Occasional Papers. Perspectives on Iberian Economic Integration

Occasional Paper 2621, a joint paper by the Bank of Spain and the Bank of Portugal, assessing economic integration between Spain and Portugal across the four freedoms of the single market. It concludes that integration is considerable but very uneven: deep in goods and in the wholesale electricity market, limited in services, labour mobility and non-bank financial investment.

Key points

• The estimated implicit barriers are equivalent to tariffs of around 20% on manufactured goods and of more than 100% on services.
• Halving these bilateral barriers would raise GDP by around 0.1% in Spain and 0.4% in Portugal.
• Wholesale electricity prices coincide, with differences of less than €1/MWh, in approximately 95% of hours, thanks to the complementarity between Spanish solar power and Portuguese hydro and pumped storage.
• Mobility of workers and students is modest and asymmetric (more Portuguese moving to Spain than the other way round).
• It recommends strengthening effective enforcement of rules, regulatory cooperation, mutual recognition, infrastructure and administrative interoperability.

Who is affected

European economic policy analysis (single market, energy, capital markets); of interest to firms with Iberian business and to the debate on EU integration.

Plain-language version

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