“Southern European countries take economic revenge”

PDuring the Eurozone crisis, they were given a particularly offensive acronym: “PIGS” for Portugal, Italy, Greece and Spain. They were students of poor economics who were looked down upon by the pro-Orthodoxy leaders in Germany. A layer of preconceived notions and clichés didn’t help during the tense negotiations of the various relief plans: these countries were notoriously full of lazy workers, corruption and inefficient bureaucracies.

Ten years later, the sick man of Europe is Germany, which is currently in recession. The countries of the South, which show surprisingly strong growth, are taking revenge. “pigs have wings”Written in November 2023 by BCA Research, an investment advisory firm. Between 2019 and 2023, including the period of the Covid-19 pandemic, Greece and Portugal recorded cumulative growth of almost 6%, Italy 3.5%, Spain 2.5%, France 1.5% and Germany… 0.7%.

Looking closer, the catch even started in 2017. According to the calculations of the economic research firm Capital Economics, these four peripheral countries experienced growth 5 points higher than Germany.

A sharp reduction in unemployment

Of course, this difference primarily reflects a sudden change in circumstances that would be very difficult to predict. The German model was based on two pillars: industry, dependent on cheap Russian gas, and exports. The war in Ukraine destroyed the first. The new Cold War between the United States and China has collapsed for the second time. As for the transition to electric cars, it shakes up one of the most important sectors of the country.

On the other hand, the countries of the South have been riding a strong wave of tourism, one of their main strengths, since the post-pandemic opening of their economies. The EU has also played an important role with the NextGenerationEU plan, with a combined loan of around €800 billion in 2021. If payments in Europe are very slow and should continue until 2026, they benefit primarily from peripheral countries, with Italy and Spain the two main beneficiaries.

However, the improvement goes deeper. The (violent and difficult) reforms of the labor market led to a sharp decrease in unemployment. In Spain, this has increased from 25% in 2014 to 11.5% today; in Italy from 13% to 7.5%; in Greece from 26.5% to 10%. Banks have also been cleaned, even in Italy, where concerns have long been repeated in this area.