Southern European countries still remember how during the worst moments of the great recession of 2008 the word PIGS became popular to refer to them (PIGS, which means “pigs” in English, is the acronym of Portugal, Italy, Greece and Spain in that language). The PIGS, a clearly pejorative term, were the economies that performed the worst during the crisis and that hampered the growth of the eurozone.. 15 years later, the group is experiencing a kind of revenge: they are managing to weather the pandemic crisis and the war in Ukraine better than their northern neighbors. Although the gap opened by the great recession still remains.

Eurozone GDP data in 2023, released on Tuesday by Eurostat, once again paints a flat encephalogram panorama. Euro countries have now gone 15 consecutive months without seeing anything resembling economic growth. After a third quarter in which the economy contracted 0.1%, the eurozone has miraculously and unexpectedly avoided technical recession: its GDP did not move in the final three months of the year.

Something that is especially striking when Germany and France, which make up 50% of the eurozone in economic terms, suffered contraction and stagnation respectively.. How is it possible that the eurozone has avoided going into negative territory with half of its GDP practically in the red? the answer is in the south. “The economies of southern Europe led growth and were the main reasons why a technical recession was avoided,” says Bert Colijn, chief economist at ING.. A diagnosis in which the Bloomberg news agency agrees. “[The eurozone] maintained its stable production, favored by the expansion of Spain and Italy,” they point out.

In the case of Spain, GDP increased by 0.6% in the last quarter of the year, while Italy grew by 0.2% and in Portugal it grew by 0.8%.. Figures that contrast with those of Germany (-0.3%), France (0%), Sweden (0.1%) or Austria (0.2%). What was observed in the final quarter of the year is part of a trend that has been observed since Russia invaded Ukraine in February 2022.. While the German economy has remained frozen in its pre-war dimension, the southern countries have managed to maintain dynamism.

Proof of this is that, compared to pre-pandemic records, the GDP level of Spain, Portugal, Italy or Greece exceeds that of northern economies such as Germany, the Netherlands or Austria and also that of France. The Spanish economy is now 9.8% larger than in the fourth quarter of 2019 (the last before the pandemic); Portugal's GDP is 10.8% higher, Italy's is 7.7% higher and Greece's (without data yet for the fourth quarter) is 8.6% higher than then.

In contrast, the German economy is only 2% larger than before the pandemic, Austria's GDP has grown by 4.6% since then, while Sweden's has grown by 6.7% and France's by 7.6%. Among the large northern economies, Belgium is one of the best performing, with a GDP level 8.1% higher than at the end of 2019.

The current situation radically contrasts with the panorama experienced during the great recession of 2008.. If we analyze how these same countries were doing four years after that date – the same ones that have passed since the pandemic until today – the image is the opposite.. In the first quarter of 2012, Germany, Sweden, Belgium, Austria and France had already recovered their pre-crisis GDP level and the Netherlands was only 1.4% below. On the other hand, the economies of Spain, Italy, Portugal, Spain and, above all, Greece, were still sinking.

Why is this time being different? Why are more productive countries with healthier public accounts coming out worse? The war in Ukraine and the different nature of the current crisis are the keys. The German case sheds a lot of light. Germany has been hit by a strong industrial crisis, aggravated by the sharp increase in the price of energy after the closure of the Russian gas tap. In addition, the country faces increasing competition from China, a regular client of the powerful German industry, which is changing its role towards a producer.. Consequently, the main muscle of the German nation has been weakened.

In contrast, the south—more dependent on the service sector and less on industry—has benefited from the full recovery of tourism and other high-contact services.. Furthermore, countries like Spain or Portugal depend much less on Russian gas, so the impact of the war has been much more modest.

The scars remain

Although this time it seems that it is the southern countries that are weathering the crisis better, the deep gap that opened between the south and the north during the great recession is still far from being closed.. If we take an arithmetic average of the GDP of the southern countries and the most representative economies of the north (Germany, Austria, Belgium, the Netherlands and Sweden), the differences are evident.

While the northern bloc currently has a GDP level 18% higher than in the first quarter of 2008, in the south it is barely 4.3% higher. However, the differences would predictably be reduced if the importance of each bloc is weighed (in the case of the south, the very serious collapse of Greece greatly conditions the results).