult to obtain, but they do limit the risk of payment default by offering creditors recourse to the endorser of the bill of exchange.

Electronic transfers via the SWIFT network, widely used by Spanish banks, are a fast, fairly reliable and cheap payment instrument, provided the purchaser orders payment in good faith. If the buyer fails to order a transfer, the legal recourse is to institute ordinary proceedings, based on the unpaid invoice. Banks in Spain have also been implementing SEPA standards for euro-denominated payments.

Debt Collection

Unless there are special clauses included in the commercial contract, the applicable rate of interest is that applied by the European Central Bank in its most recent refinancing operation (performed prior to the first calendar day of the half year concerned), with an additional eight percentage points. The rate is published by the Finance Minister every six months, in the Boletín Oficial del Estado. The statute of limitations for ordinary claims is five years.

Amicable phase

There are no formalities or conditions for the dispatch of a reminder to the debtor, but it is advisable to send a claim to the debtor first. The creditor can obtain guarantees for the payment of the debt.

Legal proceedings

If no settlement agreement is reached with the customer, the creditor can initiate a legal collection process, using civil procedure law (ley de Enjuiciamento civil).

Exchange proceedings

Exchange proceedings are used for claims based on bills of exchange, promissory notes and cheques. A judge of the first instance (juzgado de primera instancia) verifies that the ‘exchange title’ has been correctly implemented and then orders the debtor to make payment of both the principal amount and the late interests and costs, within ten days. The judge will also order a seizure for security (embargo preventivo) on the debtor’s assets, equivalent to the outstanding amount. The debtor has ten days to dispute the ruling.

If there is no payment received or opposition within the prescribed time, the judge will order enforcement measures. If necessary, the judicial representative will carry out attachment. When claims are contested, a court hearing is held to examine both parties’ arguments and a judgement should be handed down within ten additional days. Although this is time frame that is prescribed under Spanish law, it is rarely adhered to by the courts.

Ordinary proceedings

In addition to the juicio cambiario, creditors unable to reach a payment settlement out of court can enforce their rights through a civil procedure (juicio declarativo). Civil procedures are divided into ordinary proceedings (juicio ordinario) for claims of over €6,000 and oral proceedings (juicio verbal) – a more simplified system – for smaller claims. Both proceedings are initiated with a lawsuit served on the debtor.

The claimant is required to explain the facts of his claim and provide all supporting documents – either originals, or copies that have been certified by a public notary – on filing its initial petition. Prior to the investigation of the case, the judge will summon the parties during a first hearing (audiencia previa), using ordinary proceedings, to encourage a conciliation. If this is unsuccessful, the lawsuit will be pursued. The court can then order specific measures to clarify issues or facts that remain unclear, before passing judgment.

Monitory proceedings (Juicio monitorio)

For monetary, liquid and overdue claims, whatever the outstanding amount (previously limited to up to €250,000), creditors can now benefit from a more flexible summary procedure. The filing of a petición inicial is directly submitted to the judge of first instance (juzgado de primera instancia) where the debtor is located. After reviewing the supporting documents, the judge can order the debtor to pay within 20 days.

If the debtor does not respond, the judicial representative will inform the judge and request confirmation of the decision in favour of the initial request. The judicial representative then hands down a ruling confirming the conclusion of monitory proceedings, which is transmitted to the creditor. This allows the creditor to contact the Enforcement Office for the next phase. If the debtor disputes the ruling and provides motivated arguments for this within a written statement signed by a barrister and a solicitor, a full trial on the case will be instigated.

Enforcement of a Legal Decision

When all appeal venues have been exhausted, domestic court decisions become enforceable. If the debtor fails to satisfy the judgment within 20 days, the Court Clerk, upon request, can seek out the debtor’s assets and seize them.

Decisions on foreign awards rendered by EU countries benefit from enforcement conditions, such as EU Payment orders and the European Enforcement Order. Judgements rendered by non-EU countries are recognised and enforced, provided that the issuing country is party to a bilateral or multilateral agreement with Spain. If no such agreement is in place, Spanish exequatur proceedings will be followed.

Insolvency Proceedings

Pre-insolvency proceedings

A debtor has the possibility of negotiating a formal refinancing agreement (acuerdo de refinanciacion formal) with his creditors. This agreement must be signed by the court. Within this agreement, the parties are free to write off as much of the debt as they deem necessary.

Bankruptcy proceedings

Bankruptcy proceedings are launched by filing a petition for an insolvency order. After examination of the petition, the judge makes an insolvency order. Creditors are expected to notify their claims within one month of publication of the insolvency order. The court appoints an insolvency manager, who examines the debtor’s financial situation and establishes a report on its debts. If there is no opposition to the report, the insolvency manager submits the final version to the judge. The judge subsequently orders the commencement of the arrangement phase with its repayment schedule, viability plan and alternative proposals for repayment.

During these proceedings, the debtor may file for liquidation: upon petition of the debtor, at any time; when the debtor is no longer able to make the scheduled payments or the obligations incurred, as defined in the arrangement; upon petition of a creditor, for breach of the arrangement; upon petition of the judicial administration, upon termination of professional or commercial activity.

The judicial administration draws up a liquidation plan in order to realise (sell) the assets, consisting of the bankruptcy estate, which is submitted to the judge for approval.

Liquidation

Liquidation in Spain aims to sell the company’s assets. During this phase, the company retains its legal persona. Liquidators are appointed to execute the process and they can also take over the function of administrative body and company representative.

The liquidator cannot redistribute the company’s assets among its associates until all of its creditors have been paid and payment demands against the company have been settled. Aggrieved creditors can contest transactions that they believe may have taken place illegally during the allocation of the assets.

Last updated: January 2025