The countries of southern Europe, synonymous with the eurozone crisis a decade ago, have become the region’s locomotives. Spain’s economy is expected to grow by 2.7% this year, and Greece by 2.2%. Portugal is slowing down but its pace remains above the eurozone average, estimated at 1.7% in 2024. Even Italy is no longer the problem country it once was. Yet, at the same time, the German economy has been stagnating for two years, while France’s gross domestic product (GDP) is struggling to grow by 1.1% this year.
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In part, this is simply a catch-up effect, after the collapse of the previous decade. Spanish unemployment, which had reached 27%, has largely bounced back but remains at 11%. Greece, which experienced a greater crisis than the US during the Great Depression of 1929, has not really recovered from the shock: Its economy remains 17% below the 2007 peak.
But the trend has completely reversed, with an improvement that began before the pandemic, and has accelerated since the end of lockdowns. The excellent health of tourism is one of the reasons for this. These countries are also reaping the rewards of the drastic remedy imposed during the years of austerity. The deregulation of labor markets in particular has reduced unemployment and improved the competitiveness of these economies.
In addition, European solidarity, which dates back to the pandemic, is a key factor. The southern countries are gradually receiving the money from the common loan of €750 billion agreed in 2020 (NextGenerationEU). Greece is about to receive its third installment, bringing the total to €17 billion, almost 7.5% of GDP. Italy is the big winner in absolute terms, having received its fifth payment in August, bringing the total to €112 billion, equivalent to just over 5% of its GDP. And these payments will continue as almost half of the allocation initially promised has yet to be disbursed.
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The Spanish economy was “moving like a motorcycle,” the head of government, Pedro Sanchez, liked to congratulate himself in 2023. At the time, economists considered this expression exaggerated, as part of the 2.5% growth recorded last year could be explained by a delayed catch-up, after the 11% drop in GDP during the pandemic.
In 2024, Sanchez swapped his favorite expression for another: The Spanish economy was now moving forward “like a rocket,” he said in May, all smiles. And even though economists had some reservations about the quality of the jobs created and the production model, and point to an unemployment rate that remained at around 11%, the evidence was clear. On September 26, the Spanish government announced that GDP was expected to jump by 2.7% in 2024, and by 2.4% in 2025. “Spain is the economic locomotive of the eurozone,” concluded Jesus Castillo, economist at Natixis, with growth expected to be limited to 0.8% in 2024 and 1.1% in 2025.
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Publish date : 2024-10-08 07:54:00
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