Greece Ranks Among the EU’s Top Economic Performers
Europe is undergoing a transformation that would have surprised many just a few years ago: countries once considered economically unstable and grouped under the ironic acronym PIGS (Portugal, Italy, Greece, Spain, and Ireland) have emerged as leaders of growth.
A decade ago, these nations were on the brink of collapse, yet today they are outperforming Germany and other major regional economies. Greece, Spain, and Portugal, once symbols of the eurozone’s debt crisis, are now growing more than three times faster than the eurozone average. Even Italy, while lagging behind, is showing steady progress.
Europe is now moving at two different speeds, and southern countries have become its driving force. Let’s explore how this shift happened and what investors can expect from the region’s new economic leaders.
Several key factors have contributed to the economic rise of Southern Europe:
These factors are shaping the economic resurgence of Southern Europe, positioning these nations as key players in the region's future growth.
The positive turnaround in Southern Europe is the result of a long and challenging recovery process. Greece, Spain, Italy, and Portugal had to rebuild after severe recessions. International bailout programs played a crucial role, though they came with strict austerity measures that were painful to implement. Despite these difficulties, these countries managed to restructure their finances, attract investors, revive exports, and reduce record-high unemployment rates.
According to data from the German journalist network RND, the average GDP growth across the 27 EU countries was just 0.4% in 2023. In contrast, Greece's economy grew by 2%, Portugal by 2.3%, and Spain by 2.5%. This was no one-off event; in the first quarter of 2024, Greece maintained its growth at 2.1%, while the eurozone average was 0.6%. Meanwhile, Germany, traditionally the growth engine of Europe, lagged behind, affected by rising energy prices.
How was this achieved? Bureaucratic hurdles were removed, and corporate taxes were lowered, which stimulated business growth. Labor market reforms simplified hiring and firing processes, while the use of temporary contracts was reduced.
Additionally, Southern Europe focused on expanding its service sector, particularly tourism, which has generated record revenues since the end of COVID-19 restrictions. In 2023, Greece, Spain, and Portugal welcomed a record number of tourists, and expert forecasts suggest that 2024 will continue this upward trend.
The Bank of Greece's data for the first half of this year confirms this: tourist numbers increased by 24.5%, and the amount spent by visitors grew by 28.2% compared to the same period in 2023.
The 2010s crisis had a severe impact on the real estate market, but today this sector is experiencing a strong recovery. The construction industry is rebounding, and property prices are rising, driven by the overall economic recovery and increased investments, including foreign capital.
A major factor in the recovery of these countries has been access to their share of the €800 billion Next Generation EU stimulus package, provided by the European Parliament to help economies bounce back from the pandemic. Greece, in particular, plans to make an early repayment of over €8 billion in loans this year, as the country's economy has regained its investment-grade rating for the first time in 13 years.
Southern European countries—Spain, Italy, Portugal, and Greece—are showing stronger recovery compared to their northern eurozone neighbors. The main drivers of this growth include rising tourism and wage increases, which have boosted consumer spending. Additionally, these countries have been less affected by the global slowdown in manufacturing and the surge in gas prices driven by the current geopolitical situation.
However, despite positive economic indicators, experts like Bank of Greece Governor Yannis Stournaras caution that not all problems have been resolved. Reforms, particularly in areas like justice and public administration, are starting to slow down.
Economists also warn that the recovery in Southern Europe isn’t a one-size-fits-all solution for all European economies. Challenges remain, including the long-term sustainability of economic growth, high levels of public debt, and structural employment issues.
Looking ahead, Southern European countries will need to strengthen their economic positions by continuing to grow tourism and consumer demand. However, for sustainable development, it will be essential to focus on structural reforms, attracting investments, and diversifying their economies.
On a positive note, these countries are making significant strides in digitalization and the transition to renewable energy, which could become key drivers of sustainable economic growth in the future.
Since the crisis, investment within the eurozone has remained low, with savings flowing out of the EU, weakening financial integration and risk-sharing. Economic convergence between older eurozone members has stalled since 2010, and income inequality and unemployment have increased.
Social issues driven by the crisis, globalization, digital changes, and rising migration have fueled anti-EU sentiment and distrust toward EU institutions. This has been exemplified by events like Brexit and the rise of populist movements. Nevertheless, the majority of eurozone citizens still view the euro positively and continue to trust European institutions.
One of the key risks for Southern European countries remains their heavy reliance on tourism. Protests against over-tourism in Spain, Portugal, and Greece signal that the sector is nearing its limits. Furthermore, climate change is becoming a serious threat not only to tourism but also to agriculture—both vital sectors of their economies.
Therefore, despite impressive economic growth, the future of these countries will depend on their ability to diversify their economies, adapt to climate change, and continue structural reforms.
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