“The Spanish Exception”… How did Madrid achieve an economic boom supported by immigrants? | economy

In recent years, the Spanish economy has recorded a remarkable performance that has placed it among the fastest growing in Europe, in a transformation that came in contrast to the image that was long associated with the economies of the south of the continent after the 2008 crisis.

But Spain has reversed the usual image of southern Europe, and has provided exceptional economic performance during the last three years. It has been able to provide about a third of the jobs created in all European Union countries, and disposable income in Spain has increased at a rate three times the rate of increase in income in France, and eight times this rate in Germany.

Madrid has also succeeded in reducing rates of unemployment, poverty and social inequality to their lowest levels in nearly two decades, which prompted the British magazine “The Economist” to classify Spain in 2024 at the top of the world’s economies in terms of raising the standard of living of the population, which “Atlantic” magazine described as “the Spanish exception.”

This economic success helped the ruling Socialist Workers Party, led by Spanish Prime Minister Pedro Sanchez, to remain in power for 8 years, even as the popularity of left-wing parties declined in other European countries in favor of the populist right.

Difficult experience

During the global financial crisis in 2008, major sectors in Spain collapsed, the unemployment rate jumped to 27%, and the banking system entered into a vicious circle to the point that the Spanish government itself could no longer bear the cost of saving it, and it turned to the European Union to obtain an aid package to save its economy.

Hence, the current Spanish government has focused on avoiding a repeat of the 2008 crisis, Diego Rubio, director of Prime Minister Pedro Sanchez’s office, told The Atlantic.

Then came the Corona pandemic, which the Spanish government, like other European Union countries, tried to contain by paying workers’ salaries and providing generous aid to the business sector.

Acceptance of immigrants

Diego Rubio and his team faced a major problem after recovering from the Corona pandemic in 2020, which was a significant increase in demand with the influx of tourists again in large numbers to Spain, and the expansion of infrastructure projects, while Spain, which has one of the fastest aging societies in Europe, did not have a sufficient number of workers to keep up with this economic growth.

The government response, according to Rubio, was to broadly expand legal immigration channels.

But Rubio faced a dilemma with the rise of the anti-immigrant far-right in the Spanish political arena, at a time when Spain desperately needs immigration, and the solution was to strictly prevent African immigrants who cross the Mediterranean Sea by boat and enter the country illegally, which sparks widespread rejection in the Spanish street, and at the same time the Spanish government has significantly increased the less controversial forms of immigration, which is the entry of immigrants from Latin America into the country legally to work.

The Atlantic magazine points out that Spanish society is relatively tolerant towards immigrants from Latin America, who speak Spanish and share some cultural traits with Spanish society.

The government quickly provided expedited work permit procedures for immigrants in sectors experiencing labor shortages, simplified the process of submitting foreign work visa applications for employers, and made it easier for immigrants to settle in areas known as “empty Spain,” where the working-age population has declined significantly.

The result was that in the period from 2021 to 2023, more than 3 million immigrants entered Spain, recording the largest increase in the number of immigrants during 3 years in the country’s history, and compared to Spain’s population of 48 million people, this number is more than three times the size of the wave of immigration to the United States during the same period.

Rather than hurting native workers, the immigration boom appears to have helped them: unemployment among native Spaniards fell sharply, while incomes generally rose.

A report issued by the Bank of Spain indicates that a quarter of the increase in the country’s GDP per capita between 2022 and 2024 is due to immigrants.

In this context, Atlantic quoted William Chislett, a researcher at the Elcano Royal Institute in Madrid, as saying: “I have been writing about Spain for 50 years, and I have never seen its economy work like this before. I have no doubt that immigration is the most important factor.”

Support the poor

The Atlantic magazine report indicates that Spain has pursued a set of policies that left-wing parties may fear implementing as a result of criticism from the populist right. It has welcomed record numbers of immigrants, raised the minimum wage, and imposed controls on energy prices so as not to lower the standard of living of the majority of the population.

Spain’s leaders adopted a set of economic policies to support poor families. They raised the country’s minimum wage by about 30%, implemented new measures to protect workers that reduced the use of temporary contracts, and launched the country’s first program for a “minimum basic income” for poor families, amounting to the equivalent of about $1,900 per month.

Carlos Cuerbo, who is now Spain’s Deputy Prime Minister and Minister of Economy, helped lead Spain’s economic strategy that has achieved such success, according to Atlantic.

Cuerbo believes that one of the lessons learned from the 2008 crisis is that boosting the incomes of the poorest groups is the only sustainable way for the economy to grow. He adds: “When the rich get extra money, they tend to save it, which pushes asset prices up, but when the poor get extra money, they spend it, which creates all kinds of real economic activities.”

The second lesson of 2008, according to the magazine, was that inequality is a corrosive force that generates class resentments and populist anger. The austerity policies that Spain pursued during that crisis, such as freezing the minimum wage and reducing social spending, became fuel for populist movements.

Housing problem

But the housing crisis remains the most prominent economic challenge facing the Spanish government. The massive influx of immigrants after the Corona pandemic, in addition to the recovery of tourism and rising incomes, created a huge demand for housing, but Spain was building homes at that time at a rate slightly more than a tenth of the rate it was building before 2008.

With demand increasing dramatically amid tight supply, house prices rose by more than 50% between December 2020 and December 2025, more than doubling the increase in wages over the same period.

In almost all public opinion polls, housing has become the most important issue for Spanish voters.

Antonio Roldan, an economist at AE University in Madrid, told Atlantic magazine, “It is true that the government has taken many correct measures, but raising wages and providing aid does not solve the housing crisis, which is the obstacle that prevents people from reaching the middle class,” as he described it.