How Southern Europe's Economies Caught Up with the North
Duration
9:15
Captions
1
Language
EN
Published
Sep 15, 2025
Description
Sign up to Brilliant for free and you'll also get 20% off an annual premium subscription: https://brilliant.org/tldr/ In this video we’re going to look at why southern Europe is suddenly outperforming the economic powerhouses of the north, and whether this can last. 📰 Too Long: https://toolong.news/ 💡 Got a Topic Suggestion? - https://forms.gle/mahEFmsW1yGTNEYXA Our mission is to explain news and politics in an impartial, efficient, and accessible way, balancing import and interest while fostering independent thought. TLDR is a completely independent & privately owned media company that's not afraid to tackle the issues we think are most important. The channel is run by a small group of young people, with us hoping to pass on our enthusiasm for politics to other young people. We are primarily fan sourced with most of our funding coming from donations and ad revenue. No shady corporations, no one telling us what to say. We can't wait to grow further and help more people get informed. Help support us by subscribing, engaging and sharing. Thanks! References: Debt Crisis and Recovery https://economic-research.bnpparibas.com/html/en-US/Southern-Europe-recovery-public-accounts-5/11/2023,48560 https://economic-research.bnpparibas.com/pdf/en-US/Southern-Europe-potential-growth-11/29/2020,39584 https://www.ft.com/https://economic-research.bnpparibas.com/html/en-US/Southern-Europe-recovery-public-accounts-5/11/2023,48560content/134b686d-1fe9-4dff-90d7-acc257ed672a IMF GDP data https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/OEMDC/ADVEC/WEOWORLD/DEU/EUQ/EU/ROU Italy GDP https://tradingeconomics.com/italy/full-year-gdp-growth Spain GDP https://www.surinenglish.com/spain/the-economy-grew-2023-five-times-more-20240327090126-nt.html https://www.surinenglish.com/spain/the-economy-grew-2023-five-times-more-20240327090126-nt.html https://economy-finance.ec.europa.eu/economic-surveillance-eu-economies/spain/economic-forecast-spain_en https://tradingeconomics.com/spain/full-year-gdp-growth EU Fiscal Deficit https://www.bloomberg.com/news/articles/2025-06-04/eu-calls-out-one-third-of-members-for-breaking-its-fiscal-rules?embedded-checkout=true Germany and France economic woes https://www.euractiv.com/section/politics/news/germany-agonises-over-e200-billion-budget-hole/ https://www.cnbc.com/2025/09/04/italy-used-to-be-the-bad-boy-of-europe-now-its-france.html#:~:text=France's%20debt%20pile%20amounted%20to,was%205.8%25%20of%20its%20GDP. https://think.ing.com/articles/market-impact-of-french-political-turmoil/ EU recovery fund https://www.bloomberg.com/news/articles/2020-05-21/who-stands-to-benefit-most-from-the-eu-recovery-fund-plan-map https://www.reuters.com/world/europe/italy-spent-around-45-eu-covid-recovery-cash-received-so-far-report-shows-2024-02-22/ Tourism revenues https://www.lamoncloa.gob.es/lang/en/gobierno/news/paginas/2025/20250115-international-tourist-spending.aspx#:~:text=At%20a%20press%20conference%20held,more%20than%20the%20previous%20year. https://www.euronews.com/travel/2025/09/02/spains-tourism-hits-new-highs-why-shoulder-season-might-not-be-the-bargain-it-once-was
Captions (1)
For years, southern Europe was seen as
the Euro zone's weak spot. According to
most mainstream commentators, at least
in Northern Europe, Greece, Italy,
Spain, and Portugal were the problem
children, drowning in debt and deficits,
who would have to be bailed out by their
more responsible northern peers. Today,
however, the tables have turned. France
is in a deep budget crisis with talk of
an IMF bailout. The Netherlands and
Sweden are flirting with recession, as
is the EU's former industrial
powerhouse, Germany, which has been
grappling with a deep economic downturn
since 2019. On the other hand, southern
Europe has bounced back. Spain's growth
outpaced its larger Euro zone peers last
year. Italy's government has proven more
fiscally cautious and stable than
investors had anticipated. And Greece is
enjoying a years'sl long recovery from
the debt crisis that saw its credit
rating lifted to investment grade in
2023.
So in this video, we're going to look at
why southern Europe is suddenly
outperforming the economic powerhouses
of the north and whether this can last.
Never miss an episode and always feel in
the loop by subscribing and ringing the
bell. So, let's start with a bit of
context. Southern European countries
always had lower productivity and GDP
per capita than countries like Germany,
but the economic gap between Northern
and Southern Europe was amplified by the
Eurozone crisis. In short, in the 90s
and early 2000s, many southern European
countries racked up some pretty
significant debts. This problem had
something to do with the introduction of
the euro, which allowed southern
European Euro zone states to borrow at
significantly lower rates than had been
previously possible. Portugal's debt GDP
ratio, for instance, rose from 50% in
1999 to about 70% in 2007, while Greece
made little to no progress paying down
its debt burden, which remained around
100% of GDP for most of the 2000s. After
the Eurozone crisis, governments had to
engage in massive spending to keep their
economies afloat and their electorates
happy. Public debt shot up, especially
in southern Europe, reaching 130% of GDP
in Portugal, 100% in Spain, and as high
as 170% in Greece. As borrowing costs
rose and sovereign defaults loomed,
these countries appealed for help from
the EU and ECB. But more frugal northern
European economies made any bailouts
contingent on the implementation of
tough austerity measures.
Unsurprisingly, this sparked a heated
debate between the North and the South.
And this is when the meme about southern
Europe being spendth thrift slackers
really took hold in the discourse. In
the end, austerity won out, leading to
brutal public service cuts and years of
economic stagnation. Euroat data from
2016 shows that there was still a very
clear economic divide between the north
and south in the aftermath of the
crisis. Italy's situation is especially
noticeable. Whilst productivity was 9%
higher than the European average in
2005, it gradually shrunk over the
subsequent 15 years or so. Similarly,
Spanish productivity was roughly at the
European average before the crash, but
fell to about 6% below while remaining
well below the European average in
Greece and Portugal. However, in the
last few years, southern Europe's
economies seem to have recovered, and
their growth even outpaced that of the
North. Between 2017 and 2023, Southern
European economies outgrew Germany by
about 5%. And according to recent IMF
data, Southern Europe is expected to
continue outperforming throughout the
rest of this year and well above the
Eurozone growth average. The one
exception is Italy, which expected to
see a bit of a slowdown in 2025,
although we should note that comes off
the back of a remarkably impressive
post-pandemic recovery. Spain's economy
has particularly stood out from the
pack. Clever policies helped keep
inflation relatively low and in 2023 its
economy grew by 2 and a.5% five times
more than the Eurozone average. Strong
growth continued into 2024 and the
latest Euroat data forecast 2.6% growth
in 2025.
Greece's economy grew 2.3% last year and
is expected to grow by 2% this year. And
Portugal isn't doing too bad either. It
marginally beat its government forecast
last year, achieving 1.9% of GDP growth
and is expected to continue growing this
year. Southern European economies have
also been able to balance their books,
and most are meeting the EU's budget
rules, which require member states to
keep deficits below 3% of GDP. Spain,
for example, recorded a deficit of 3.2%
in 2024 and is expected to bring it down
to 2.8% this year. Italy has cut its
deficit to 3.4%. 4% nearly half of what
it was the year before. Meanwhile,
Greece, Cyprus, and Portugal have gone
one better by running budget surpluses,
putting them in the same camp as Ireland
and Denmark, the only other EU countries
to post surpluses last year. Meanwhile,
France, Europe's second largest economy,
is struggling to reign in spending. Its
deficit is 5.4% of GDP with debt above
110%, among the highest in the world.
Even Germany, once regarded as a bastion
of fiscal orthodoxy, is in a fiscal
pickle. Despite scrapping the debt break
to borrow more money, in late July,
Mertz announced that the country was
still looking at a roughly 170 billion
euro black hole in its budget through
2029, largely thanks to weaker than
expected tax revenues. This is why
Southern Europe's government bonds are
also performing well, a sign that
investors have faith in their economies.
Southern European borrowing costs are
now much closer to Germany's. And for
certain bonds, Spain and Italy now enjoy
lower borrowing costs than France. So
why is the South doing so well? Well,
there are a few reasons we can number.
The first reason is that austerity has,
in a very limited sense, worked. After
more than a decade of significant
structural reforms and austerity,
including spending cuts and tax
increases, southern European economies
have become more fiscally prudent than
they were pre208. The second thing to
note is the EU's 800 billion euro co
recovery fund which has predominantly
benefited southern countries with Italy
and Spain the first and second largest
beneficiaries of the fund. This has
allowed them to better manage their
heavy debt burdens and finance
structural reforms which have become
critical to developing their economies.
Italy is estimated that the EU funds
alone will boost their GDP by 3.4% by
2026. Third, in general, southern
European countries were also less
exposed to the withdrawal of Russian
gas, which meant they weren't too
affected by soaring energy costs and the
crisis that followed, which dampened
industrial output in northern economies.
Finally, southern Europe has been lifted
by a powerful rebound in tourism since
pandemic restrictions ended, which
accounts for a significant portion of
their total GDP, a trend that keeps
gathering pace. Spain, for example,
recorded a record 126.1 billion euros in
tourism revenue last year, and the
momentum hasn't slowed with revenue so
far this year already up 7.2% compared
with 2024.
Now, it's important not to overstate
these gains. Southern European countries
have endured a decade of stagnant
growth. Debt still remains high and
wages still lag behind northern
counterparts. But the recent turnaround
showed that fiscal discipline, reforms,
and EU support could be closing the
historic gap between North and South.
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