Spain offers more than just vacations and folklore. Economic growth is outpacing that of other major EU member states and the country is increasingly playing a unique economic and political role.
Women in traditional flamenco attire at a fair in Málaga, August.
Jesus Merida / Sopa / Imago
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In the years since the financial crisis and the end of the COVID-19 pandemic, Spain has made remarkable strides, emerging as a key player in the European Union.
Economic momentum
Not only is Spain home to the EU’s fourth-largest economy, but its growth outpaces that of other major member states. While Germany’s economy contracted by 0.3% last year, Spain registered a robust 2.7% increase – and a similar figure is anticipated this year.
Tourism remains Spain’s primary economic engine, contributing 13% to the country’s GDP. With 85 million visitors last year alone, Spain has shattered records and shows no signs of slowing down.
Unlike Italy, France or Germany, Spain’s industrial base is relatively modest, apart from regions like the Basque Country and Catalonia. However, the country has successfully pivoted to high-tech sectors, particularly renewable energy.
Spain’s historically low industrial output was once seen as a vulnerability, but in today’s geopolitically volatile trade environment, it has become a strength. The country maintains a balanced trade account, and its current account shows a surplus. Moreover, two of Europe’s 10 largest banks by market capitalization – Banco Santander and BBVA – are Spanish.
Spain has also shed the stigma of being part of «PIGS» (Portugal, Italy, Greece and Spain), a derogatory acronym used during the 2008 financial crisis. Those days are long gone. According to the Spanish newspaper El Economista, the country’s economic rebound is of near-epic proportions.
The challenge now lies in managing its still-high national debt. Yet, with rapid GDP growth, Spain’s debt burden has been reduced as a percentage of GDP, leaving it better positioned than France or Italy.
Green energy is fueling the country’s resilience
Patrick Artus, chief economist at wealth management company Natixis, urged his clients in March to invest in Spain over Germany, France or Italy. The Spanish stock market has since validated his advice. The country’s benchmark index has climbed 19% since the start of the year, thanks in part to Spain’s energy independence. With more than half its power derived from renewable sources, Spain is far less reliant on Russian natural gas than many of its European counterparts, leaving it better prepared to weather external shocks.
Unlike Germany, where subsidies for solar energy have strained public finances, Spain’s solar sector thrives without government support. Its low-cost electricity has attracted foreign giants like Blackstone and Amazon, which are establishing massive data centers in northern Spain. Adding to its competitive edge, wage growth in Spain has remained moderate, helping the country maintain its attractiveness as an investment destination.
Even the European Central Bank has praised Spain’s recent performance. In a recent speech addressing Europe’s broader economic stagnation, ECB Executive Board member Isabel Schnabel highlighted Spain’s stronger-than-expected growth, driven by a rebound in tourism and foreign trade. Over the past two and a half years, net exports have added an average of 0.4 percentage points to Spain’s annual GDP growth.
Strategic vision
Spain has only tapped €18 billion of the EU recovery fund established during the pandemic, leaving €60 billion available for disbursement through mid-2026.
The government plans to maintain expansionary fiscal policies to stimulate domestic consumption while ramping up its investment in green energy. By further developing its renewable energy infrastructure, Spain aims to position itself as a European energy hub, exporting green hydrogen to the continent.
With this strategy, the country is poised for above-average growth in the coming years. The International Monetary Fund projects Spain’s GDP will expand by over 2% next year.
A satisfied population
While strikes regularly disrupt economic life in Germany and France, Spain experiences only sporadic labor unrest, limited to sectors such as health care and administrative staff of schools and universities. According to the Ministry of Labor, just 280,000 workers – about 1.5% of the workforce – participated in strikes last year.
Much of this relative calm can be attributed to Prime Minister Pedro Sánchez’s socialist policies, which have struck a chord with many Spaniards. Buoyant tax revenues have allowed his government to roll out popular initiatives, including successive increases in the minimum wage, caps on gas prices, and subsidies for electricity bills. Public transportation is now almost entirely state-funded.
However, critics argue that Sánchez’s policies may be overreaching. Recently introduced rent controls in metropolitan areas risk further tightening an already strained housing market. Planned tax hikes on banks and energy companies have sparked backlash, with financial institutions warning that the measures could restrict lending.
A model of migrant integration
Spain’s population has grown by 3.6% since 2019, reaching 48.6 million in 2024. This increase of 1.7 million people is entirely driven by immigration, as the country’s birth rate remains one of the lowest in Europe. Yet, unlike in many other EU nations, immigrants in Spain face less resistance from locals.
One reason for this is Spain’s relatively low population density – 95 people per square kilometer, less than half that of Germany or Switzerland. Integration is also smoother because most migrants come from Latin America, sharing Spain’s language and cultural traditions.
Even with the migration crisis in the Canary Islands, where boats from Africa arrive daily, Sánchez has maintained a constructive stance on immigration. Many migrants come from Morocco, for example, to work as seasonal workers in agriculture, after which they leave the country again. Sánchez has suggested that this «circular migration» should also be open to other African countries. Under discussion is a limited right of residence for migrants from certain African countries.
Pointing to the fact that many of Spain’s older citizens were migrants themselves, Sánchez called on Spaniards to «be that welcoming, tolerant, supportive society that they would have liked to find.» His father worked as a guest laborer in Germany during the 1960s, and the parents of Justice Minister Félix Bolaños also spent years in Switzerland as migrant workers.
Spain’s rising influence in the EU
The EU, of which Spain has been a member only since 1986, benefits from the country’s unique relationship with Africa and Latin America. Spain is one of the main investors in countries such as Argentina, Chile and Mexico. In addition to close cultural ties, the country also has a strong presence in the banking and telecommunications sectors. In Africa, Spain has cultivated strong relationships with key transit countries for migrants from sub-Saharan Africa, notably Morocco, Senegal and Mauritania.
Spain has also cultivated close ties with many countries in the Middle East since the Franco era. The country is seeking to leverage these relationships by positioning itself as a mediator in the region’s conflicts The country boasts a history of diplomatic achievements, most notably at the Madrid peace conference in October 1991, where then-Prime Minister Felipe González managed to bring together Israel, Jordan, Syria, Lebanon, and Palestinian leader Yasir Arafat for negotiations.
However, the fact that Spain, along with Norway and Ireland, has officially recognized Palestine as a state, which has severely affected relations with Israel, complicates future mediation efforts. Nonetheless, Madrid hosted Arab, Turkish and European representatives to discuss a two-state solution in mid-September. Mahmoud Abbas, President of the Palestinian Authority, has already called for Madrid to be the venue for a new peace conference.
The future looks bright
Spain can afford to look to the future with optimism. The country is poised to maintain above-average growth rates compared with the EU in the coming years, defying some of the criticisms often leveled at it by observers, including The Economist.
The British newsmagazine has long painted Spain as a nation defined by its love of fiestas, administrative inefficiency and a weak industrial base. Yet the data tells a different story.
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Publish date : 2024-12-11 10:42:00
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