Great piece in today’s FT on the reversal of fortune in European economies. 

The Eurozone is experiencing a significant shift as the southern nations plus —Portugal, Italy, Ireland, Greece, and Spain—outperform their northern counterparts, particularly Germany, which faces economic stagnation. This reversal stems from targeted structural reforms, substantial EU investments, and favorable industry dynamics, including a reliance on tourism and green energy.

Southern countries have embraced the €800 billion EU-backed NextGenerationEU program, channeling funds into infrastructure, digital innovation, and green energy while undertaking necessary economic reforms. Tourism and renewable energy sectors have driven economic expansion, with Spain leading through substantial growth in foreign direct investments and renewable energy projects.

Despite the progress, challenges persist. Southern Europe grapples with high public debt, bureaucratic inertia, and workforce shortages. Germany’s industrial decline raises concerns about potential ripple effects, especially for nations reliant on German demand. Meanwhile, socioeconomic disparities linger, with Greece still recovering from its debt crisis and struggling with high poverty rates.

The sustainability of this growth hinges on continuing reforms, balancing structural weaknesses, and mitigating external shocks.