It seems federation is popular lately in Europe: Spain, Germany, Belgium,... Even UK, with Scotland, Wales and Northern Ireland. And in other countries, like France and Italy, regions are asking for such a transfer. Some countries already split, like Czhec replublic and Slovaquia. And Belgium probably soon.
In all those countries, there is some decentralization in process, more and more power and control is transfered to regions.
It is amazing when you think they are building Europe (or trying to, or saying they try to). Europe would maybe some day become a federation of countries, those countries being a federation of regions. So, Europe would be a federation of federations... A lot of paper work and wasted money.
But in the game, Spain is a country. At the time of WW2, Franco had enforced a full control on it, and was refusing any autonomy to the regions.