I'd personally have said the opposite, and put the country in which the issuing embassy was located.

As its usually only embassies who issue passports outside of a home country, the question would be pointless if all Spanish embassies were concidered as being in 'Spain'.

I would be surprised if it really mattered in this case though as I don't think Ryanair will notice anyhow, and I think it usually only becomes an issue when you are applying for visas to some countries.