German employment numbers were updated in this piece on August 24, 2023 to reflect second quarter data.
Southern Europe’s stronger economic recovery
The reasons for the Eurozone crisis and subsequent economic stagnation in Southern Europe are complex. However, the common economic narrative that Southern European countries were mismanaged is mostly untrue. While it is true that Southern European economies experienced a significant rise in private sector debt along with real estate bubbles, this was the consequence of capital flows coming from Northern Europe to the South. Moreover, the European Central Bank (ECB)’s one-size-fits-all monetary policy was probably too stimulative for Southern European economies in the run-up to the crisis, thus adding fuel to the fire.
In the aftermath of the Eurozone crash, austerity measures, demanded by surplus-running countries like Germany, deepened the downturn and contributed to years of economic stagnation.
However, the post-COVID economic recovery has now led to a reversal of fortunes. In general, Southern European economies are currently outperforming those of Northern Europe – Germany, in particular. We discussed Germany’s current economic malaise in a recent post.
While Southern Europe experienced a stronger initial GDP contraction in 2020, during the first year of the COVID pandemic, the bounce back has been stronger too. While Germany’s GDP has completely stagnated since the end of 2019, France, Portugal, and Greece are up by 2%, 4%, and 6%, respectively.
Moreover, International Monetary Fund (IMF) projections forecast that Southern Europe will continue to outperform the North in the coming years. Greece is expected to grow above 2% this year. Spain, Portugal, and France will see more than 1% growth this year and next.
Along with a faster recovery in economic output, Southern European countries are also leading the Eurozone in terms of employment growth. Total employment is up by almost 8% in Greece and 6% in France and Spain. Meanwhile, German employment is only up by a little over 1% since the end of 2019.
Germany’s private sector has seen zero job growth
The poor German perfo
