Weaknesses remain, but Spanish growth prospects aren’t bad

The Elcano Royal Institute is a think-tank for international and strategic studies that analyses world events and trends from a Spanish, European and global perspective.

The Elcano Royal Institute's Working Papers are longer documents of an academic nature - usually between 12,000 and 15,000 words long, with footnotes and bibliographies - on current international affairs of relevance to Spain or on different aspects of Spain's foreign policy and security.

Spain’s economic recovery, with output expected to grow by more than 3% this year and unemployment falling steadily, is generating a lot of attention across the Eurozone. The successful completion of the financial sector restructuring that followed the banking bail-out in 2012, the strong recovery of exports and the widespread narrative according to which Spain has done its homework and Spaniards are ‘the Germans of the South’ has made Spain the poster boy of reforms in Europe.

However, not everyone shares such an optimistic view. In a recent policy paper, Simon Tilford, deputy Director of the Centre for European Reform, a London-based think tank, argues that the recovery is not a result of austerity and reforms and that the economy’s outlook is cloudier than the dominant narrative suggests. High levels of debt and unemployment, deflationary risks, stubbornly low productivity and dangerous demographics all make the recovery weak. Moreover, argues Tilford, when the next recession hits Europe, Spain will not be well prepared to face it.