Europe’s starting point is demanding. EU R&D expenditure remained at 2.2% of GDP in 2024, already below that of the United States and Japan—both at 3.4%—and China, which has outpaced Europe since 2020 with 2.6%. For Brussels, the problem is not only investing more, but transforming knowledge more effectively into business innovation, strategic technologies, and companies capable of scaling. It is precisely in this process of transformation that Spain continues to exhibit its main weaknesses.
R&D: real progress, persistent gap
Spain has increased its R&D expenditure to 1.5% of GDP in 2024, a notable improvement compared with previous years. However, the figure remains well below the European average—2.24%—and even further from the national target of 2.12%. The European Innovation Scoreboard classifies Spain as a moderate innovator, with a performance equivalent to 92.7% of the EU average.
The Commission identifies several factors behind this stagnation: insufficient momentum in private R&D investment, relatively low public investment, and inefficiencies in the instruments supporting business innovation. The most uncomfortable conclusion is that Spain still fails to translate its scientific excellence into commercial outcomes: the country generates knowledge, but struggles to convert it into competitive products, processes, and companies.
Knowledge transfer: the link that remains broken
One of the report’s most critical sections points to the structural weakness of the mechanisms for transferring knowledge between science and industry. Brussels acknowledges the recent reforms—the Science Law and the Organic Law on the University System—but considers that the current incentives are not sufficient to stimulate private R&D or to steer universities and public research organisations towards applied innovation.
The specific recommendations call for strengthening knowledge intermediaries, adjusting incentives in public research centres, and moving towards funding more closely linked to outcomes. The underlying message is clear: improving knowledge transfer is not an academic objective, but a prerequisite for increasing productivity and gaining access to higher value-added sectors.
Startups with momentum, scaleups without capital
The report acknowledges the dynamism of Spain’s early-stage entrepreneurial ecosystem, but highlights a structural weakness in the growth phase. Only between 15% and 20% of investors focus on companies in the scaling stage, making the transition from startup to scaleup the ecosystem’s main bottleneck.
This is compounded by an excessive dependence on bank financing and a venture capital market that remains underdeveloped. Brussels recommends promoting market-based financial instruments—including supplementary pension schemes that channel private savings into high-potential companies—and strengthening the connection between startups and capital markets.
Digitalisation, regulation, and energy: the other fronts
In digital connectivity, Spain ranks among the best-performing countries in the EU, with very high-capacity network coverage reaching 95.9% in 2025. However, the adoption of cloud services remains below the European average—38% compared with 47%—and digitalisation has not yet fully translated into productivity gains.
On the regulatory front, regulatory fragmentation between the autonomous communities continues to be a real barrier for companies operating across multiple regions. Régimen 20 has taken steps in the right direction, but Brussels considers the pace to be insufficient. In the energy sector, Spain is making progress in renewable energy, but the planned storage capacity for 2030—14.2 GW—still falls well short of the 22.5 GW target, while cross-border electricity interconnection stands at 3.11%, far below the required 15%.
In terms of human capital, the report reiterates the shortage of technical and STEM professionals and calls for more dual Vocational Education and Training, stronger labour market relevance in higher education, and adult learning programmes geared towards the green and digital transitions.
Compass’ Insight: Europe as a mirror, not a checklist
The European Semester tends to generate a predictable reaction in Spain: governments highlight the progress, the opposition emphasises the shortcomings, and the public debate consumes the report as political ammunition before its content has been properly digested. That dynamic is the greatest obstacle preventing the Country Report from fulfilling its real purpose. Because the value of the report does not lie in its recommendations—which Spain can accept or ignore with few immediate consequences—but in something much harder to replace: the obligation to compare itself rigorously with countries that started from similar conditions but made different choices. Without that external mirror, the domestic debate on innovation and competitiveness tends towards complacency or polarisation, but rarely towards genuine self-demand. A country that measures itself only against itself will always find reasons to believe it is doing well. The European Semester is not a judge. It is the only mechanism that reminds Spain, through shared data and a common methodology, how much distance remains between where it is and where it could be.
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