Bigger, not better

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

Yet Spaniards are poorer relative to Europe than they were 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. That is the defining feature of the Spanish growth model.

Counting Heads

A country can get richer in three ways. Its families can produce more and grow in number, 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%, 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.

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. 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%, 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 frustration is not with the direction of travel, it is with the distance lost.

The Productivity Gap

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%, ahead of Germany at 3.6%. But output per hour worked has risen just 3.2%, against 7.1% in Germany.

The problem is that 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 public spending the cause?

Critics say Spanish growth is doped by public spending and debt. Defenders cite private jobs, record exports and a current account surplus. Both argue about how fast Spain grows, not who benefits. On what drives it, 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 the deficit is interest. Before interest, Spain’s budget is near balance, a stronger position than Germany’s or France’s. 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, and 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, against a deficit near 10% before the crisis. France 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.

Spain’s growth has been powered by people, with 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.