At the western end of the arterial Gran Via, Plaza de España is home to Franco-era architecture like the monstrous red and white Edificio España. The nearby Palacio Real (royal palace) was rebuilt in 1764 and is still used for state functions. It contains some wonderfully ornate rooms and is free on Wednesdays to EU citizens (take your passport). Admire the statues in the lovely Sabatini Gardens afterwards.
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