Spain grows faster than the Eurozone despite record debt levels

Spain grows faster than the Eurozone despite record debt levels

Is the Spanish economy truly outperforming its neighbors, or is this an illusion created by selective data? Recent narratives claim Spain has recovered its pre-pandemic GDP faster than the Eurozone average, with Germany in recession and much of the north stagnant. However, the other side of this accounting is less flattering: public debt exceeds €1.5 trillion, a historic high, and GDP per capita grows seven times slower than in the Eurozone, according to the Banco de España. The same country presents two incompatible pictures.

Why does Spain grow faster than the Eurozone?

The argument is easy to repeat but hard to dismantle without nuance: with the German engine sputtering, Spain has moved from passenger car to locomotive. The cited data point to annualized growth of 2.8% in the first quarter and consumption resilience visible in busy bars. Some call it a miracle; others prefer statistical revision or hospitality with terraces full of €3.50 beers.

Behind this strength lies an uncomfortable pattern. Growth relies on low value-added sectors, a working-age population increasing via migration, and unchecked public spending. Europe's champions in waiters, summarizes the most critical analysis. The question is not whether GDP rises, but how much of that GDP ends up in the disposable income of those who generate it.

Spanish GDP per capita grows seven times slower than in the Eurozone

Here is the data that breaks the narrative. The supervisor itself, the Banco de España, warns that GDP per capita has increased seven times less in Spain than in the Eurozone average. In plain terms: the economy grows, but the population grows at nearly the same rate, so the average citizen does not feel the splendor in their pocket.

The crude comparison does not favor optimism either. Nominal GDP per capita remains below 2008 levels, and today's euros are worth significantly less than those from fifteen years ago. It is also argued that GDP series are revised downward over time and that the INE has ceased to be a neutral arbiter. The detailed breakdown, item by item, is what needs careful reading.

What is Spain's unemployment rate compared to the OECD?

The short answer is uncomfortable: Spain has the highest unemployment in the entire OECD, with a rate comparable to economies like South Africa. The official figure is masked, according to the harshest analysis, by permanent temporary workers and those enrolled in courses to avoid being listed as job seekers. Under this lens, real unemployment could approach 30-35%.

The second disconcerting indicator is working hours. They are at their lowest since 2019 per employed person and have not recovered the 2000 level. Jobs are created, yes, but with fewer hours and less productivity. In the same quarter where record growth is claimed, the statistical package reflected the destruction of 140,000 jobs. Growth with less work inside: the squaring of the circle.

Who introduced the ERTEs that cushioned the pandemic?

They were not an invention of the current legislature. ERTEs (temporary layoff schemes) were launched in 2012, with Fátima Báñez heading Labor, and were the inherited instrument that allowed maintaining payrolls during the shutdown of activity. Acknowledging this does not change management, but it dismantles the appropriation of the invention.

The other invoked memory is that of 2008. Then, with José Luis Rodríguez Zapatero at La Moncloa, economic strength was claimed just before the collapse, and Spain ended up among the last to recover, paying for the holes in its own and foreign banks. Those who do not remember that, says the recurring irony, were still in high school.

The media narrative: good news that almost no one reads

Growth headlines are published in Expansión, elEconomista, El Mundo, or 20minutos, and yet a portion of the staff complains, failing to attract the audience they should. The counter-explanation is that these same media outlets dedicate more space to other issues and leave debt, unemployment, and working hours in the background. Each person chooses the scoreboard that suits them.

The disconcerting data

Spain took almost two years longer than the rest of Europe to recover its pre-pandemic GDP. This is also in the papers and does not quite fit the label of locomotive. The response from defenders of the official narrative is that these reports are already outdated and that the present is different. It may be. With debt at record highs, unemployment leading the OECD, and working hours not recovering since 2007, the locomotive driver would do well not to accelerate in the next curve.