Blessing or Curse? The Rise of Tourism-Led Growth in Europe's Southern Periphery

Despite being one of the world's major internationally traded services, tourism remains neglected within debates on European integration and growth models. We highlight the rise of tourism-led growth in southern Europe and argue that the process of European integration has been a double-edged sword, simultaneously incentivizing and forcing southern European economies to reap their comparative advantage in tourism. While European integration has created the preconditions for the expansion of intra-European tourism, monetary integration pre-empts macroeconomic management. Since the eurozone crisis, internal devaluation and fiscal austerity have suppressed the domestic growth drivers, inducing these governments towards an export-led growth strategy. We document the emergence of unprecedented tourism-related current account surpluses in southern Europe, driven strongly by tourism imports from the EMU core countries and the UK. Thus, while different export-led growth strategies now coexist in the EMU, southern Europe's excessive reliance on international tourism for growth comes with severe pitfalls.