Spain has transformed from a symbol of European economic fragility into the continent's fastest-growing major advanced economy, driven by strategic shifts in energy, exports, labor, and demographics, though this rapid growth presents significant challenges to the well-being of its citizens.
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If I asked you to picture the economic
engine of Europe, where does your mind
go? You probably think of the industrial
factories of Germany or maybe the
financial hubs of London or Paris. If I
asked you to picture the economy of
Spain, you might picture something very
different. You might picture tourism.
You might picture a waiter serving
sangria to a British retiree. Or if you
follow economic news, you might picture
high unemployment and slow, painful
bureaucracy. For the last 15 years,
Spain has been the poster child for
European fragility. But while no one was
looking, something changed. The script
flipped. In 2024, Spain was the fastest
growing major advanced economy in the
world. That's right. That is a true
fact. While Germany, the traditional
powerhouse of Europe, was actually
shrinking, posting negative growth, and
France was struggling to keep its head
above water, Spain's economy expanded by
3%. That was, by the way, five times the
average growth rate of the Euro zone,
which is also a little bit sad, but it's
good for Spain. To put that in
perspective, in the last year, Spain
created more jobs than France and
Germany combined. So, how did this
happen? How did the country historically
mocked as one of the pigs of Europe,
which is Portugal, Italy, Greece, and
Spain, suddenly become the continent's
star performer? Well, but to understand
this, what some are calling the Iberian
miracle, we have to take a look at some
of the massive pillars as to what's
happening in Spain and why to some
people this is not a miracle at all. So
now, you cannot run a modern economy
without cheap power. And this is where
Spain has pulled off a master stroke. So
when Russia invaded Ukraine in 2022, the
European economic model shattered,
Germany, which relied on cheap Russian
gas to power its factories, saw its
energy costs explode. Its heavy industry
became uncompetitive overnight. But
Spain, well, Spain is an energy island
in a sense. It has very few pipeline
connections to the rest of Europe, which
used to be a weakness, but suddenly
became a strength. Because they weren't
as dependent on Russian gas, and because
they have vast empty geography, Spain
went allin on renewables earlier and
harder than almost anyone else in the
world. Today, Spain generates over 50%
of its electricity from renewable
resources. In fact, solar and wind have
become so dominant that on certain sunny
days and certain windy days in 2024, the
price of electricity in the wholesale
market actually dropped to zero and
sometimes went negative, by the way. So,
while German factories were shutting
down because they couldn't afford
electric bills, Spanish businesses were
enjoying some of the lowest energy
prices in the world. And this is what
some economists call the Iberian
exception. It kind of acted like a
massive tax cut for the entire country,
lowering inflation and boosting
production while the rest of Europe was
suffocating. So we got energy prices.
But next we have the export
transformation. So there is a lazy
stereotype that Spain is just a vacation
colony for Northern Europe. I mean
everyone likes to go to Spain, right?
It's beautiful, it's sunny, they have
the islands, it's amazing. And sure,
tourism is huge because of this. We are
talking about a country that welcomed 85
million tourists last year. Nearly
double the population of the country.
But if you look at the data, the real
story isn't tourism. It's what experts
call high value services. So we are
seeing a boom in Spanish exports of
consulting, engineering, financial
services, and telecom. In the last 3
years, Spain's service exports excluding
tourism have grown by nearly 30%.
Spanish construction giants are building
infrastructure in the US and as I know
in Canada as well. Spanish banking
dominates large parts of Latin America
too. And for decades, Spain ran a trade
deficit, meaning it bought more from the
world than it sold. That is the sign of
a weak dependent economy. But recently,
Spain has been running a massive current
account surplus of over €50 billion,
meaning they are actually selling things
of high value to the rest of the world
compared to how they always have. Now, a
next pillar of their Iberian miracle is
a labor market fix, we'll call it. So,
for 40 years, Spain's Achilles heel was
its job market. It was a disaster. It
was famous for having a dual market. You
either had an untouchable permanent job
or you were stuck in a cycle of endless
temporary junk contracts that lasted 3 months.
months.
Looking at you, Canada. This meant young
people couldn't buy houses or plan for
the future, which killed domestic
spending. Now, in 2021, Spain passed a
controversial labor reform that
essentially banned most of those
temporary contracts. Critics said that
it would destroy jobs. The data says
that the opposite happened since the law
passed. The number of workers with
permanent contracts has skyrocketed by
millions. And so why does this matter
for the economy as a whole and the GDP?
Well, because of consumer confidence.
When you have a permanent job, a
permanent contract, you can get a
mortgage, you can buy a car, you can go
out for dinner on a Tuesday. As it turns
out, job security is good for an
economy. Who would have thought? Now,
domestic consumption, which is Spaniards
spending money in Spain, well, that has
also woken up because for the first time
in a generation, millions of workers
feel slightly more secure. There are
currently over 21 million people working
in Spain, which is the highest number in
the country's history. And now we're
going to talk about the last pillar of
the Iberian miracle, and that is the
controversial demographic surge. So,
finally, we have to talk about the sheer
number of people that have entered
Spain. See, while Italy, Germany, and
Eastern Europe are facing demographic
collapse with shrinking populations,
Spain's population is booming, which hit
a record 48 million people just
recently. So, it's not because of some
sort of baby boom. It's because of, as
we know, immigration. In the last 2
years alone, Spain added hundreds of
thousands of new workers to its labor
force, largely from Latin America. From
a purely economic standpoint, this has
been rocket fuel for the overall
economy. These immigrants, according to
the government, are filling labor
shortages and agriculture, construction,
and hospitality that are crippling a lot
of other countries. They are paying
social security taxes and keeping the
pension system alive. And so, these are
the four pillars. We will come back to
this shortly, but for the next part, I'd
like to talk about the specific parts of
Spain that are actually booming right
now. And and also to the question, is
this growth actually real? I mean, is
Spain actually building a European
superpower economy or is just this some
sort of post-pandemic sugar rush of an
economy? So, we have to take a look at
where the money is actually going. And
right now, the smart money, the billions
from Brussels, from Wall Street, from
Silicon Valley, they are betting that
Spain is about to become two things.
One, the battery of Europe, and two, the
cloud capital of the south. So for the
last century, Spain's geography was an
economic disadvantage. It was on the
periphery, far away from the industrial
heart of Germany and the markets of the
UK. It had no oil, no gas, and difficult
mountainous terrain. But in the 21st
century economy, that geography suddenly
became a gold mine. Spain has more solar
radiation than almost anywhere else in
Europe. It has vast empty spaces in the
interior, what locals call ispana
vasiada or empty Spain, perfect for
massive wind farms. The Spanish
government all of a sudden pivoted to
try to become a massive energy exporter.
During this time as well, they want to
replace Russia as the continent's gas
station, but with cleaner electricity
from renewables from the empty parts of
Spain. Now, the centerpiece of this plan
is something called H2 Med pipeline.
This is a multibillion euro project to
build a massive underwater pipeline
connecting Barcelona to Marseilles and
eventually into Germany. But it won't
carry gas. It will carry hydrogen. You
see, hydrogen is the holy grail of clean
energy. It's fuel made by splitting
water using renewable electricity. It's
incredibly energyintensive to make,
which means that you can only produce it
cheaply if you have dirt cheap solar and
wind power. Luckily, Spain has that and
Germany does not. The plan is for Spain
to produce millions of tons of this fuel
and pipe it north to run German heavy
industry. If it works, it fundamentally
changes the power dynamics of all of
Europe. Instead of Spain begging Germany
for bailouts, Germany relies on Spain
for power. Now, but this energy play is
also about luring in giant tech
companies. You see, we are living in the
age of AI. You see, AI runs on three
things. Chips, data centers, and the
hopes and dreams of large-scale
investors. Now, now two of those things
consume a large amount of electricity.
So, tech giants like Amazon, Microsoft,
and Google are currently scouring the
planet for places to build massive data
center regions where land is cheap and
power is cheap as well and renewable.
And guess where they landed? Let me tell
you, in 2024, Amazon Web Services
announced an investment of nearly€16
billion in the region of Aragon. Also,
Microsoft is quadrupling its investments
in Spain because Spain guaranteed them
green power at stable prices for the
next 20 years. And then there is the
party chip plan. By the way, the Spanish
government has thrown 12 billion of
public funds onto the table to attract
semiconductor factories. And this is a
little bit of a harder battle than the
other ones because competing with the US
and Taiwan is is tough for chips. So,
it's an uphill battle, but it signals an
ambition for wanting change in the
country. Spain's no longer going to be a
tourist country. It wants to be a
country that builds infrastructure for
its citizens. And so, what are some of
the experts saying on this giant change?
Well, the International Monetary Fund
and the Bank of Spain are projecting
that the country's unemployment rate
could drop below 11% in the next 2
years. Now, in the US or the UK, 11%
sounds like a catastrophe, like the
worst number ever, but you have to
understand the Spanish history. So,
Spain hasn't even had unemployment below
10% since the 2008 financial crisis. And
for a generation of Spaniards,
double-digit unemployment is just a fact
of life, kind of like gravity almost.
Breaking that psychological barrier
would be historic for the country. Now,
on top of that, Spain is currently the
biggest beneficiary of the European
Union's next generation EU funds. That's
160 billion euros of grants and loans
flowing into the Spanish economy to
digitize businesses and insulate homes.
Now, on paper, the future looks golden
for Spain. The GDP is up. The debt to
GDP ratio slowly coming down as the
economy grows. The factories of the
future are breaking ground in Aragon and
Valencia. And so, if you were an alien
looking at all of these charts, you
would say Spain is a booming success
story. But economies aren't just charts.
They are also people. And if you walk
the streets of Madrid or Maaga or the
Bolerica Islands, you won't hear people
celebrating the Iberian miracle. You
will hear frustration. You will hear
about rent prices that have doubled
recently. You will hear about crowded
hospitals and cultural tension because
this is the dark side of the boom. The
macro numbers look great, but as we have
seen, especially here in Canada, the
individual numbers may not be so good.
You see, right now there is a massive
disconnect in Spain. The country is
getting richer, but the people are not.
This brings us to the most uncomfortable
reality of the Spanish boom, and that is
the GDP illusion. Remember how we said
Spain's economy grew by roughly 3%.
Well, that sounds amazing for the
European Union. But Spain's population
also grew massively due to immigration.
When you divide that bigger economic pie
by a much larger number of people, the
slice per person doesn't really grow. In
fact, it barely grew at all in Spain. In
economic terms, GDP per capita has been
effectively stagnant. For the average
citizen, the boom feels less like a
miracle and more like a crowded room
where walls are sort of closing in. And
nowhere is this more felt than in the
Spanish housing market. So, Spain is
currently facing a housing crisis that
threatens to tear its social fabric
apart at this current second. In cities
like Madrid, Valencia, and the Bleric
Islands, rental prices have skyrocketed
by double digits in just the last 2
years alone. So, why? Well, it's because
the same success that boosted the GDP
has been cannibalizing the housing
market. So, first of all, you have
something like the digital nomad effect,
something that I have a a close heart
to. Wealthy remote workers from Northern
Europe and the US are flocking to Spain
for the lifestyle. They earn London or
New York salaries, but pay Spanish
rents. So for a local Spaniard earning
the an average salary of €1,300 to
€2,000 a month competing with a software
engineer from California for an
apartment, it's mathematically
impossible for them. Then you have the
Airbnb phenomenon, which I've been
paying attention to. So landlords have
realized that they can make three times
as much money renting to tourists for a
weekend than to a Spanish family for a
month or a year. Entire neighborhoods
and city centers are being hollowed out,
and they are becoming more like theme
parks for visitors and more devoid of
local life. In 2024, this came to a head
when tens of thousands of locals took to
the streets protesting against mass
tourism. We saw protesters spraying
tourists with water pistols while they
were eating dinner. And again, this is
not just for tourists. I mean, the
tension extends to the demographic boom
that we saw earlier that has been
praised by governments all around the
world. Yes, adding millions of
immigrants has saved the pension system
in Spain and filled labor shortages. But
social integration is also much harder
than economic integration. So, public
services, healthcare centers, schools,
and transport, they're all straining
under the sudden population spike.
Waiting lists for doctors are getting
longer, and classrooms are getting
fuller. You see, there's a growing
feeling of the middle class in Spain
that the benefits of this growth are
just going towards the elites. They are
getting the benefits of cheaper labor
for businesses, higher rents for
landlords. Meanwhile, the downsides of
this growth are Meanwhile, the downsides
are going to the middle class, which are
more crowded services, lower wages, and
cultural friction. And also keep in mind
that right now youth unemployment is
still around 27% in Spain which is
amongst the highest in the entire world.
And so this brings us back to our
original question. Will Spain become the
next superpower? And I think that
depends on what the definition of a
superpower is. If your definition of a
superpower is a country that has overall
economic growth, has growing influence
over its neighbors or on a a global
scale and is developing a lot more
industries internally, then then sure,
Spain is becoming the next superpower.
But if you view it as creating better
lives for the citizens within the
country, then Spain is surely not
becoming a superpower anytime soon. But
what do you think? Let me know in the
comments below. Make sure to check out
my documentaries playlist if you liked
this video because I have a lot of other
videos just like this on there. So,
please check out that playlist and I'll
see you guys in my next video in just a few
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