BRUSSELS—Spain's efforts to rein in spending and improve its economic performance are running out of steam despite much work yet to do, the European Commission warned Wednesday in a report that also singled out Slovenia as a potential trouble spot.

"Spain should…maintain the reform momentum" to deal with "formidable challenges ahead," Commissioner for Economic and Monetary Affairs Olli Rehn said after presenting an annual health check of the competitiveness of several countries in the European Union.

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