This year seems very promising for southern European economies: for the first time in years, Greece, Spain and Italy have positive growth prospects, especially in comparison to other European countries. In fact, while France is expecting 1.1% GDP growth for this year, Germany is expected to close this year with a negative growth of -0.2%, in a similar fashion as last year (-0.3%). The reasons for the complicated situation of the German economy can be found, among other things, in excessive bureaucracy, the current geopolitical situation, energetic insecurity, and a lack of high-skilled labor, as reported by German finance minister Robert Habeck.
The biggest winner of this year seems to be Spain, with an expected growth rate of 2.7% in 2024 and 2.5 % in 2025. The reasons for the “Spanish miracle” are diverse: we are talking about a boom in the touristic sector, a demographic increase (mainly from Latin American immigration), low energy prices thanks to renewables, a swift implementation of European recovery funds, and targeted policies for improving the purchasing power of the most vulnerable.
As for Italy and Greece, the situation is still positive but more modest. As we had previously reported, Italy seems to be experience a quite a positive economic context right now, and the expectations are that of a growth rate of 1% for the end of the year and 1.1% for 2025. On the other hand, Greece is expecting growth of 2.2% and a severe reduction in public debt, signaling good news for the Hellenic country after more than a decade of severe crisis.
The Euro crisis and the austerity that followed seem to have disciplined southern European economies in resource management and implementing structural reforms. For Mediterranean countries to keep this momentum, policymakers must pay special attention to the reasons for their success and swiftly react to any dangerous signal given to them by their productive tissue, civil society or the financial markets.
Author: Luis Cabezas
Photo: Freepik