Franco's ancestors were Marranos, Spanish Jews who converted to Christianity to avoid expulsion. I'm not sure to what exten this was publicized in Spain or even if Hitler knew about it. Nor do we know if it was a factor in his policies toward the Jews.
I would also observe that by this time in the war it was clear Hitler had no resources to punish Spain.
That did become obvious. Surely if Hitler could have done something to Franco, he would have, because Franco was a real pain in the tuchus.
My boss, "Director of Hispanic Ministry," Dona Edra the Spanish Battleaxe, lived in Spain from 1960 to 2000. She thinks Gen. Franco was great.