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AdOZEN YEARS GDPGDPBBVAGDPCATLGDPYour browser does not support the element. ago Spain was a byword for economic failure. The country’s government and banks appeared to be locked in a death spiral and depended on bail-outs. Young people were leaving the country or protesting at their lack of opportunities. Homes lay half-built and airports abandoned, relics of a burst construction bubble.How that has changed. By our reckoning, the country is on course to be the of 2024 across a range of measures including growth, inflation, unemployment, fiscal policy and the performance of the stockmarket. Both overall economic growth and the pace of job creation are running faster than in America, which has been the envy of the rich world.Greece and Ireland, which were also crisis-stricken a decade ago, have fared well in 2024, too. So has Denmark, where the economy has been boosted by the success of Novo Nordisk’s anti-obesity drugs. But it is Spain that offers the best rejoinder to those who say Europe is doomed to stagnation. Its economy is reaping the reward of past reforms. That offers lessons for the rest of the continent, but should also serve as a warning for Spanish policymakers today.One lesson is to focus on services and not fetishise manufacturing. Although industrial production has not fallen as fast in Spain as in Germany, partly thanks to lower energy costs, it has still stagnated. But tourism has bounced back from its pandemic low, and the , increasingly exporting consulting services and technological know-how as well as sun and sangría. Non-tourism services have risen from around 5.5% of before the pandemic to between 7-8% now, says , a bank.Another lesson is to stay open. Whereas young people once left Spain in search of opportunities, now they arrive instead. Since 2019 the country’s foreign-born workforce has risen by around 1.2m, mostly from Latin America. Many of these migrants are in low-paid, low-skilled employment, meaning that though the economy is 7% bigger than in 2019, it is only 3% bigger after adjusting for population growth. Yet that is still better than in countries such as Britain and Canada, which have seen similar immigration booms, but a decline in per person.Spain has also welcomed investment from Chinese firms. On December 10th Stellantis, a carmaker, and , a Chinese battery-maker, said they would build a new battery factory in Zaragoza. (Stellantis’s biggest shareholder, Exor, part-owns ’s parent company.) Chery International, a Chinese carmaker, has chosen Barcelona as the site for its first European manufacturing plant.Most important, Spain shows that structural reforms bring long-term rewards. Much of its recent success reflects decisions after the financial crisis to reform its banks and labour market. The financial sector has consolidated, and labour-market reforms have made it easier to renegotiate contracts and encouraged bosses to take on more permanent staff. A package of measures aiming to boost renewables, including abolishing the “sun tax” that levied additional fees on solar power, has helped green energy boom.Still, Spain must not rest easy. Tourism and immigration are bidding up house prices; investment and productivity growth remain elusive. An unwieldy and fragile coalition government is going in the wrong direction. It is unable to pass the further reforms needed to boost long-term growth, including in education and services. It is embracing fiddly regulations, driving up costs for businesses. It will need to find money to increase defence spending which, at just 1.3% of , is much too low.Spain shows that European economies can overcome seemingly insurmountable challenges. It must take care that it does not start to illustrate the danger of standing still.
