Europe's Economic Laggards Have Become Its Leaders

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More than a decade after painful austerity, Greece, Portugal and Spain have been growing faster than traditional powerhouses like Germany.

Monastiraki Square is a huge tourist attraction in Athens. Tourism has helped bolster the economies of Greece and other southern European countries.Credit...Hilary Swift for The New York Times

Something extraordinary is happening to the European economy: Southern nations that nearly broke up the euro currency bloc during the financial crisis in 2012 are growing faster than Germany and other big countries that have long served as the region's growth engines.

The dynamic is bolstering the economic health of the region and keeping the eurozone from slipping too far. In a reversal of fortunes, the laggards have become leaders. Greece, Spain and Portugal grew in 2023 more than twice as fast as the eurozone average. Italy was not far behind.

Just over a decade ago, Southern Europe was the center of a eurozone debt crisis that threatened to pull apart the bloc of countries that use the euro. It has taken years to recover from deep national recessions and multibillion-dollar international bailouts with tough austerity programs. Since then, the same countries have worked to mend their finances, attracting investors, reviving growth and exports, and reversing record-high unemployment.

Now Germany, Europe's largest economy, is dragging down the region's fortunes. It has been struggling to pull itself out of a slump set off by soaring energy prices after Russia's invasion of Ukraine.

That was clear on Tuesday, when new data showed that economic output of the euro currency bloc grew 0.3 percent in the first quarter this year from the previous quarter, according to the European Union's statistics agency, Eurostat. The eurozone economy shrank by 0.1 percent in both the third and fourth quarters of last year, a technical recession.

Germany, which accounts for one-quarter of the bloc's economy, barely avoided a recession in the first quarter of 2024, growing 0.2 percent. Spain and Portugal expanded more than three times that pace, showing that Europe's economy continues to grow at two speeds.

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