A bigger Spain, not a richer one

In May 2024, Pedro Sánchez announced that the Spanish economy “is no longer going like a motorbike, it is going like a rocket.” On the headline numbers he has a case. Spain grew 2.6% in 2025 while Germany barely moved. Since 2007, Spanish real GDP has expanded 18.7%, ahead of both Germany and the euro area.

But the average Spaniard is poorer relative to the average European than before the financial crisis. In 2007, Spain’s GDP per head stood at 104% of the EU average in purchasing power terms. Today it stands at 91.5%, below Italy.

Spain has outgrown its neighbours while its citizens have fallen behind them. This is not a paradox. It is the Spanish growth model.

Counting Heads

A country can grow in three ways. Its people can produce more and grow in number, which is the ideal case. They can produce more without growing in number, so each household is better off even if the country is no larger. Or they can grow in number without producing more, so the country expands and its citizens stand still. Spain has spent the past two decades in the third.

Since 2007, Spain’s population has risen 9.1%. That is almost double the euro area’s 4.7% and six times Germany’s 1.5%. In accounting terms, roughly half of Spanish growth over that period comes from having more people. Strip them out and GDP per head rose 8.7%, against 12.4% in the euro area and 15.7% in Germany. The rocket is mostly a larger crowd.

Japan is the mirror image. Its headline growth has been dismal for three decades, but because its population is shrinking, output per person has held up far better than the headlines suggest. Spain gets the flattering numerator. Japan gets the flattering denominator.

A larger workforce lifts output and the denominator at the same time. Whether residents end up richer depends on what each additional worker produces.

What Families Feel

GDP per head is still a national average. Closer to what a family actually feels is real household disposable income per head, and here the damage is starker. Spanish households sat below their 2010 income level for eight consecutive years, from 2011 to 2018. A Spaniard who started university in 2011 could have graduated, finished a master’s and taken a first job (quite possibly in Germany) before household incomes recovered. By the end of that run, German households were 11% above their 2010 level.

The recovery since has been genuine. Between 2019 and 2024, Spanish household income per head rose 5.9%. That is ahead of Germany at 4.0% and Italy at 4.3%, and level with France at 6.1%. Spaniards are getting richer again, at a normal European pace.

But a normal pace cannot close an abnormal hole. Fourteen years on, Spanish household income per head is up 8.2%, against 17.3% in Germany. The problem is not the direction of travel. It is the distance lost.

Working more, not better

Output per head can rise in two ways. Either more of the population works, or each hour worked produces more. Spain has done almost all of the first and almost none of the second.

Since 2015, employment per head of population has risen 14.6%, against 3.6% in Germany. Output per hour worked has risen just 3.2%, against 7.1% in Germany.

The trouble with this engine is that you can only put everyone to work once. The employment rate cannot rise forever. Once it plateaus, growth per head will converge on a productivity trend that has barely moved in a decade.

Is it the state?

Critics say Spanish growth is doped by public spending and debt. Defenders point to private jobs, record exports and a current account surplus. Both camps argue about how fast Spain grows, not about who benefits. On what drives the growth, the numbers side with the defenders.

Government consumption accounted for around 18% of Spain’s growth in 2025, against 25% in the euro area. Household consumption and investment alone contributed more than the entire growth rate. Of the 2.2 million jobs created since 2019, at most 27% came in public administration, education and health, a category that also counts private hospitals and schools.

One strand of the critique holds. A 2.4% deficit means debt still rises in euros. But most of that deficit is interest. Before interest, Spain’s budget is near balance, a stronger position than Germany’s or France’s (Spain spent the early 2010s on the receiving end of fiscal lectures from Berlin. It now runs a tighter primary budget than Berlin does). The debt ratio has fallen to 100.7% because growth outpaces the interest bill.

The defenders are also right on the external side, and their best fact is rarely quoted. Non-tourism services exports reached €120bn in 2025, up 76% from €68bn in 2019. They now exceed tourism receipts of €105bn. Spain no longer sells sunshine and buys everything else. It sells consulting, software and engineering.

The current account has been in surplus every year since 2012 and reached 3.2% of GDP in 2025. Before the crisis it ran a deficit near 10%. France now runs a deficit of 0.4% of GDP, and Italy a surplus of just 0.7%.

A sturdier launchpad

A country can repair its external balance, break export records and still watch its citizens slip eight points below the EU average. Spain has done exactly that over the last decade.

Its growth has been powered by people: more residents, and more of them in work. When that runs out, only productivity can carry it, and output per hour has risen 3.2% in ten years.

The repairs of the past fifteen years, an external surplus, an export base beyond tourism and a falling debt ratio, give Spain a sturdier platform than at any point since it joined the euro. The test now is whether policy turns to what lifts output per hour: investment per worker, firm scale and skills.

More people can make Spain bigger. Only higher output per hour will make it richer.