Spain and Greece were for many years synonymous with crisis, unemployment, emigration and decline.
Now they have become the growth engines of the Eurozone.
Spain is expected to grow 2.9% this year, more than any other advanced economy and more than triple the average for Eurozone countries, while the Greek economy will record growth of around 2.3%, according to the IMF.
At the same time, Germany and France, the two largest economies in the European Union (EU), are fighting for the infamous title of “sick man of Europe”.
The German economy is expected to contract by 0.2% this year, while France, which is growing very little, will close 2024 with a large deficit in its public accounts equivalent to 6% of GDP, which has raised alarm bells.
The concern is such that on Monday, December 2 France’s borrowing costs exceeded those of Greece for the first time in history.
“The Greek economy is in very good shape. There is a rebound after a long crisis. There are a large number of important investments and the income left by tourists has also increased,” explains Vassilis Monastiriotis, professor of Political Economy at the European Institute of Economics at the London School of Economics (LSE).
However, Monastiriotis believes the growth could be better.
“What is happening in the rest of Europe, especially in Germany and France, is dragging down Greek growth,” adds the Greek economist.
For his part, Ruben Dewite, an economist at the Brussels-based think tank ING, states that since the end of the coronavirus crisis, Spain is one of the countries that has contributed the most to the economic growth of the Eurozone.
“In that sense, it can be said that both southern European nations have become locomotives of growth for the bloc,” he tells BBC Mundo.
Record after record after long crises
Spain and Greece were among the countries most affected by the Great Recession that hit the world economy in 2008.
A major economic crisis broke out in Spain that was accentuated by the explosion of a real estate bubble, while in Greece the crisis intensified in 2010 when the country revealed a very high deficit, was excluded from the bond markets and was forced to ask for emergency loans to the EU and the IMF.
Both events were part of the euro crisis that threatened to bring down the Eurozone.
The two countries managed to overcome their crises thanks to generous international bailouts and harsh austerity programs. They also introduced legislative changes to attract investment and generate economic growth.
But when the wounds left by the crisis were barely healing, the 2020 pandemic arrived.
Spain fell into recession again that year. Its enormous dependence on tourism caused its economy to contract by 11% in 2020, the largest collapse in 85 years and the largest within the EU.
The end of the pandemic unleashed a boom in the tourism sector, which gave a great boost to the economies of the southern European countries.
“When Spain opened up again at the end of the pandemic, the phenomenon of ‘revenge spending’ by consumers after the long period of confinement,” explains economist Ruben Dewitte.
“People wanted to go out, take vacations and spend money, and the Spanish economy has benefited from this.”
Since then, Spain continues to add records in tourism income and in the arrival of travelers.
In August, the number of international tourists who visited the country was close to 11 million, 7.3% more than in the same month of the previous year and higher than the figure for July.
This year the country is expected to exceed the 65 million international arrivalsanother record number.
Greece has seen a similar rebound.
According to a report by Insete, an NGO founded on the initiative of the Greek Tourism Confederation, international arrivals already exceed pre-pandemic levels.
Between January and August 2024, the country received more than 27.7 million visitors, an increase of almost 10% compared to the same period in 2023.
Increased confidence and investments
The economies of Spain, Greece and other southern European countries have also been benefiting from a large aid package of 750 billion euros ($789 billion dollars) approved by the European Union in 2020 to boost the bloc’s economic recovery after the pandemic.
In the case of Greece, confidence in the financial markets has returned, as has investments, says economist Vassilis Monastiriotis, from the LSE.
“Since the end of the sovereign debt crisis, there has been a lot of emphasis on policies to increase the population’s income, such as the increase in the minimum wage in 2019,” he explains.
According to Monastiriotis, this has given a great boost to the Greek economy and domestic demand.
“In addition, with the change of government in 2019 there was an increase in investor confidenceso investments in the country have increased,” he continues.
Several multinational companies such as Microsoft and Pfizer have made million-dollar investments in Greece in recent years.
“But the main boost to the economy has been given by tourism,” insists Monastiriotis.
Last year, 33 million people visited the country, a record number, according to the Bank of Greece.
According to the same source, the number of visitors had increased by 15.5% in the first half of 2024. This year it is expected to exceed 35 million.
In response to growing demand, several airlines have announced plans to increase the number of seats and flights available to Greece.
A large number of companies are also investing to increase and satisfy hotel demand of travelers.
But while politicians and the tourism industry celebrate these investments, many Greeks complain that an overabundance of tourists is overwhelming public services, creating water shortages and causing housing prices to skyrocket.
Katerina Kikilia, head of the Tourism Management department at the University of Western Attica in Athens, believes that in Greece there is already a problem of “overtourism”, especially in the summer months.
“Apart from the capital, there is also it on the famous Greek islands of Mykonos and Santorini, which already had this problem in 2019 or even before and now it has become intolerable for the locals,” he told the BBC in September this year. .
Excess tourism is also being felt in Spain. Last summer there were protests in cities such as Barcelona, Malaga and Palma de Mallorca against the massive arrival of visitors.
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The protesters denounced that tourists not only saturate public spaces but also drive up housing prices, as more and more apartments are used for vacation rentals, to the detriment of local residents.
Immigration and public spending
Apart from the contributions of the tourism sector and government spending that has increased sharply since the coronavirus crisis, another factor that has driven Spanish economic growth has been the increase in hourly productivity, facilitated in part by a sharp increase in immigration.
Spain received a net total of 727,005 immigrants in 2022, according to the National Institute of Statistics (INE).
Likewise, exports of professional services have skyrocketed.
“They have gone from representing around 6% of GDP to 7.5%. We have seen a strong increase in demand coming from Latin America and the United States, so it can be intuited that it is linked to services that are being offered in Spanish,” explains Miguel Cardoso, economist at BBVA Research.
Cardoso states that It is difficult for everyone to benefit equally of economic improvement and that this time migrants have been among those who have contributed the most and those who have benefited the most.
According to an analysis carried out by Fedea and BBVA Research, 90% of the workers who have joined the Spanish labor market in the last three years are immigrants.
The problem of inflation
Cardoso points out that a part of the Spanish population feels that, despite the good state of the economy, they have lost purchasing power due to the increase in inflation.
“They feel that they have the same job they had five years ago, that their salary has not grown with inflation and that they pay more and more taxes,” he says.
“Here in Spain, everyone is going to tell you the same thing: the food basket costs double or more than it did a few years ago, while salaries have barely risen”Samuel Rico, manager of the TSR Group, a freight transport and shipping company based in Madrid and A Coruña, tells BBC Mundo.
“I travel a lot and I feel that Spain is becoming more and more expensive. The prices here are already as high as in France and I feel that when I go to Germany a supermarket there is almost cheaper, but the difference is that German and French salaries are better than Spanish ones,” he adds.
“And for businessmen it is even worse. We pay more and more taxeswhich does not translate into the improvement of public services either. But it does cost more and more to hire someone.”
According to economists, in the current inflationary context, the benefits of the recovery will take time to reach the majority of the population.
And this will happen as long as growth continues in a sustained manner, they warn.
Sustainable growth?
For economists, the doubt remains as to whether the growth of Spain and Greece will be sustainable over time.
Ruben Dewitte predicts that the increase in Spanish GDP will lose speed.
“If we look at the factors that have contributed to Spain’s strong growth, tourism, public spending and immigration, they are factors that simply cannot continue to grow indefinitely in the long term,” the economist points out.
But he believes that there are two factors that could help: consumption and private investment.
For his part, Vassilis Monastiriotis considers that Greece’s fundamentals are good: “The debt is decreasing, so the expectation is that growth will continue above the European average in the coming years.”
But he admits that the Greek economy has a major structural problem and another productivity problem.
“The country depends on the export of a few products, such as oil, as well as the tourism sector.”
That is why he believes that the current growth not sustainable in the long term.
“The e “The long-term Greek economy has the great challenge of going through a transition towards diversification, creating more industries, more manufacturing and also more ecological production.”
Another challenge is unemployment in both countries.
Although it has fallen dramatically since the crisis, it is still around 11% in Spain and 9% in Greece, close to double the European Union average.
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