AMID the drama of the past few months over a possible Grexit, it has been easy to overlook that other parts of southern Europe have been recovering—just as Greece itself would have done if politics had not got in the way. The revival of Spain’s economy is especially important because it is the fourth-biggest in the euro area and the one whose troubles seemed most likely to prompt a break-up of the single-currency club only three years ago. For some, the Spanish rebound is proof that structural reforms pay off. Yet so deep was the downturn that Spain is still far from regaining all the ground it lost. Moreover, it is not clear how much the recovery has to do with Spain’s vaunted policy shifts.
The Spanish economy has been growing for two years, following the extended double-dip recession in 2008-13 (see chart). The recovery was initially lacklustre but it picked up in the spring of 2014 and has sparkled particularly this year, with growth of 0.9% in the first quarter (an annualised rate of 3.8%) and 1% in the second quarter. Unemployment remains troublingly high, at 22.5% in June, but has fallen sharply from its peak of 26.3% in early...Continue reading
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