Abstract
Competitiveness in Spain has deteriorated dramatically over the past decade driven mainly by a decrease in labour productivity. Since the onset of the current crisis, however, there were some signs of recovery in labour productivity, which accompanied by well design policies could lead to a sustainable improvement in competitiveness. The purpose of this paper is to shed light on the main factors that lead to the deterioration in Spain’s competitiveness and describe some of the recent developments that lead us to believe that there are early signs of a departure from pre-crisis growth patterns. Finally, the paper discusses a number of policy shortcomings that Spain will need to address in order to attain a sustainable improvement in labour productivity and, therefore, make a structural transformation towards a more balanced economic growth.