Spain's Labor Reforms Start to Yield Results

Pablo Garcia could not have wished for a better Christmas present. After a year without work, the 34-year-old Spaniard landed a job at a PSA Peugeot Citroën plant on the outskirts of Madrid. “We have increased production in recent weeks, and it seems there might be a new car model coming next year,” says Garcia, who works the afternoon shift on the paneling assembly line. “I’ve started to consider buying a new house in the neighborhood next to the factory.”

Garcia and the 69 other hires Peugeot made in Spain last year are signs that the contentious labor legislation pushed through by Prime Minister Mariano Rajoy last February is starting to bear fruit. The reforms make it easier for companies to opt out of collective wage agreements brokered by unions and cap severance costs on new contracts. The goal is to reverse the loss of economic competitiveness Spain suffered since adopting the euro in 1999, without forcing it to give up the single currency.