Given the low wages, hardworking people, no sense of entitlement why do you think the economy is doing so bad there? Seems like those are ingredients for a booming economy.
Spain has a several hundred year head start on America so they have taken the art of bureaucracy to a new level. They put so many roadblocks in your way it discourages entrepreneurs. If you hire someone other than a relative it's impossible to get rid of them if they fail to perform. Planning boards and government officials make investment nearly impossible. We have a development near us that would have been snatched up at pennies on the dollar and redeveloped in America but it's been sitting unfinished for over 10 years. And that's just one, there are thousands in our region, not to mention the rest of Spain.
Spain also has a large undereducated part of the population. Since our area was mainly agricultural it was only in the last 20 years that local children got educated past the third grade. You don't need much more than the basics to pick fruit. Their tradition of the siesta, the afternoon break, doesn't help things either. The Prime Minister mentioned trying to get rid of it and go to a normal work week last year but we haven't heard anything about it since.
Difficult to start/run a business (socialist countries are usually not business friendly)? Probably high taxes (goes along with socialist countries and to that extent, the U.S. is socialist)?