Spain’s growth is less than it seems

Spain is “the current superstar economy of the eurozone”, says Mehreen Khan in The Daily Telegraph. Four years ago it was “embroiled in one of the worst banking and house-price collapses” in the region. Now it’s the fastest-growing of the big eurozone economies: over the next two years, GDP is expected to expand by 3.2% and 2.5% respectively, according to the International Monetary Fund. But there may be less than there appears to be to this “growth miracle”.

Credit for the recovery is usually given to Prime Minister Mariano Rajoy’s policies: reforming the banking system, shaking up the labour market and lowering corporate taxes. But the government’s role in the recovery may have been exaggerated.

“Spain’s recovery has been helped hugely by external factors outside Rajoy’s control,” writes the FT. These include a weaker euro, which has helped to boost exports, as well as the decline in oil prices and the European Central Bank’s quantitative-easing policies. It’s far from clear that the domestic economy is back on a solid footing: unemployment is at 22%, the highest in the EU after Greece.

What’s more, Spain faces significant challenges to its political stability, says Richard Barley in The Wall Street Journal. In September, parties campaigning for the Catalonia region to become independent from the rest of the country won 48% of the vote in regional elections. Given that Catalonia accounts for one-fifth of GDP, “the fate of the region matters”. Investors should treat Spain with caution until these messy politics are resolved.