Why is the Spanish economy performing so well?

 Whilst the UK, France and Germany are suffering weak GDP growth rates, Spain is experiencing a bit of a growth boom.

Why is that?

Having just returned from a road trip around France and Spain, I think I have some of the answers.

Fuel prices at the pumps in the UK are high but France is very high.  I was typically paying around EU2.2 per litre yet in Spain the rates were a surprising EU1.6 per litre  - significantly cheaper than the UK.

Germany has a large chemical industry sector which relies heavily on gas as an input material and lots of energy.  Ever since Merkel decided to turn off Germany's nuclear power following the Japan Fukushima disaster, Germany has been exposed to very volatile energy prices.  It is heavily reliant on Russian gas. Therefore the Germany chemical industry is suffering. 

Likewise there are reports that the UK's chemical industry could lose 250k jobs due to the very high cost of energy.  My daughter is qualified as a chemical engineer but due to the lack of jobs has ended up working in  bank. It looks likely our chemical industry could die during Labour's term in office.

France electricity is significantly cheaper than the UK. With plentiful nuclear energy and a large land mass for wind turbines, energy prices are not a barrier to commerce - unlike the UK.

One problem the UK is facing is Rachel's  job's tax and 2 huge inflation busting  increases in the minimum wage which employers are struggling to absorb.  The UK's minimum wage is now £12.71 per hour (EU14.70/hr).  Compare that with France EU12.02, Germany EU13.90/hr and Spain at just EU8.20.

When the minimum wage was introduced into the UK in 1999 it was £3.60 per hour.  Had that simply kept pace with inflation it would have risen to £8.50 whereas it is now £12.71. When it was introduced it was set at around 45% of median earnings.  With these inflation busting increases it is now 67% of median wage. This has removed the classic bell curve distribution of wages and skewed it so the bulk of the working population now earn the same wage. Or maybe it's cause and effect and the UK is little more than economy with low skilled jobs?

My suspicion is that's why Spain feels affordable and people were eating out, drinking and happy.

France by comparison is more subdued. Restaurants are struggling and the cost of living crisis seems to be hurting. 

So Britain's minimum wage, high energy prices and comparatively high fuel prices  seem to be reason why our performance is lacklustre compared to Spain.  Government policy is making the UK un-competitive in this global world.

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