Spain has recently witnessed political fragmentation and several high-profile corruption scandals. However, it has also emerged as a leader in renewable energy, economic recovery, and labour market reforms. Since 2023, Spain has achieved remarkable economic growth, outpacing much of the eurozone, driven by factors such as immigration, EU-backed investments, and a thriving tourism sector. At the same time, its ambitious renewable energy initiatives have positioned it at the forefront of Europe’s green transition, with significant progress in solar, wind, and green hydrogen projects. Yet Spain continues to grapple with structural challenges such as low productivity, housing shortages, and the need for greater transparency in governance. In this article, Mario Levin and Esperança Pereira explore the interplay between these dynamics, examining how Spain’s successes and struggles are shaping its future on both a national and European stage.
From boom to bust: The financial crisis that reshaped Spain’s political landscape
Between 2008 and 2014, Spain experienced a severe financial crisis triggered by the collapse of a property bubble that had been fuelled by a booming real estate market and unsustainably high GDP growth rates. The bursting of the bubble led to a prolonged economic downturn, marked by falling property prices, rising unemployment, and a banking sector in crisis. This period also brought significant political changes, as austerity measures, large-scale corruption scandals, and growing separatist movements - particularly in Catalonia - undermined public trust in political leadership. These factors collectively reshaped Spain’s political landscape, contributing to widespread dissatisfaction and the rise of new political movements.
Since 2015, Spain’s political landscape has been marked by fragmentation, with the emergence of new parties fundamentally altering the traditional two-party system dominated by the Spanish Socialist Workers party (PSOE) and the conservative People’s Party (PP). This shift has resulted in complex coalition governments involving smaller regionalist parties, whose goals often diverge from those of the major parties, particularly on sensitive issues like Catalonia’s independence. Following poor results in the May 2023 regional elections, Prime Minister Pedro Sánchez called for a general election in July that year. While the PP won the most votes and seats, it failed to secure a majority. Ultimately, Sánchez’s PSOE formed a minority coalition government with the left-wing alliance Sumar, supported externally by regionalist parties such as ERC and Junts. This coalition reflects Spain’s increasingly fractured political environment, where governance relies on delicate negotiations and compromises among diverse political actors.
This coalition reflects Spain’s increasingly fractured political environment, where governance relies on delicate negotiations and compromises among diverse political actors.”
Since 2024, Sánchez has been grappling with a deepening political instability, largely driven by a series of corruption scandals uncovered by investigative journalism. These scandals, centred on irregularities in the awarding of public contracts, have implicated officials at local, regional, and national levels. High-profile cases like the Caso Koldo have consisted of sophisticated schemes defrauding millions of euros, with funds allegedly laundered through offshore accounts. The scandal’s complexity and the involvement of prominent figures have further intensified public scrutiny of Sánchez’s administration.
Caso Koldo is to a major corruption scandal in Spain involving irregular commissions on face mask contracts during the early months of the COVID-19 pandemic. This scandal, which centres around Koldo García Izaguirre, an advisor to former Minister of Transport José Luis Ábalos, implicates several government departments and autonomous communities, including the Canary Islands and Balearic Islands. Contracts worth approximately EUR 54 million were allegedly awarded to a private company without standard tender procedures, raising concerns about the misuse of public funds. The Spanish prosecutors have alleged that García and others had laundered money and engaged in bribery, with evidence pointing to kickbacks totalling millions of euros.
This scandal has shaken the PSOE, with Ábalos named as an intermediary in the scheme. Arrests have been made, but investigations continue into financial irregularities and alleged illegal financing linked to the plot. This case poses significant political challenges for Prime Minister Sánchez's administration. While, as at April 2025, the investigations are yet to be complete, Caso Koldo has undoubtedly severely damaged PSOE’s support and credibility. Former Minister Ábalos was suspended from the party after refusing to resign his parliamentary seat, though he denies wrongdoing. Caso Koldo has not only eroded trust in government institutions, but also exposed the systemic vulnerabilities in Spain’s public procurement processes, amplifying calls for reform and accountability.
Fast-growing GDP amid an evolving political landscape
Notwithstanding its political upheavals, Spain’s GDP has been steadily increasing since 2024. Official data from the National Statistics Institute (Instituto Nacional de Estadística) shows that the country’s economy grew by 3.2% in 2024 - almost five times the eurozone average of 0.9%. Spain significantly outperformed neighbouring countries such as France (1.1%), Italy (0.5%), and Germany (-0.2%). The growth forecast for 2025 stands at 2.6%, reflecting continued economic dynamism. This growth can be attributed to several factors, including immigration from Latin America and Morocco, which has reportedly helped address labour shortages in key sectors like agriculture, construction, and tourism. For example, according to the Labour Force Survey (Encuesta de Población Activa), 88% of new jobs in 2024 were filled by workers of foreign origin or dual nationality, compared to just 12% by Spanish nationals. Additionally, unemployment has fallen to its lowest level since 2007, further underscoring Spain’s economic recovery.
Spain’s economic growth has also been driven by a range of other factors, including a booming tourism industry, rising services and industrial exports to the European single market and beyond since 2021, the expansion of financial and technology businesses, and low energy costs thanks to the country’s growing renewable energy capacity (see below). Labour reforms and fiscal consolidations implemented by the centre-left coalition government have also played a key role, such as the steady increase in the minimum wage by over 50% since 2018, which has significantly boosted incomes for low-wage workers. Additionally, Spain’s broader economic growth has benefited from substantial EU support in recent years. The Recovery and Resilience Facility (RRF) has provided grants to fund crucial investment and reform measures as part of Spain’s post-COVID recovery plan. More recently, the European Investment Bank (EIB) has contributed EUR 12 billion to support growth through investments in energy, climate action, innovation, and housing.
Despite these successes, Spain continues to face challenges such as low productivity, an overdependence on the public sector, and persistently low wages. Tourism, while driving economic growth, has exacerbated housing shortages in major cities, leading to backlash against visitors, short-term rental platforms, and investment funds that displace locals to the outskirts. In response, Spain introduced stricter regulations for short-term rentals in early 2025 to address these issues.
Spain’s leadership in Europe’s Green Energy revolution
Since 2023, Spain has set new records in renewable energy generation, contributing significantly to Europe’s goal of achieving greater energy autonomy and climate neutrality by 2050. In 2024, the Spanish government approved nearly 300 renewable energy projects worth EUR 18 billion, aimed at increasing the country’s green energy capacity by over 28 gigawatts. These projects include solar power plants, wind farms, and a hydropower facility, reflecting Spain’s commitment to expanding its renewable infrastructure. Additionally, the EIB granted a EUR 1 billion loan to support investments in solar energy and onshore wind projects, as well as modernising existing facilities into hybrid renewable sites. This initiative is expected to add 2.3 gigawatts of capacity and generate enough green energy to power over 1.15 million homes annually, further solidifying Spain’s position as a leader in Europe’s energy transition.
In 2024, the Spanish government approved nearly 300 renewable energy projects worth EUR 18 billion, aimed at increasing the country’s green energy capacity by over 28 gigawatts.”
These solar energy and onshore wind projects align closely with Spain’s National Integrated Energy and Climate Plan (NECP) for 2023-2030, which sets ambitious targets for renewable energy to account for 48% of final energy consumption and 81% of electricity generation by 2030. Spain has also emerged as a leader in green hydrogen, accounting for 20% of all green hydrogen projects in the EU. This success is largely attributed to Spain’s strategic geographical position, abundant renewable resources, and advanced clean energy capabilities. However, achieving these ambitious goals will require overcoming significant challenges, including securing adequate financing mechanisms, establishing robust policy frameworks, fostering coordinated public-private partnerships, and addressing corruption risks to ensure transparency and accountability in the implementation of clean energy initiatives.
From 100% green to blackout: The risks of renewable power
On 22 April 2025, Spain’s national grid operator Red Eléctrica confirmed that renewable energy sources met 100% of the electricity demand across the country’s peninsular system, for the first time on a weekday. On that day, wind power generated 45.8% of the output; solar PV 27%; hydroelectric 23.1%, with solar thermal and other renewables making up the remainder. This milestone demonstrated Spain’s growing reliance on renewables. However, only six days later, on 28 April 2025, Spain and Portugal experienced one of the largest blackouts in European modern history, affecting nearly 60 million people. Some critics, particularly those associated with the opposition to the current government, quickly blamed the blackout on Spain’s high share of renewable energy, suggesting that the rapid reliance on renewable energy has made the grid vulnerable, claiming that the grid's stability can be affected by the intermittent nature of solar and wind energy. These claims were strongly refuted by both Red Eléctrica and government officials. As at time of writing, official investigations by the government and grid operators are ongoing to fully understand the complex technical failures behind the blackout.
Beyond the need to ensure that reliance on renewable energy can guarantee consistent supply of electricity, the coming years will also test Spain’s ability to overcome persistent challenges, especially as the outcomes of major corruption trials could reshape its political landscape and influence public trust. Even so, the ambitious targets set by the National Energy and Climate Plan, coupled with continued investment in renewables and clean energy, may allow Spain to not only fulfil its climate commitments but also place it as a European leader in the transition to green energy. More broadly, Spain’s economic performance remains a bright spot in the eurozone, underscoring its potential for continued growth and regional leadership.
