Spain’s car industry has come back from the dead, saved by drastic wage cuts that transform the social character of Europe.

The French group Renault has restarted night shifts at its plant in Valladolid this month for the first time in a decade as demand surges for its snazzy bi-tonal Captur, much of it from South Korea of all places.

It is a moment that traumatised workers here in the heartland of old Castile never expected to see again after Spain’s economy crashed into depression six years ago, and then crashed yet deeper before hitting rock bottom in 2012. “We all thought this factory was going to be closed. It was a terrible time,” said Luis Estevez, a manager of the assembly plant.

Other countries may be mothballing lines or cutting shifts as Europe flirts with a triple-dip recession, but Spain’s 17 car factories are firing on all cylinders. Output has risen 20pc over the last two years, on track to reach 2.4m this year and 3m by 2017, leaving Britain, Italy, Russia and, above all, France ever further behind.

Nissan began night shifts last week at its Pulsar factory in Barcelona. Ford is shutting its Belgian plant at Genk, and switching output of the Mondeo and Galaxy to Valencia. The long-running saga of General Motors’ operations in Zaragoza has ended happily after all. The factory will survive, and thrive. Output will jump 15pc this year, and jump again in 2015 as 80,000 Opel Mokkas come on stream.

The car industry is the spearhead of Spain’s great plan for export-led recovery. Some 85pc of all vehicles built in the country last month were shipped abroad, chiefly to France, Germany and Britain.

The pro-business government of Mariano Rajoy and its allies point to this remarkable surge as a vindication of their policies, proof that it is possible to claw back competitiveness within the eurozone by means of an “internal devaluation”, a euphemism for deflationary wage cuts. “Spain shows what reforms can do. We have become the export champions of Europe,” said Ana Botín, the chairman of Santander.

David Fuller's view

Here is a PDF version of Ambrose Evans-Pritchard's column.

Well, good for Spain for taking on these jobs which are a lifeline for the economy and many previously unemployed people.  They may even encourage other countries and companies to invest in Spain.

However, the big picture which continues to unfold in this era of globalisation is a levelling of the playing field in terms of wages for assembly plants and other semiskilled jobs.  Unions are losing more jobs than they protect as multinational businesses relocate and or automate.   

This is a tough environment but it is good for investors.