Last year the 27 EU member states averaged 0.4% growth. “The German economy even contracted by 0.3%, […] while France and Italy have so far failed to show any convincing growth momentum,” writes the German National Network of Journalists (RND).
“The fact that the EU did not go into recession in 2023 is also due to the strong economic growth of the former crisis states. Last year Greece saw economic growth of 2%, Portugal 2.3% and Spain 2.5% – and this year the three states look set to have strong growth again. In the first quarter of 2024, for example, the Eurozone had an average growth rate of 0.6% according to Eurostat – in Greece GDP grew by 2.1%.”
Where is the growth coming from?
“There are many reasons why the economies of the countries of the European South are growing,” RND continues. “One reason is tourism: Portugal, Spain and Greece set records for holidaymakers last year and look set to break them again this year.
Because of their heavy reliance on tourism, the economies of the three countries experienced a significant downturn during the pandemic. That is why the strong growth now is also the result of the coronavirus years. The situation is similar in the real estate sector, which was severely hit during the 2010s and the euro crisis. Today the construction sector is growing and real estate prices are rising.
In addition, the NextGenerationEU recovery fund, created by the Union after the pandemic, is also contributing to the development of the southern states. In fact, the southern European states benefit from the funds and low-interest loans much more than the northern states – which is especially true for Greece, which receives more money from the fund than any other country in proportion to its economic output.”
Is the economic miracle of the South sustainable?
“But how sustainable is the economic miracle of the South?” the German network asks. “Although the debt crisis has forced Greece, Spain and Portugal to undertake numerous reforms, the three countries still have structural weaknesses.” Bank of Greece governor Yannis Stournaras “warned that he sees a fatigue in Greece regarding the implementation of reforms, adding that there is still much to be done, primarily in the justice and public administration sectors.”
Positive steps are being made in digitisation and the transition to green, renewable energy sources, “areas in which the countries of the South are making faster progress than many countries of the North. This is a good basis for sustainable economic growth.
However, there are risks, such as a heavy reliance on the tourism industry. In Spain, Portugal and Greece there have been many demonstrations against over-tourism – which shows that tourism growth is reaching its limits.”
Finally, added to this is climate change, which is expected to pose “an increasing challenge, not only for tourism, but also for agriculture, significantly affecting all three countries,” RND concludes.
