GDP, Italy on top of EU ranking with Spain, Greece and Portugal: is this the revenge of the former Pigs?

In the 1990s a rather derogatory term was coined to illustrate the disappointing economic performance of Mediterranean countries such as Portugal, Italy, Greece and Spain, the so-called 'Pigs'. Now we are witnessing the opposite phenomenon. As documented by the data released by the European Commission in its spring economic forecasts, it is no longer what used to be called the locomotive of Europe, Germany, that is driving growth in the Old Continent, but rather the group of countries considered in the common vulgate as the least virtuous, both from the point of view of growth and of the maintenance of public accounts. All countries that perform above the European average.

The good news is that, despite serious uncertainties in the international environment, recession has been avoided and GDP growth is now expected to be 1.0% in the EU and 0.8% in the eurozone in 2024. In 2025, GDP will accelerate to 1.6 % in the EU and 1.4 % in the eurozone. Encouraging signs, then, even if we are still dealing with growth rates that are fairly low on average, but which should nevertheless be viewed positively when set against the current scenario with two ongoing wars, and therefore with margins of uncertainty weighing on the immediate future.

With a growth rate of 0.9 per cent for the current year, Italy is performing better than the two main European economies (the government predicted 1 per cent in its April Defence Report). In Italy 'domestic demand supports growth', the European Commission reports in detail. "In 2023, real GDP grew by 0.9 per cent, driven by a vigorous expansion of capital expenditure. This was reflected in large tax credits for energy-efficient renovation of residential buildings, which continued to show their effects until the end of the year. Both household and government consumption expenditure increased by 1.2 %. Net exports made a positive contribution to growth, and trade in services continued to increase at a sustained pace. For these reasons, economic activity is expected to expand at the same pace as the previous year. The Commission's forecasts 'are in line with ours', commented Economy Minister Giancarlo Giorgetti. "Unfortunately, the negative effects of the Superbonus will weigh on the debt in the coming years. On the other hand, the European data on the debt/GDP ratio do not incorporate the effects of the most recent measures that will have positive effects on the accounts'. Moreover, much of the growth estimated this year depends on the full implementation of the NRP, and the game is still to be played, bearing in mind that the additional growth attributed to the Plan stands at 3.4 per cent in 2026, three decimals more than the 3.1 per cent indicated after the revision agreed at the European level last December.

Having overcome recession, Germany is slowly recovering. The former locomotive of Europe continues to suffer from the effects of the war in Ukraine on energy relations with Russia on the one hand, and trade disputes with China on the other. The European Commission forecasts that in 2024 the German economy will not grow more than a modest 0.1 per cent, while in 2025 it will grow by 1 per cent, the lowest level on the continent. Forecasts that seem to be in line with the estimates of the German Council of Economic Experts, which set the bar for growth in 2024 at 0.2 per cent, compared to the 0.7 per cent forecast last autumn. The development of the German economy is characterised by weak overall economic demand, according to President of the German Council of Economic Experts Monika Schnitzer. "Currently, households are still reluctant to consume, while industry and the construction sector register only a limited number of new orders," said Council member Martin Werding.

For France, the EU Commission expects growth of 0.7 % this year. The expectation is that in the first part of 2024 it will be the recovery of consumption that will provide the main contribution to the recovery of domestic demand. In particular, household consumption is expected to benefit from the increase in purchasing power in the first half of the year, thanks to falling inflation and wage increases in line with recorded inflation. Household and business investment, on the other hand, would still suffer from the high interest rate environment, pending the first cut by the European Central Bank expected in June.