The global turbulence highlights the need to deepen European integration as an engine of growth and strengthening the negotiating position of the European Union: this is what the statements of different European leaders say. But specifying measures that go beyond these promises is another type of task, and inertia is not good news for an economy as dependent on the European market as the Spanish one. At the moment, neither the Eurobond proposal conceptualized by Olivier Blanchard and Ángel Ubide, nor the financial union imagined by Brussels for more than a decade seem to gather the necessary consensus. Nor are there any major reforms in sight aimed at strengthening the single market, or the implementation of a community investment budget that is up to the task. Without news of the long-awaited integration drive, it seems difficult for the external engine of our growth to recover. The European Union is the main destination for Spanish exports, with 60% of the total, nearly ten points above the average of the other large economies in our environment. Given such a degree of dependence, and the massive entry of imports from China, it is not surprising that the foreign sector has lost its role in the current expansionary cycle.
The search for trade agreements with third countries is, therefore, a step that, of course, we must thank Brussels for. Negotiations have accelerated since Trump’s tariff offensive: agreements with Indonesia, Mexico and Mercosur are in the process of adoption or ratification; and the recently proclaimed entente with a demographic giant like India is in the parliamentary process phase. Progress is expected with other important actors, although not with North Africa, a very relevant area for Spain that already represents 5% of our total trade, that is, more than the sum of the countries with which the EU has strengthened its relations in recent times. In any case, historical experience shows that the real impact of trade agreements is not immediate. In the short term, the differential factor will come from the internal market, that is, from consumer spending and investment efforts made from within the country. And the difficulty is how to maintain its vigor when the main economies around us are stagnant (among other reasons, precisely due to European paralysis). Some cracks have already appeared, starting with inflation: the push of internal demand, together with the lack of competition in some market services sectors such as healthcare, result in an increase in the CPI higher than the average of the countries that share the single currency. Remunerations are trying to follow this upward path—the agreed salaries were adjusted by 3.5% in 2025, compared to the 2.8% of the European average—so that, although the purchasing power of households barely advances, competitiveness is fading. The trend does not pose imminent risks, thanks to the surplus position that the balance of payments maintains, but it does make it difficult to penetrate new markets with the capacity to take over from community languor. In principle, inflationary tensions can be mitigated thanks to investment, since this variable brings with it an expansion of productive capacity that by definition helps respond to demand through greater activity, and not by adjusting prices. But the progressive deterioration of competitiveness also affects investment, an aggregate that partly coincides with exports. However, the internal dynamics of consumption, construction and job creation that support Spanish growth are maintained. But the same impulse, happening in a faltering European environment, generates its own limitations. Further proof that, in an open economy, the expansionary cycle must be compatible with the external environment.
Prices
Prices continue to rise at a rate higher than the European average. In January the general CPI increased by 2.4% in harmonized terms, compared to 1.7% in the eurozone. The differential is similar in underlying terms, that is, excluding energy and fresh food, which are the most volatile components. Inflation should persist in the coming months, both in absolute terms and in comparison with the eurozone, due to pressures on costs in the food chain and strong demand in service sectors less exposed to competition. Raymond Torres is Director of Economics at Funcas. In X: @RaymondTorres_
