We refuse using euphemisms and we abuse slurs and swearing when talking about everything, we do not change it when talking about other ethnicities and we eat the 'racists' or 'insensitive'. We are not. I think you've been a victim of cultural impact. In fact, using euphemisms when talking about other races is seen as something dumb.

 If there is one ethnic group that is rejected by some people in Spain, it's the gypsy community. They mind their own bussines and do things their way, that leads to some racism. Some gypsies are racists towards 'payos' too, so lets not be naive about it. My opinion is that they are as Spaniard as anyone else, and they're a cultural pillar for some of our regions, I love some palos of flamenco and they are the best at it.

 Arabs here are well integrated. My sister was close friends with a Moroccan muslum girl, and I can tell she fitted very well. 2 cities of Spain, Ceuta and Melilla, are mostly muslim. Yes there are jihadists being detained in Spain, like everywhere else, but those are just a few shit-stains in an otherwhise law abiding community.

TL;DR: We talk shit about everything everytime, don't take it too seriously. Xenophobia and racism are not among our issues, they're not non-existent, as they should,