Spain´s economic turnaround is now a reality, with GDP set to expand by 3.3 percent this year. Although unemployment remains high at 23.8 percent, the economy is nonetheless adding 25,000 new jobs a month.
The labor market reforms in Spain initiated in 2010 have made it easier for companies to lay off employees and to override the collective bargaining agreements forged with Spain’s powerful unions. Subsequent economic reforms have included tax breaks for companies and stimulus packages for SME’s. Altogether, the changes have put into motion a painful but necessary process that has recently begun to show fruit.
Although unemployment in Spain remains among Europe´s highest, at 23.8% in first quarter 2015, the Spanish job market is adding some 25,000 jobs per month, according to the National Statistics Institute. Meanwhile, economic growth since the country emerged from recession in September 2013 has exceeded the European average.
The Eurozone economy expanded 0.4 percent quarter-on-quarter in the first three months of 2015, according to the EU’s statistics office Eurostat, as the single currency bloc’s four largest economies all posted growth. Spain, the Eurozone’s fourth- largest economy after Germany, France and Italy, has led the way with an upturn of 0.9 percent. For the whole of 2014, Spain’s economy expanded 1.4%—the first year since 2008 in which there has been full-year growth. Even Germany, the economic engine of the single currency bloc, has failed to keep up with the pace of Spain’s turnaround. The International Monetary Fund now forecasts overall growth of 3.1 percent in Spain in 2015, while the government, even more optimistic, says GDP will expand by 3.3percent this year and 3 percent next year.
During 2015, the Eurozone has for the first time since early 2011 witnessed more rapid expansion than both the United States and the United Kingdom. Buoyed by lower oil prices and a weaker euro, international investors have once again been looking towards the Eurozone as a source of solid investment opportunity.
In large part, the brighter outlook in Spain can be attributed to flourishing business links with the United States. Spanish Secretary of State for Commerce Jaime García-Legaz noted recently that the United States remains Spain’s most important investor nation, while in terms of outward investment, the U.S. is Spain’s third-largest single market.
Coca-Cola announced early in 2015 that it expects to see growth in its Spanish operations for the first time in four years. Director General for Spain and Portugal Jorge Garduño said Spain is showing “clear signs of economic recovery.”
Meanwhile, two American online giants, Google and Amazon, have also bet heavily on the Spanish recovery. Search engine Google has set up an entrepreneurs’ campus in Madrid similar to ones in London, Tel Aviv and Seoul. Amazon, meanwhile, has chosen the Spanish capital as headquarters for its European business-to-business software arm, marking the first time the internet sales giant has inaugurated such a center outside the United States.
Consumer spending in Spain recovered in 2014, rising 0.9% in the last quarter of the year, and has been cited as the driver behind the country´s recovery. The European Commission has forecast an increase of 2.7% in Spanish consumer spending in 2015, one of the highest on the continent.
Prominent U.S. business leaders have been quick to praise the administration’s efforts to get the country back on track after a recession that briefly raised the specter of a full European bailout. The EC still has its concerns: public finances and health; the financial sector; the labor market, and SMEs and services have all had “need to improve” stamped on their report card. But in general, the outlook for Spain is considerably more encouraging than it was recently as 2013.
In the first few weeks of 2015, equity issuance surpassed the second half of the previous year, as airports administrator Aena held the largest IPO in Spain since 2011 and Santander, the Eurozone’s largest bank by market capitalization, sold 7.5 billion Euros in new shares.
John W. Snow, the former Secretary of the U.S. Treasury who now heads the investment giant Cerberus Capital Management, L.P., has described Spain’s economy as the best in Europe, and the one with the most promising trajectory.
While expectations for Spain as an investor haven continue to skyrocket, Jaime Bergaz of PricewaterhouseCoopers (PwC) sounded a note of optimism on the Eurozone’s most buoyant economy: “Spain will never be Greece.”