Spain Faces High Fiscal Deviation Risk Amid Eurozone Budget Challenges and Green Investment Commitments
Spain faces high fiscal deviation risk for 2025 amid budgetary uncertainties while committing over a quarter of EU green bond funds to sustainable projects.
- • Spain ranks among Eurozone countries with relatively high fiscal deviation risk for 2025, projected deficit target is 2.1% of GDP.
- • Parliamentary fragmentation since 2023 has prevented Spain from presenting an official budget to the European Commission.
- • Spain plans to invest €68.34 billion in sustainable projects via EU green bonds, comprising 25.9% of total NextGenerationEU green bond spending.
- • The European Commission's green bonds have raised €78.5 billion to finance recovery and resilience plans, with Spain playing a major role in implementation.
Key details
Spain is among the Eurozone countries with a relatively high risk of deviating from its fiscal targets in 2025, according to a report by Oxford Economics. The Spanish government has set a target deficit of 2.1% of GDP for next year, which Oxford Economics views as somewhat optimistic compared to their projection of 2.4%. This elevated risk is attributed to less fiscal consolidation than anticipated and the government's heavy reliance on continued strong GDP growth to improve the fiscal deficit.
The government’s difficulty in presenting a national budget since 2023, due to parliamentary fragmentation, adds uncertainty to Spain's fiscal outlook. Economist Rory Fennessy from Oxford Economics noted the balance between expected structural budget adjustments and potential dampening effects on economic growth could influence deviation risks. The report positions Spain just behind France, Latvia, and Malta in fiscal deviation risk, with low risk expected for Italy and some other Eurozone members.
Parallel to these fiscal challenges, Spain is significantly engaged in the European Union's sustainable investment programs through green bonds under the NextGenerationEU recovery fund framework. By December 2025, the EU had raised €78.5 billion via green bonds to finance recovery and resilience plans emphasizing green investments. Spain plans to invest €68.34 billion—25.9% of all EU green bond-funded spending—focused on projects such as alternative fuel infrastructure, SME energy efficiency improvements, rail digitalization, and enhancing cross-border transport networks.
Italy leads these green bond investments with €73.06 billion (27.8%), and together with Spain, these two nations account for over half of the total expected sustainable funding. While €64.89 billion of the green bond proceeds had been executed by August 2025, Spain reported €3.13 billion spent, ranking fifth among member states.
Spain’s notable role in sustainability projects intersects with its fiscal budget pressures, highlighting a complex economic landscape where ambitious green investments coincide with heightened fiscal deviation risks in an uncertain political environment.
This article was synthesized and translated from native language sources to provide English-speaking readers with local perspectives.
