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EU growth, the pigs’ revenge: Spain, Portugal, Italy and Greece are leading the economic recovery, but will this recovery last?

EU growth, the pigs’ revenge: Spain, Portugal, Italy and Greece are leading the economic recovery, but will this recovery last?

It is no longer the German locomotive that is driving the recovery in Europe, but in the Mediterranean economies, such as Portugal, Italy, Greece and Spain, for which the English-language business newspapers in the 1990s coined the abbreviation PIGS, the I originally standing for Ireland but soon… What was used to refer to Italy. The latest forecasts from the European Commission confirm a stronger appeal for those countries that for years were considered the sick people of Europe, and those that would have drowned the euro with their debt.

Italy’s growth for 2024 is confirmed at 0.9% and will rise to 1.1% in 2025. While Germany will grow only 0.1% this year and 1% in 2025, and France 0.7% and 1.3% next year. Spain, Greece and Portugal are working faster. Madrid’s GDP is estimated to grow by 2.1% this year, falling to 1.9% in 2025, Athens to grow by 2.2% in 2024 and 2.3% in 2025, and Lisbon by 1.7% this year and 1.9% in 2025. How can we explain this leap forward and above all, is it only cyclical or will it also have long-term effects?

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Because pigs grow more than others

“The reasons for recovery vary from one country to another. Portugal and Greece are the countries that underwent structural change. They have undertaken structural reforms that have significantly improved growth in the long term. Greece today has an agile and flexible economic system, has been growing faster than the European average for some time, and is the only country in the European Union that will not have to make any adjustments to its public finances, because although its debt is high, even if it is decreasing, it It has taken a stronger structural growth path than other countries. However, the recovery of Italy and Spain depends on Pnrr funds, of which the two countries are the main beneficiaries. Carlo Altomonti, professor of economic policy at Bocconi University in Milan, explains that Greece is the country that benefits more than all others from Next Generation EU money, even if only in per capita terms.

Will Italy’s recovery be long-term?

“For Italy, the good news is that if we do not make any mistakes, EU resources should continue to arrive in 2025 and 2026,” continues Altomonte. From an economic point of view, the data speaks clearly: we are growing more than France and Germany. “As a result of the National Reconstruction Plan and because we are a little bit more dependent on the United States, which has a very strong economy, while Berlin, in particular, is more dependent on China, which is not doing well at this point.” But the real question for Italy is : Will we continue to grow once the influence of the European money wears off? «If we look at long-term estimates, Germany and France will improve next year and then continue to grow while we, once the Pnrr is passed, risk returning towards the “zero point” trend if we do not implement the plan. “Reforms,” Bocconi’s economist highlights, “there are some structural issues that the Italian economy must solve in the next two or three years to restart potential growth.”

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Stability of public finances

“We must implement public administration and justice reforms and relaunch women and youth employment, which remains below the EU average. Failure to do so would jeopardize the stability of public finances,” Altomonte concludes. Public accounts already burdened by debt that will rise from 137.3% of GDP in 2023, to 138.6% in 2024, to 141.7% in 2025, also due to the superbonus effect which, as Altomonte reminds us, has “an incidence of two or three points.

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