Spain Economy November 2026: Democrats Sweep US Midterms as Spain Heads for a Political Showdown

Democrats have won control of both chambers of the US Congress in a sweeping midterm victory that amounts to a rebuke of President Donald Trump and his economic agenda. The result gives Washington a divided government for the final two years of Trump's term, but it does not remove the president's power to shape trade policy, foreign relations or the war in Iran.

In Spain, Prime Minister Pedro Sánchez was quick to seize on the US midterm results ahead of Spain's November 29 general election, drawing a direct comparison between the two countries.

“Yesterday, American society voted against policies that only make people poorer. Against hatred. Against machismo. Against climate change denial and the privileges of the elites,” Sánchez wrote on X. “It happened in Brazil. It has just happened in the US. And it will happen soon in Spain.”

I recently had a discussion about how the US midterm results might influence Spain's elections with a “boomer” Spaniard. He grew up during the final years of Franco's dictatorship and describes himself as centre-left. Yet he was fairly matter-of-fact about expecting the opposition People's Party (PP) to win the election. After all, he reasoned, it's “their turn” to govern.

When I pressed him on which PP policies which PP policies he like (oh, how Anglo of me!), he simply threw back a classic phrase: “Spain is different!” And that was the end of it.

Perhaps, and rather frustratingly, he may be onto something that speaks volumes about how Spanish voters approach elections. While Sánchez can point to an economy growing faster than much of Europe, persistent inflation, housing costs and mounting frustration with public services are putting pressure on his government. Sánchez leads a minority coalition government, and voters facing financial pressures may be more inclined to give the opposition a chance than to strengthen the current government, hoping a change in leadership will improve their economic circumstances rather than focusing on the specific policies those parties are actually proposing.

Or, perhaps it's time to strike the expression ‘Spain is different’ from the Spanish foreign policy dictionary, as global politics increasingly converge. Whichever way it goes, when the US sneezes, Europe still catches a cold.

What the US midterms mean for Europe

The Democratic victory gives the party greater power to investigate the administration, block legislation and scrutinize Trump's policies. But it does not give Congress a veto-proof majority, and Trump remains president with significant authority over foreign policy and tariffs.

European governments will still have to negotiate with Washington over trade, regardless of the shift in congressional power. A weaker president could face greater domestic resistance, but that does not necessarily mean fewer tariff threats or a more predictable trade relationship. Congress can constrain some of Trump's ambitions, but it cannot simply take control of the executive branch's trade policy.

The implications extend well beyond tariffs, where the impact on Spain is limited (Spain’s total trade with the United States represented about 4.4% of GDP). The war involving Iran has pushed energy prices higher, adding to inflation across Europe and increasing pressure on households and businesses. Even if tensions ease, disrupted supply routes and uncertainty over energy shipments could keep prices elevated.

The conflict also complicates the European response to Russia's war in Ukraine. Uncertainty over the scale and continuity of US military and financial support has left European governments facing greater pressure to fund Ukraine's defense and expand their own military capabilities. A more supportive Congress could approve additional assistance, but it cannot guarantee that the Trump administration will deliver it.

The result leaves Europe in a difficult position: greater congressional scrutiny of the president, but no immediate end to the foreign policy and trade risks created by the White House. Those risks will continue to feed into energy costs, inflation, government budgets and business confidence.

Spain's economic growth faces inflation pressure

Spain's economy continued to outperform much of the eurozone in the third quarter. Gross domestic product rose 0.6% from the previous quarter and 2.7% from a year earlier, according to the National Statistics Institute (INE), up from annual growth of 2.6% in the second quarter.

Domestic demand accounted for almost all of the annual expansion, contributing 2.6 percentage points. Household consumption grew 3.1% from a year earlier, while public consumption rose 2.5%. Investment was less convincing: gross fixed capital formation increased 2.1%, a marked slowdown from the previous quarter. Exports rose 3.6%, while imports increased 3.9%.

The impressive macro figures give Sánchez a strong economic record to campaign on, but it does not tell the whole story for households facing higher rents, food bills and energy costs.

Spain's flash inflation rate held at 4.9% in October, unchanged from September, according to the INE. Lower increases in fuel prices helped contain the headline figure, while gas and liquid fuels pushed in the opposite direction. Core inflation, which excludes energy and unprocessed food, was 3.1%.

Across the eurozone, inflation accelerated to 4% in October from 3.8% the previous month, driven largely by energy prices. Energy inflation reached 20.8%, while the rate excluding energy, food, alcohol and tobacco was 2.5%. That suggests the latest jump is concentrated in energy, but prolonged high prices could eventually feed through to transport, production and other household expenses.

The European Central Bank held its deposit rate at 2.5% on Oct. 29. But the renewed energy shock has increased expectations of a rate increase before the end of the year, with some policymakers signaling that a December move could be necessary if inflation pressures persist. A higher rate would feed into borrowing costs, including mortgages and business loans.

Here’s how higher ECB rates affect your mortgage, savings, and loans.

ECB President Christine Lagarde has also announced that she will leave her post in February 2027, earlier than expected. Her departure is unlikely to change the immediate policy challenge: the Governing Council must weigh the risk of energy-driven inflation against the damage higher borrowing costs could do to an already uneven recovery.

Spain's labor market loses momentum

Spain added 73,600 jobs in the third quarter, taking total employment to 22.85 million, according to the INE's labor force survey. Employment was up 465,500 from a year earlier, but the number of unemployed people also rose, increasing by 95,900 to 2.59 million. The unemployment rate reached 10.18%, up from the previous quarter.

The quarterly figures point to a less even recovery than the headline employment total suggests. Services added 235,600 jobs, while agriculture, industry and construction all shed workers. Public employment increased by 89,900, while private employment fell by 16,300. Self-employment also declined.

CaixaBank Research noted that annual employment growth had slowed to 2.1%, below its forecast of 2.8%. The slowdown was concentrated in non-salaried work: salaried employment increased by 568,000 over the year, while non-salaried employment fell by 102,000.

The labor market remains a source of strength for the Spanish economy, but rising unemployment alongside continued job creation points to a recovery that is not reaching every part of the workforce.

For voters, the number of jobs matters; so do job security and whether wages keep pace with the cost of living. With elections approaching, the government is also looking to put more money in workers' pockets, proposing a 5.3% increase in the minimum wage to €1,286 a month from January 2027, up from €1,221.

Housing crisis and Urda train disaster fuel public anger

Housing has become one of the defining issues of Sánchez's campaign, with protests continuing despite the government's approval of a decree intended to extend some rental contracts, limit rent increases and curb speculative practices. Housing organizations argue that regulation alone will not resolve a shortage of affordable homes or address the role of investment and speculation in pushing prices beyond the reach of many residents.

The encampment in Madrid's Puerta del Sol began in September after the eviction of 87-year-old Maricarmen Abascal and helped spark demonstrations across the country. Police cleared the remaining encampment on Nov. 3, but the wider housing movement has continued to press its demands. A nationwide strike called by unions and housing organizations has also brought together concerns over rents, wages and purchasing power.

The housing debate has increasingly focused on whether homes are being treated primarily as financial assets rather than places to live. That criticism cuts across the government's measures and raises a broader question about whether public policy can make housing affordable without addressing the incentives driving investment and property prices.

The deadly train collision near Urda, in Toledo, has torn open another front for the government. The Oct. 28 disaster, involving a Renfe train and a stationary Iryo service, killed 69 people and injured around 200. Transport Minister Óscar Puente resigned on Nov. 3, following the crash and January's Adamuz accident, which killed 46 people. Railway workers have since raised concerns about safety and working conditions, with unions threatening industrial action. The cause of the Urda collision remains under investigation.

The tragedy has also reignited debate over the liberalization of Spain's passenger rail market. Mariano Rajoy's (PP) government approved the opening of the market to competition, allowing private operators to enter a network whose infrastructure remains publicly managed. Private companies have since expanded their presence in high-speed passenger services under the Sánchez (PSOE) government.

Javier Barrio, whose wife was among those killed in the crash, blamed “capitalists who want to make money as quickly as possible” as the ultimate cause of the railway tragedy.

While that does not establish that privatization caused the collision, it has brought the government's management of essential infrastructure under renewed scrutiny, at a time when voters are already questioning whether public services are keeping pace with the country's economic growth.

Spain's 2026 election will come down to household finances

Sánchez is heading into the election with an economy growing faster than much of Europe, employment near record levels and a government that has made housing affordability a central policy priority. But GDP figures alone do not capture the pressures facing households. Rent, mortgage payments, energy bills and the reliability of public services will shape how voters assess his record.

The Democrats' victory in the US is a reminder of the old political adage: “It's the economy, stupid.” But the focus is less on the macroeconomic picture than on what people can afford—a home, a tank of gas or the monthly bills.

The reckoning for Sánchez and the Socialist Party is whether voters will give them more time —and the parliamentary strength to pursue their housing and infrastructure promises— or decide that eight years in government are enough and give the PP its turn. That choice comes with an elephant in the room: how much ground would the PP have to concede to far-right Vox to secure a governing majority, and what would that mean for the policies it could pursue?

PS. And in other slightly unsettling news, human extinction is now also on the table. Here's why (yes, it's AI-related).