A Socialist government in Spain has emerged as Europe's fastest-growing economy, the EU's most outspoken voice against Israel, and the launch pad for both Chinese industry into Europe and European capital into Latin America. The continent's centre of gravity may have moved south

The European story for 2025 was meant to be German recovery, French recalibration and Italian consolidation. The European story for 2026 is none of those. It is Spain.

The numbers are by now hard to dismiss. According to Eurostat preliminary estimates released on 30 January, Spain's gross domestic product grew by 2.8% in 2025, against a eurozone average of 1.5%. The fourth quarter alone delivered 0.8% expansion, more than double the eurozone's 0.3%, and the strongest of any large EU economy. ING, in its January 2026 Spain outlook, observed that Spain's economy has grown 2.8 percentage points faster than the eurozone since the end of 2019. Goldman Sachs, in a July 2025 note by Spain economist Filippo Taddei, called this "the least appreciated structural change of the Spanish economy in our conversations with investors," pointing to a shift from tourism dependence towards finance, real estate, ICT and professional services as the new growth motor. The European Commission's autumn 2025 forecast pencils in 2.9% growth for 2025 and 2.3% for 2026. BBVA Research and CaixaBank Research, the two leading Spanish banks, both broadly concur. So does the IMF.

This is not, by historical standards, supposed to happen. Spain spent most of the post-2008 period as the weak link of the European south, a country that had to be rescued from its own banks and whose youth unemployment rate touched 50% in 2013. The reversal has been so sharp that, by the European Commission's reckoning, Spanish public debt will fall back below 100% of GDP in 2026 from a pandemic peak of 120%, and unemployment, at 9.9% in the fourth quarter of 2025, has dropped below double figures for the first time since 2008. None of this was forecast even three years ago.

The political instrument behind the turnaround, Pedro Sánchez's PSOE-Sumar minority coalition, has spent the same period collecting enemies abroad while quietly delivering at home. Sánchez has positioned himself as the most outspoken European leader on Israel's conduct in Gaza. On 8 September 2025, he announced nine measures to "stop the genocide in Gaza," including a permanent arms embargo, a ban on ships carrying military fuel for Israeli forces from docking in Spanish ports, denial of Spanish airspace to Israeli military flights, an embargo on goods from settlements in the West Bank, and an entry ban on individuals "directly involved in genocide, human rights violations and war crimes." On 8 October the Spanish parliament ratified the embargo into law by 178 votes to 169. Spain had already, in May 2024, become the first major Western European state to formally recognise Palestinian statehood, alongside Norway and Ireland. It was the first European country to seek to join South Africa's case against Israel at the International Court of Justice. Israel's foreign minister Gideon Saar denounced Sánchez's measures as "antisemitic"; Madrid responded that the charge was "false and slanderous."

The position is not free of cost. Spain's defence and dual-use export industries have lost significant Israeli contracts, and Madrid's relations with Washington under the Trump administration have visibly cooled. But the political economy of the move is what matters. By staking out the most morally legible position in Europe on Gaza, Sánchez has converted Spain into the natural diplomatic interlocutor for the Arab world, the African Union and, crucially, Latin America. His own foreign policy strategy document for 2025-2028, published by the Ministry of Foreign Affairs in Madrid, explicitly identifies the Mediterranean and Ibero-America as the two pillars of Spain's repositioning.

That repositioning has produced a quieter and more consequential opening. Spain has become the principal European entry point for Chinese industrial capital. CATL and Stellantis broke ground in November 2025 on a €4.1bn lithium-iron-phosphate gigafactory in Figueruelas near Zaragoza, slated for 50 GWh of annual battery output by the end of 2026. The plant will create more than 4,000 direct jobs and has secured over €298mn of EU NextGenerationEU funding. CATL is rotating in 2,000 Chinese workers to oversee construction. In the same complex, Stellantis-backed Leapmotor will begin Chinese-platform EV production in the second half of 2026. Chery has already started assembling vehicles at the former Nissan plant in the Free Trade Zone of Barcelona under its Ebro joint venture, the first car rolling off the line on 23 November 2025. SAIC's MG, the best-selling Chinese brand in Spain in 2025 with 45,163 vehicles registered, announced in April 2026 that it will build its first European EV factory on Spanish soil. In late April 2026 that FAW Group's luxury Hongqi brand is in advanced talks with Stellantis to produce vehicles at the same Zaragoza facility. Chinese-brand cars, on data published by Ara, accounted for over 11% of Spanish car sales in 2025, almost double the 6.64% of 2024.

The pattern is unmistakable, if not at all surprising. Sánchez's government, with the explicit support of the conservative opposition Partido Popular on the CATL project, has positioned Spain as the EU country most willing to host Chinese industrial investment effectively taking on the heft of northern VAG (Volkswagen) and Renault. The motive is straightforward for the Spaniards. Berlin, Paris and Rome have all hesitated, fearful of US and Chinese influence. Madrid has broken free of the EU monoculture by not having its own Brexit fiasco, sigh.

The result is a Spanish industrial base being rebuilt around Chinese battery and electric-vehicle technology, supported by EU funding, even as European tariffs on direct Chinese imports tighten. Whatever one's view of the strategy, it is working and supercharging the Spanish economy.

The Latin American opening is the other half. At the IV EU-CELAC summit in Santa Marta in November 2025, Sánchez was one of the very few European heads of government to attend. Merz, Macron, Meloni and Commission president Ursula von der Leyen all stayed away, citing scheduling conflicts that Euronews and other outlets attributed to discomfort with the Trump administration's escalating posture towards Venezuela. Sánchez went, alongside Portuguese prime minister Luis Montenegro and European Council president António Costa, and used the platform to push for Mercosur ratification before year-end and modernisation of the EU-Mexico agreement. Spain, on his own figures cited at the summit, is the largest single investor in Latin America, contributing €9.4bn to the EU's Global Gateway agenda for the region, of which €5.3bn has already been mobilised. The Wilson Center's analysis of EU-CELAC dynamics has noted that Spain's bilateral leadership, anchored in the shared Spanish language and historical ties, gives it a comparative advantage no other European state can match. It also supercharges the country with Spanish-speaking immigrants rather than non-productive retirees from northern Europe. 

The Mediterranean is the third front. Spain's December 2025 high-level meeting with Morocco in Madrid, the thirteenth such summit, formalised a deepening alignment with Rabat that has positioned Spain as the EU's primary southern Mediterranean broker. Sánchez has endorsed Morocco's Western Sahara autonomy plan, secured Moroccan cooperation on irregular migration into Ceuta and Melilla, and made the Spanish embassy in Rabat one of NATO's two designated Contact Points for the Southern Neighbourhood for 2025-2026. Algeria, on the analytical reading of Madrid-based Mohamed Benabdelkader, has been quietly relegated. The Foreign Action Strategy 2025-2028 names the Maghreb, the Mediterranean and Ibero-America, in that order, as Spain's external priorities. The Atlantic, where Washington still expects deference, does not feature in the same hierarchy.

What follows from all of this is the question of whether Europe has a new functional capital. Berlin is the EU's largest economy but is growing at 0.4% and is paralysed by coalition arithmetic. Paris is consumed by domestic politics. Rome has hitched itself to Washington in a fit of shortsightedness that already appears to be going sour. Britain continues to languish on the edge and has lost its voice due to poor Brexit negotiations. Madrid, in contrast, is growing at three times the eurozone rate, has the political coherence to make controversial foreign policy moves stick, and has, in Sánchez, a leader willing to occupy the diplomatic ground that other European capitals have vacated. The weather is also a damn site more pleasant most of the year. 

The wager that Sánchez is making is that Spain can be simultaneously a Mediterranean power, a Latin American hub and an Asian industrial gateway, while taking Europe's most independent and brave line on Israel's actions. None of those bets has yet failed despite complaints from Washington and Tel Aviv.

Maybe it is the language barrier, we generally only pay attention to what happens in our own language, the Spanish have been transforming themselves at a pace and most people have completely dropped the ball.  Whether Madrid is yet the new centre of gravity in Europe is debatable over a bottle of Sangria. That the centre of gravity is moving south, from the Rhine to the Manzanares, is now a serious consideration. Also, did we mention it's sunny, and Berlin is usually miserable and cold in winter?