The Spanish and Irish economies are growing strongly as both recover from severe downturns to become the fastest-growing countries in the eurozone, according to the latest data.
Both Spain and Ireland were among the European countries worst hit by the global financial crisis but have made strong recoveries as a prolonged period of austerity comes to an end and consumer and business confidence returns.
Overall, the economy grew 1 per cent in the three months to the end of June, up from 0.9 per cent in the first quarter, according to preliminary figures from INE, the national statistics bureau. Official data from Dublin, delayed due to a series of extensive revisions, showed that the Irish economy grew 1.4 per cent in the first quarter.Record spending by foreign tourists helped Spain to its fastest quarter of growth since 2007, while the Irish economy has returned to its pre-crisis size and grew at six times the pace of the wider eurozone.
Tourists injected €6.5bn into the Spanish economy in June, up 4.3 per cent on the previous year. Figures for the first half of the year were also a record at €28.3bn, up 7.4 per cent from the same period in 2014, helping the Spanish economy grow for an eighth consecutive quarter.
The International Monetary Fund expects Spain’s economy to grow 3.1 per cent this year and the Irish economy to expand by 4 per cent. Earlier this week the Irish central bank, one of the most cautious of official forecasters, raised its outlook for growth both this year and next to 4.1 and 4.2 per cent respectively.
“Normality is back,” said Danny McCoy, head of Ibec, the Irish employers’ lobby. Goodbody stockbrokers calculated that the Irish economy returned to its pre-crisis level in the third quarter of last year.
Staking his re-election hopes on the improving economy, Mariano Rajoy, prime minister, has repeatedly said that reform policies put in place by his party — the centre-right Partido Popular (PP) — have been responsible for Spain’s turnround and strong economic performance.The Spanish economy is expected to play a large role in the upcoming national elections, which are scheduled to be held before the end of the year.
Last week, the INE announced that Spain had created 411,000 jobs in the last quarter, the largest quarterly growth in employment since 2005. Unemployment fell from 23.8 per cent in the first quarter to 22.4 per cent in June.
But according to José Ignacio Conde-Ruiz, a professor of economics at the Universidad Complutense de Madrid, Spain’s current growth is heavily weighted towards increases in domestic consumption.
“Better would be slightly lower growth with more investment and less consumption,” said Mr Conde-Ruiz. “Because you can’t have growth based on domestic consumption for long [periods].”
Unemployment ranks as the most important issue among Spanish voters, according to a recent survey by the national polling service. Corruption and the economy were ranked second and third respectively in last month’s survey.
Spaniards’ view of the country’s economic outlook has improved, with 28.3 per cent saying the economy would be better a year from now, compared to 15 per cent two years ago.
But the recovery may be too late and too uneven to give Mr Rajoy’s party a majority, according to Pablo Simon, editor of the political blog Politikon and a professor of political science at Madrid’s Universidad Carlos III.
Javier Díaz-Giménez, professor of economics at the IESE Business School, said: “The Q2 quarterly growth number confirms the strong performance of the Spanish economy in the first semester [half]. But growing at that rate during the second part of the year is going to be harder. The coming elections have shifted upwards the level of uncertainty and many international investors have placed Spain in a wait-and-see mode.”