The pain is not in Spain

It was not so long ago that many skeptics viewed Spain, like much of southern Europe, as a stagnant economy with muted prospects. This year, however, Spain’s IBEX 35 stock market index is up 53%. What’s changed?

From 2008 until 2014, Spain was hit hard by the Global Financial Crisis and turmoil in the country’s government bonds. In 2014, unemployment reached 27%. (For context, peak US unemployment in the Great Depression was 25%.) In response, Spain launched an austerity program and introduced new structural reforms to open up the markets and create a more vibrant, innovative private sector.

It’s not just the market that’s fared well lately—rather, the stock market reflects payoff from those reforms and strides made in the economy. In 2024, Spain accounted for 50% of all economic growth in the European Union. Let that sink in.

Since 2020, Spain’s economy has grown 8% while Germany’s gross domestic product has been flat. Spain borrows at lower rates than France does. The yield on 10-year Spanish debt is currently 3.11% versus 3.37% for France. Let that sink in, too.

Net migration into Spain has been a positive contributor to economic growth. Spain’s birth rate is low, and the government has embraced immigration as a source of growth. Since 2021, more than one million migrant workers, often from Latin America, have found jobs, reflecting 75% of the growth in the Spanish labor market. Unlike in the UK and other European countries, where an influx of immigrants has caused wages to stagnate, Spain has managed to increase both migration and real wages.

Post-Covid infrastructure aid from the EU has also proven a positive contributor to growth. For example, Spain is building a modern, high-speed rail system. Tourism has exploded in recent years, with a record 94 million people visiting in 2024, almost twice its population of 49 million people. Banking and financial services have achieved robust growth, as well. Spain has less exposure to US tariffs than some others in Europe—one less headwind than many of its EU peers.

One particular advantage is Spain’s access to lower-cost electricity, thanks partly to strength in renewables and partly to the country’s position as a hub for natural gas from Algeria. Spain is using this cost advantage to invest in building AI data centers. Lower electrical costs should help attract new sources of manufacturing over time.

Yet for all the good news, many Spaniards are not convinced. Housing costs have risen sharply, and tourism is overwhelming popular destinations, leading to protests from locals. Spain’s debt levels are still high, and the government struggles to pass any meaningful tax increases or spending cuts. Nonetheless, though there is more to do, Spain has come a long way. Taking all in all, we feel confident in the progress made.