Spain is the warmest country in Europe in January, too. This isn't just because it's home to the Canary Islands; the southern region (Andalucia) is usually very warm and sunny. I adore Spain in winter because not only are parts wonderfully sunny but you can also travel to its ski slopes relatively quickly.
Is Algarve cooler than Costa del Sol?
Not much difference in average temps in either location, though the algarve is more influenced by its proximity to atlantic weather systems than the costa del sols more sheltered med location.