Vacationers aboard a vacationer boat go for a tour across the port of Mahon, the most important pure harbour in Europe, on the Balearic island of Menorca, on Could 30, 2024. (Photograph by JAIME REINA / AFP)
MADRID, Spain — Derided as “Membership Med” nations in the course of the European debt disaster 15 years in the past, the economies of Spain, Greece and Portugal are actually outperforming their northern friends because of a rebound in tourism.
The three nations needed to endure harsh austerity measures within the early 2010s imposed by their European Union companions, who have been fast accountable their fiscal laxity and lack of competitiveness for his or her financial woes.
However “the scenario has modified” for the reason that Covid-19 pandemic ended, mentioned Zsolt Darvas, an economist at Bruegel, a Brussels-based assume tank.
“At the moment, these nations are rising sooner than the European Union common, they’re now not seen as black sheep.”
Spain’s gross home product (GDP) expanded by 2.5 p.c final yr, whereas Portugal’s financial system grew by 2.3 p.c and Greece’s by 2 p.c.
That compares to progress of 0.4 p.c for the complete 27-member European Union, which was weighed down by Germany’s 0.3 p.c contraction, making it the world’s worst-performing main financial system in 2023.
The Worldwide Financial Fund expects the three nations to proceed to outperform this yr, though at a extra modest tempo.
It sees progress this yr of two.4 p.c in Spain, 1.7 p.c in Portugal and a pair of p.c in Greece.
Spain’s financial system is taking off “like a rocket”, Spanish Prime Minister Pedro Sanchez mentioned not too long ago. The nation is “the locomotive” of job creation within the EU, he added on Thursday.
‘Nice efforts’
Economists say this turnaround is basically as a result of a powerful rebound in tourism, which reached report ranges final yr following the lifting of pandemic journey restrictions.
The sector is vital for the three nations, accounting for nearly 25 p.c of Greece’s financial system, and 12 p.c in each Portugal and Spain.
The trio of countries are additionally benefiting from the EU’s huge pandemic restoration fund, whose mixture of grants and loans in alternate for structural reforms will largely go to southern nations.
Spain — the most important beneficiary of the fund after Italy — has up to now obtained 38 billion euros, Greece 15 billion euros and Portugal eight billion euros.
READ: Spanish GDP grew by sooner than anticipated 0.5% in second quarter
The three nations have additionally made “nice efforts to enhance their financial attractiveness” with structural reforms which have boosted their competitiveness and improved their labour markets, mentioned Darvas.
The reforms have helped draw international funding, particularly in renewable power and cloud computing.
Amazon’s cloud computing division AWS introduced final month it might make investments over 15 billion euros to increase its information centres in Spain.
Many automakers similar to Volkswagen and Stellantis, whose manufacturers embody Peugeot, Fiat and Jeep, have chosen to assemble their new electrical autos in Spain, Europe’s second largest car producer after Germany.
Challenges stay
The expansion spurt within the three nations, nonetheless, is partly catching up after the steep falls in GDP in the course of the monetary disaster. Greece’s GDP for instance plunged 25 p.c.
READ: Concern and impatience as Santorini awaits return of mass tourism
Economists warn they nonetheless face challenges.
Whereas they’ve all seen joblessness fall, the unemployment charge in Greece and Spain sits above 11 p.c, approach above the EU common of 5.9 p.c.
Former European financial and financial affairs commissioner Olli Rehn instructed AFP that “deficits and debt ranges stay giant in some instances” despite the fact that “divergences between euro space nations have decreased in comparison with 10 years in the past”.
Portugal swung to a price range surplus of 1.2 p.c of GDP final yr whereas Greece’s public deficit declined to 1.6 p.c in 2023 from 2.5 p.c within the earlier yr. The EU common is 3.5 p.c.
This has helped its 10-year borrowing charge to drop to three.5 p.c from 13 p.c in the course of the monetary disaster.
Your subscription couldn’t be saved. Please attempt once more.
Your subscription has been profitable.
Darvas mentioned the “convergence” of southerrn European nations with northern ones “is prone to proceed” however at a “slower tempo”. Spain, Portugal and Greece nonetheless have “work to do,” he added.
