Spain has lost productivity since 2018 despite €100bn in EU funds

Spain has lost productivity since 2018 despite 100 billion euros in EU funds

The International Monetary Fund has once again flagged Spain as the exception: it is the only major eurozone economy losing productivity since 2018, while leading the rise in labour costs across the Eurozone. At the same time, Spain has received close to 100 billion euros in EU funds, much of it earmarked for digitalisation and technology. The result, according to the IMF's own data, is a country that bills more but produces the same per hour worked, with a GDP per capita that has not surpassed its 2007 peak.

GDP grows, GDP per capita does not

The headline macroeconomic figure keeps rising. Spanish GDP grows year after year, but it does so by adding population to the labour market, public spending, inflation, European money and debt. When that pie is divided among more diners, each person's slice gets thinner. Real per capita income went from 25,420 euros in 2019 to 25,620 in 2024, just 0.1% more in five years, and barely 4% above 2007. In purchasing power parity terms, Spain stood at 89% of the EU average in 2023, having reached 105% in 2006.

The Banco de España (Spain's central bank) calculated, using pre-2025 data, that real GDP was 3.7% above 2019 levels but GDP per inhabitant only 0.3%, seven times less than the eurozone average. BBVA Research estimated in 2024 that private consumption per inhabitant, adjusted for inflation, was still 2.3% below pre-elbichito levels. The IMF said in April that in 2025 Spanish per capita GDP grew at the same rate as the eurozone's, and forecasts 0.9% for Spain in 2026 versus 1.0% for the eurozone. At best, a tie.

Wages: 33,700 euros gross versus Germany's 53,751

Eurostat's cold figures for 2024, for full-time work, leave little room for interpretation. Spain pays 33,700 euros gross per year. The EU average is 39,800. France, 43,790. Germany, 53,751. Spain is 6,000 euros a year short of the European average and 20,000 short of Germany. Real wages have been stagnant for 25 years: people earn more in numbers, but buy the same as in the year 2000.

The trick lies in the presentation. Gross annual pay is quoted, and the average salary in 2024 is said to be 29,540 euros, which sounds like 2,400 a month. But that is over 14 payments, before deducting IRPF (Spanish income tax) or social security contributions. Half of employees earn less than 24,497 euros, which is the median. And the most common salary is 16,520 euros a year, about 1,180 euros a month. Official cumulative inflation since 2016 is around 30%, but the real basket —food, utilities, transport, insurance— has risen more. Electricity tripled at its peak, olive oil doubled, the basic shopping basket rose 40%. With collective agreement raises of 2-3% a year, the arithmetic does not add up.

Labour costs are rising faster than output per hour

Here lies the crux of the problem. Productivity and competitiveness are not the same thing. A country can produce little per hour and still export well if costs cooperate. The problem arises when labour costs rise faster than what each hour worked produces. Spain leads that rise in the Eurozone, according to the IMF, while losing productivity. That combination erodes competitiveness without the worker's net salary improving.

The SMI (Spain's statutory minimum wage) antiestéticatures in the conversation as a cornerstone. Some argue its rise has destroyed competitiveness, while others reply that the SMI is not what the company pays but what the worker receives. A calculation circulating among small business owners breaks it down as trinc: for an employee to take home 32,000 euros gross, the company pays out close to 50,000, of which some 18,000 go to the tax agency and social security. In hospitality, with three workers on the minimum wage, the fixed cost of keeping the premises open is around 8,100 euros a month without serving meals and 9,646 with a kitchen. The average operating profit of a business in Spain is 10%, and the net profit, 6%.

The time bomb of committed spending

The most uncomfortable analysis is not about the current year, but the coming decade. Committed spending has soared: 600,000 more public employees, 700,000 million euros more in debt, two million recipients of the IMV (minimum living income) and five million people with access to healthcare, social housing, education and school meal grants. None of that can be dismantled with a change of government. Debt is not repaid, it is refinanced. Public employees are not fired, they are frozen out and retire hoping whoever comes next will inherit the mess.

Some argue that this design is not an accident of governance but a deliberate architecture: every budget line creates an electoral census with a monthly payroll. Others respond that without that spending, social cohesion breaks down. In any case, the debate is not about the next budget, but about who pays the bill when it falls due.

The psychological factor and the labour force

There is an angle that almost never makes it into IMF reports: the disincentive. Some argue that if workers see the wealth they generate go to taxes, social contributions and transfers to those who do not produce, productivity falls on its own. Nobody needs to decree it. The question, put bluntly, is why bother if someone else takes the fruit of your effort.

On the other side of the balance is the composition of the labour force. Some argue that the mass influx of unskilled workers crushes wages at the bottom by the law of supply. According to a circulating calculation, 90% of job losses are due to automation and robotics, but as long as automating is more expensive than hiring, companies hire. And if the tax burden prevents investment in robotisation, the circle closes. The trap of the 50-employee threshold —beyond it, bureaucracy multiplies— completes the picture.

What can be done about Spanish productivity?

The remedies circulating are textbook ones: cut IRPF (income tax), raise VAT, unify legislation and cut red tape. The optimal effective tax rate sits, according to the Laffer curve, at around 16%. Beyond that, each additional point raises less revenue. The question is not whether Spain needs reforms, but whether any government is willing to pay the political cost of carrying them out.

With these per capita income gaps, convergence with Germany should be a national priority. It has not been for two decades. And the EU funds, which were supposed to be the shortcut, some argue, have been squandered on digital kits and assorted boondoggles. Time, meanwhile, keeps running.