The risk premium rose to 507 basis points over the German bund after closing Tuesday at 485. The Ibex 35, the Spanish bourse’s main indicator, opened the trading day down by 1.1 percent. By midday the blue-chip index was down 1.24 percent at 6,617.9 points.

Apart from investor alarms, there have been political concerns about the whereabouts of Prime Minister Mariano Rajoy who, until this morning, hadn’t been seen in public over the past two days of market panic and renewed jumpiness over the euro debt crisis.

In Congress for today’s question-and-answer session, Rajoy told reporters that European leaders have no plans to begin bailout discussions for Spain. “No one is talking about that, and I talk to the major European leaders every week,” the prime minister said.

Still, Rajoy admitted that “the situation is very complicated.”

“The risk premium rate has risen significantly which means that it is difficult to finance [debt] but we’re doing what we have to do to ensure that the route Spain takes is the right one.”

While acknowledging that the risk premium of Spain and Italy is “not sustainable,” De Guindos told a news conference after a meeting of European Union finance ministers that the instability in the markets “has more to do with the political crisis than with the economic and financial” crisis. The minister pointed to the “significant effort in [fiscal consolidation] and reforms” carried out by the Spanish government.

Greece seems set for another general election on June 17 after its main parties failed to reach an agreement on forming a government after the poll earlier this month. This development is expected to keep the pressure on Spain’s sovereign debt in the markets. The spread between the yield on the benchmark 10-year government bond and the German equivalent on Tuesday rose 11 basis points to 488 basis points.

“Greece has a contract: in exchange for assistance it has to put in place certain economic policies, but without a government that is not possible,” De Guindos said. “We have to think about the future steps that have to be made in Greece. We have to analyze what has been done in the case of Greece for the implications this crisis has for the rest of the Union. Greece doesn’t want to leave the euro. On this there has to be coordination; governments have to do their homework but the EU also has to do its homework.”

Earlier on Tuesday, De Guindos said Spain had asked the European Central Bank for assistance in setting valuations to the real estate assets Spanish banks are being required to remove from their balance sheets in order to speed the process up.

The government has said it will appoint two independent appraisers to carry out the valuations. “There are doubts about the Spanish banking system,” De Guindos said. “The government maintains that the perception of the reality the markets have is worse than the reality. That is why we have undertaken this exercise in transparency.”

The minister said the government wants to complete the valuation process in two months rather than the three to four months he calculated it would take last week. “They [the Eurogroup] asked us to speed up the work, and of course the Spanish government is absolutely open to this.”

There was some confusion over whether the ECB’s involvement in the valuation process was at Spain’s bidding or an initiative of the ECB itself. “The ECB showed interest in cooperating with the Bank of Spain and the independent appraisers,” De Guindos said as he brushed aside questions on whether this would undermine the prestige of the Bank of Spain.

De Guindos also dismissed suggestions that the Eurogroup had asked Spain to tap the European Financial Stability Facility to speed up the process of cleaning up the banks. “Nobody has asked anything like that,” De Guindos said. “The only thing our partners have asked is for us to speed up the valuations.”

The minister said the idea of a lock-in of bank deposits along the lines of the notorious “corralito” imposed by the Argentinean government in 2001 before the devaluation of the peso “seems to me to be a leap into the unknown that makes no sense at all.”

There have been significant outflows of investment funds this year due to a lack of confidence in Spain and fears the euro zone could break up. According to figures released earlier this month by the Bank of Spain, a net 128.655 billion euros of financial investments has been pulled from Spain since July of last year. In February alone the figure was 25.548 billion euros.

Catalan premier Artur Mas of the center-right nationalist CiU bloc said his government would for now follow decrees issued by Prime Minister Mariano Rajoy calling for deep cuts in health and education, but he would continue with his plans to challenge them before the Constitutional Court. Mas did not detail exactly where the region would make cuts to save some 1.5 billion euros this year, but said subsidies to public firms would be reduced.

In Andalusia, economic commissioner Carmen Martínez Aguayo announced the quota corresponding to the region from income taxes would be hiked by one percentage point on salaries between 60,000 and 120,000 euros. Paycuts for Andalusian government workers would also be imposed immediately, including trimming June’s bonus by up to 30 percent.

The regional government in Seville said it would also be challenging the central administration’s austerity impositions.

Cascos has turned over the region's finance records directly to Olli Rehn, vice president of the European Commission responsible for Economic and Monetary Affairs, after Montoro said Saturday that the central government may have to intervene.

Cascos said that he was handing over the records "to deny the false news" delivered by the finance minister, who shows "a lack of seriousness" and could "ruin the region's credibility" with the ratings agencies.

The Asturias government has set out a goal to reduce its deficit to 0.9 percent of GDP by the end of the year. Its debts are listed at 21.55 billion euros, or 9.1 percent of its GDP. Nevertheless, the deficit number is still lower that the median average of all the regions, which stands at 13.1 percent.

The conflict between Cascos and Montoro comes prior to a meeting with Mercedes Fernández, the Asturias PP leader, to discuss forming a coalition to govern. The political impasse in Asturias following regional elections in March will have to be decided by the only UPyD deputy. The Socialists and the United Left partnership amounts to 22 seats, while FAC, with the PP's backing, would also form a 22-seat block. UPyD leader Ignacio Prendes rejected joining Cascos but said he would study any pact with the PP.

He suffered the death of two of his children, and that double tragedy, which he overcame with the integrity of spirit he shared with his wife Sylvia Lemus, would become an enormously dramatic element in some of his later works. But his iron will, as sturdy as his health, allowed him to get over the impact of the shocking loss of his son Carlos and daughter Natasha.

He had the stamina of an athlete, but his heart bore the brunt of those blows until today it could take no more. His physical strength, which was also his literary force, was beaten down by the age of time, that metaphor to which he devoted his efforts as a writer and also as a civic response to a century in the history of Mexico and of all humanity.

This week he was still to be found in Argentina, visiting the book fair in Buenos Aires. There he announced new projects; he explained to EL PAÍS correspondent Francisco Peregil that as long as he had plans on the go (and he had stacks), he would never surrender his life to the melancholy of death. That was his motto; that is why his public actions were never interrupted by personal injuries. The fight against time was his discipline.

He would wake at dawn to set down on paper the writing that his notes from previous days suggested to him; and he would write like a man possessed through the night until daybreak. Then he would go for a walk (he had dropped running), and after midday he was ready to socialize. Toward the end of his life he kept himself mostly shut away (in London, New York, Mexico or on his excursions into the wider world), but he still left a window open here and there so as not to forget the other side of his persona. He met with politicos, economists, and writers, among others, and he listened intently; he wanted to take stock of the goings-on in the world, the results of which he poured into articles in which we can read a gradual sense of disappointment in the human condition.

Last November he sat down for hours with the former Chilean president, Ricardo Lagos. Both wished to know more about the other; their opinions and what they thought the future held in store. Fuentes was not at that time in the best of spirits; his literary passion collided with his civic calling at the start of that dialogue, and it was difficult to draw the words out of him, as if Fuentes had closed in on himself and was beyond the universe of mere possibilities. But suddenly the Chilean former leader brought up the topic of literature and Fuentes was revivified; that was his realm. Perturbed by his country, perturbed by the world, and perturbed by the personal universe which had once encouraged him, Fuentes was now only a writer, a mind in search of fictions which would explain this world.

He was a globetrotter. One of his last experiences with other writers was to be in Aix-en-Provence, where a formidable group of authors (French, Spanish and Mexicans included) came together to pay him homage with a symposium on his literature. At 9am, dressed in one of those impeccably ironed white shirts with which he enhanced his figure, he appeared before the youngsters who wanted to ask him questions. He was seated; Fuentes had never sat down, but now he did so. He signed books standing up, talked standing up, dispatched lectures as if he was running a marathon, but now Fuentes did not have the strength of before. In Buenos Aires he said that time would not defeat him. On his way to the hospital in Mexico City, this athlete of enthusiasm felt that his hold on life was not corresponded in the way it always had been even in the darkest times. And what is left of him, of that enthusiasm, is a powerful oeuvre which he wrote by hand until the finger with which he held his pencil developed a curve. Sometimes he would hold it up: “Here is my ally.” His heart ducked out on him on the most sorrowful morning of all the mornings he wanted to be happy.

The origin of Bankia's troubles lies in real estate and finance, but all the major decisions of the last three years have been made in political offices. And Mariano Rajoy, prime minister since November 20, was there for most of them, as were members of the then-ruling Socialist Party and Bank of Spain representatives. It was Rajoy who appointed Rodrigo Rato, a Popular Party (PP) heavyweight and former head of the International Monetary Fund, to lead Caja Madrid; it was also him who sanctioned the great merger of seven regional savings banks under PP control that became known as Bankia. And it was Rajoy who let Rato fall.

All the government and PP sources consulted by this newspaper agree that the climax and the ending of this particular story are 100-percent political in nature. As a matter of fact, even Rato's eleventh-hour decision to backtrack on the proposed merger with CaixaBank can be explained as a power struggle pure and simple.

A few PP sources said that Rato did not wish to share power over Bankia - banking conglomerate with 10 million clients, thousands of shareholders and majority stakes in key companies like Iberia - with Isidre Fainé, the Catalan chairman of La Caixa and Caixabank. The former's hyper-competitive style would seem to support this theory. But Rato himself told a different story to the people in his circle of trust. It was not a personal matter, he said, but rather that he could not allow what would essentially be Spain's main bank to be in the hands of Catalan nationalists.

La Caixa is controlled by the Catalan government, currently held by CiU. Rato is a founding member of the PP, a conservative party that favors Spanish unity and has often been at odds with Basque and Catalan nationalists. And Bankia was, essentially, a PP bank. Rato (who was economy minister in the governments of José María Aznar, and Rajoy's rival in the party race for succession) was allegedly offered a share of the power, and the opportunity to be the merged bank's chief when Fainé turned 70. But Rato told aides that an internal CaixaBank protocol established that power would always remain in Barcelona.

It was therefore politics that delayed a decision that was on the prime minister's table for at least two months. Rajoy, as usual, waited until the move seemed wholly inevitable. Economy Minister Luis de Guindos, on the other hand, had been telling him at least since March that it was the only thing to do. He, like all the other officials in charge of selling Spain to outside investors, kept running up against a recurring problem. They made their presentations to the investors, underscoring the reforms, the cutbacks and business opportunities, only for investors to reply: "That's all very well, but what are you going to do with Bankia?"

Rajoy was aware of that pressure. But Rato kept holding on, refusing to admit that things were as bad as they were. As recently as April 26, at the meeting of the board of BFA, Bankia's parent holding company, Rato delivered a reassuring message to the representatives of the PP, Socialist Party, United Left and trade union UGT gathered there. Some boardmembers remember that Rato was very optimistic, and that there were no critical voices in the room. Only 15 days after that, Bankia would be nationalized and all those boardmembers removed from their posts.

Yet despite the soaring risk premium, the collapse of bank shares in the stock market, the criticism in the international financial press and the impatience among his own government, Rajoy kept holding out. Until two key events took place, that is.

First, the IMF produced a devastating report on Spain. After spending a month in the country, its experts gave Bankia a very bad grade and recommended an injection of public funds to shore up the financial sector. Rajoy had promised that he would not pump public money into the banks, and that was another reason why he resisted making a move. It would essentially constitute yet another broken promise - a common theme of his first months in office.

The other key event - although government members consider it less relevant - is Rajoy's meeting with Mario Draghi in Barcelona on Thursday, May 3. The European Central Bank governor felt that the Spanish financial reform of February was insufficient, and he wanted more. Something was needed to restore international confidence in Spain, and Bankia was (and is) at the heart of all the trouble.

A day later, on Friday, Rato's resignation began to take shape. The details were ironed out over the weekend, and the announcement made on Monday.

Rajoy's decision to let Rato fall came at a high internal cost. It was he who imposed his man Rato to lead Caja Madrid in 2009 in a tense meeting with Madrid premier Esperanza Aguirre, who wanted to appoint her right-hand man Ignacio González. By removing him, Rajoy is admitting that it was a mistake to appoint him in the first place.

But there's more. Rato is not just a well-liked man within the PP - he is also the face of the party's good economic governance under Aznar. Rajoy used this image to campaign for office in 2011. Rato's fall brings down part of the PP's economic good name with it.

Also, many members of government are concerned about the way in which the resignation was handled - a conspicuous silence from the government at first, then the rumors, then a stock market in freefall and a risk premium in orbit. To many, it underscored what they view as the mistake of not having a deputy prime minister in charge of economic affairs within the executive.

The debate over the "selling" of economic policy remains open. All the tough decisions first suggested by De Guindos, including the creation of a bad bank and pharmaceutical co-payment, have a way of becoming a reality, which proves that he carries great weight within the party. But he is not deputy prime minister, and that means that his statements are often questioned in public by other PP members.

The government has three main economic figures: De Guindos, Finance Minister Cristóbal Montoro and Álvaro Nadal, head of the economic office. Add to that the Bank of Spain and Rato himself, and this crisis becomes very difficult to handle. And Rajoy's style of doing things, working in the shadows and refusing to provide explanations, makes everything more complicated.

Rajoy has already taken the most difficult step by removing Rato and nationalizing Bankia. He has proven he is ready for anything, said several members of the executive. And they trust that this message will reach the markets. If not, then the next move is already on the table: stepping in to rescue an entire regional government as a show of strength. Rajoy, again, will hold out as long as he can. But if he thinks it is inevitable in order to appease the markets, then he will do it.

The two defendants, María Antònia Munar and Miquel Nadal, were both members of the now-disbanded Unió Mallorquina (UM) political grouping and are charged with embezzlement, falsifying documents and dereliction of their public duties.

For more than 30 years, Munar was one of the most prominent politicians in the Balearics. From 2007 to 2010, she served as speaker of the local regional parliament. Nadal, her right hand-man, served as vice president of the City Council in Palma de Mallorca.

Prosecutors claim the two defendants helped approve some 240,000 euros in contracts to the production company in which they had been part owners but which was represented by the front men. One of these was Víctor García, who was married to the cousin of Munar’s husband.

García and Miquel Sard testified on the second day of the trial that they agreed to list their names as co-owners of the company Video U at Nadal’s behest. One of their goals was to obtain a license from the regional government for a local TDT channel.

Sard, whose cousin is married to Nadal, said the company also received money from the Balearics government to produce a radio program that was never broadcast. He said Nadal gave him an envelope containing 300,000 euros that came in part from the former city councilor and Munar to purchase Video U.

Luisa Almiñana, who served as another partner in the production company, said the UM hired up to 14 people to work at Video U but who turned out to be ghost employees. The employees were in fact performing work for the party or the City Council, said Almiñana, who has also been charged in the case.

After she was indicted, Almiñana said she received pressure from UM officials not to cooperate with authorities during their investigation. The UM was closely aligned with the Popular Party, which gave it three seats in the 33-member City Council in Palma de Mallorca.

It was not until April, 2011 when labor union elections were called that workers’ representatives at the hospital were allowed access to the payroll, where it was discovered that Martí was still listed as an “associate director.” He had held the phantom post for 121 months on a salary of between “80,000 and 110,000 euros,” said hospital sources.

The administrative error has caused profound anger at the hospital, which was placed in administration in March by the regional government with debts of more than 18 million euros. Under cost-cutting measures imposed by the administration of Artur Mas, Santa Creu i Sant Pau has seen its resources slashed by 10 percent.

The details of Martí’s hoodwink have been included in a 38-page complaint presented to police by a doctor at the hospital accusing senior staff of corporate crimes including embezzlement and fraud. Martí is a heavyweight in the Spanish healthcare sector and vice-president of the Medical School Organization and director of a health management professorship at the Doctor Robert Foundation, which is attached to the University of Barcelona.

Neither Martí nor the board at Santa Creus i Sant Pau have answered repeated requests by this newspaper to give their version of events. Neither has any evidence that Martí did any kind of work at the hospital between 2004 and 2011 come to light.

Some 2,500 people ended a day of meetings and discussions on Sunday with a "silent scream" and promised to return on Monday to protest against the arrests of 18 demonstrators overnight on Saturday when the police moved in to dislodge the masses. The main focal points of the open debates were government cuts in healthcare and education, nuclear disarmament, the right of women to choose to abort and the rise in value-added tax.

Videos of the police action against the protesters soon circulated via the internet but in truth the social network sites were more ablaze than Spain's streets. By Sunday, the number of people returning to the capital's Sol square had fallen to around 350. "We made a few gaffes [on Saturday]," said Luis Fernández of the Adesorg Association of the Unemployed. Fernández believes the protest should have ended after the silent scream. "This would have had a different outlook," he added, casting an arm over the sparsely populated square. "If those who aren't here had seen things pan out differently, they would have been more motivated to come."

Many members of the movement said that there was no reason for the police to break up the rally as there were few people left and they would have departed sooner or later. "The protest was peaceful, we didn't create any problems," said a participant. In Barcelona, the city authorities gave permission for a camp to be set up in the central Plaza de Catalunya square.

The police made 18 arrests in Madrid during which 20 people, including two police officers, were injured. Nine of those arrested face charges of resisting arrest, assaulting a police officer and public disobedience, offenses that can carry a sentence of between two and four years. They were released on bail on Monday. The other nine were released without charges on Sunday.

Witnesses say that the police meted out beatings even to people who complied with their orders to leave. When the eviction was carried out there were some 200 people left in the square. The 15-M movement's legal commission plans to make a formal complaint about the actions of the police, who the protestors say removed their identification badges. The movement said it plans to seek redress for the "impunity with which the police acted."

The detainees released on Monday, six of whom had previous arrests on their records, told reporters that one of their number, a woman, had been beaten at the Moratalaz police station. Another, L.A.L.O., said that he had voluntarily left Sol and was arrested in a nearby square.

The public prosecutor had asked that all 18 be handed restraining orders preventing them from going near Sol while the judicial process against them remains open but the judge did not enforce this petition.

The heavy police presence also oversaw the movement's public debates, at which megaphones were prohibited. The opposition Socialist Party accused the government of over-reacting to the threat posed by the latest wave of protests.

Socialist spokesman José Quintana called the government's stance "perfectly ridiculous" and accused it of trying to criminalize the protest movement. His parliamentary colleague, Soraya Rodríguez, said that the demonstrators' right to protest had been impeded. United Left spokesman Gregorio Gordo lamented "the central government delegation's heavy-handedness in vigilance and repression," of the protestors, who he added had "not given any reason for it."

Cristina Cifuentes, the government delegate in Madrid, said in a radio interview that she was "very satisfied" with how the protests were unfolding and termed the police's performance "impeccable."

"In general the balance has been very positive, because the important thing is that people's right to meet and protest has been coupled with the right of the rest of citizens to walk freely through the streets. Above all, they have prevented an encampment that I have always said was illegal."

Cifuentes revealed last week that she had previously attended 15-M meetings to "see things on the ground. I have never been in disguise or incognito to an assembly because I don't even dress up for Carnaval," said Cifuentes, who added there was "nothing strange" in her attending such meetings. "I live in \[downtown neighborhood\] Malasaña and next to my house there is a periodic popular assembly." Describing the movement as "not as disorganized as they want people to believe," Cifuentes noted that now "it has nothing to with social movements but with the anti-system ideology of the extreme left."

The main police labor unions praised the government delegation in the capital for its "planning and clear orders," highlighting a "change in attitude" since the arrival of Cifuentes in the post. "A year ago there was no planning, they caught us by surprise and the protestors were allowed to do as they pleased," said José María Benito of the Unified Syndicate of Police. "The difference from last year is that there were clear orders. Last year there were practically none, there was simply tolerance and more tolerance."

 On May 15, 2011 a group of citizens decided to demonstrate against a crisis that hit Spain particularly hard on the back of a real estate bubble which decimated the construction sector and left banks with thousands of foreclosed homes whose value keeps dropping. The movement caught on and derived into a permanent campout in Sol. Images of the protest made world headlines and spawned similar movements in other world cities, including Occupy Wall Street in New York.

In Barcelona, around 45,000 people marched, according to police figures, although organizers put the figure at five times that amount. Elsewhere in the world, there were protests of some size in Frankfurt, Paris, London and Brussels, but very few came out in support of the 15-M agenda in Lisbon and Athens.

Despite concerns that this year’s protest in Spain would turn violent, the police only took action at 5am to clear out the square after around 300 protesters decided to defy the government’s sit-in prohibition.

“While I was picking up my things the police were pushing me towards Calle del Carmen,” said Emilio, a 26-year-old public servant who was sleeping inside a tent in the square. “They pulled a girl by her hair.”

Other protestors confirmed that the police used force to evict them from a spot that has become the national symbol of citizen discontent. In the days prior to the protest, government representatives had warned that sit-ins would not be tolerated, and that protestors must stick to the approved schedules. But the ruling Popular Party (PP), which was in the opposition during last year’s 15-M protests, also knew that it could not use undue force against a movement that enjoys broad citizen support.

Protestors chanted slogans that have become classics of the 15-M movement, such as “Who voted for those markets?”, “We’re not paying for this crisis” and “They call it democracy, but it isn’t.”

“Today was a day for reliving the hopes of 15-M,” said activist Olmo Gálvez. “We have picked up that energy to keep moving forward.”

A year later, the youth movement has transformed into what is arguably the most interesting political development in Spain since the death of General Francisco Franco in 1975.

And what is most interesting is that the 15-M movement has steered clear of traditional politics, taking a grassroots approach to activism by offering practical solutions to the problems faced by the more than five million people unemployed in Spain.

The movement has refused to set any political agendas, avoiding the labor unions and professional politicians. Instead it has coordinated online campaigns and targeted specific issues, such as banking and electoral reform. 15-M is about a bottom-up, networked approach, in direct contrast to the vertical power structures of the main parties that have dominated Spanish political life since 1978. Through thousands of individual meetings, it has created a nationwide network that could represent a serious challenge to this country's vested interests.

The movement's strategy is based on assembling ad hoc citizen coalitions to help push back and challenge specific government actions; trying to figure out how to affect policy by exerting force on specific choke points in a system that badly needs reform. Politicians worried about inter-party politics, re-election or special interests can't see the importance of this. It's about using the power of the network to shake things up and find ways to make the political process more responsive to the needs of everyday citizens.

So, for example, the movement has been actively engaged with foreclosure associations that advise homeowners across Spain. These days it is common in Spanish cities to see groups of enraged neighbors standing guard outside buildings to impede judges from notifying, and therefore evicting, debt-ridden property owners. Most of these actions pop up spontaneously after information is exchanged on Twitter and then coordinated through the use of hashtags.

Typical of the all-encompassing approach of the 15-M movement are the myriad cooperatives set up around the country by a range of professionals looking to barter their services with other groups, as well as to sell them to the wider community.

As the Spanish welfare state crumbles, 15-M offers practical solutions based on collaboration and cooperation

"We're not angry - we're filled with hope," says Israel, an unemployed computer programmer who belongs to a cooperative set up in the Madrid working class neighborhood of San Blas last July. "I was brought up to be competitive; but what really matters is sharing. I knew when I lost my job that the state wasn't going to solve my problems, and that I was going to have to take matters in hand with others like me," he says.

Israel's cooperative is just one of the dozens that have emerged thanks to 15-M in Madrid alone; another in the Aluche district has set up a food bank, collecting donations from stores and restaurants. Other areas have set up links with villages close to Madrid where they are now growing their own food, and throughout the capital, neighborhood associations have set up weekly swap markets.

15-M has also rallied together to offer support to migrants without paperwork in Spain. In Madrid's Lavapiés neighborhood earlier this year, hundreds of people blocked a street to prevent a police unit from arresting several people with the aim of deporting them.

Turning their backs on the banking system, people have begun setting up their own credit unions and micro-financing initiatives.

"This will be the year of the cooperatives," says Arturo de Bonis of the San Blas cooperative, who believes that the labor unions can no longer defend workers' interests in a world controlled by big business and driven only by profits. "We have to organize ourselves; it is the only way forward," says the 55-year-old economist, once employed by the World Bank, who joined the movement in the first days after the original occupation of the Puerta del Sol in Madrid, helping it set out an economic program. "Business owners no longer have a stake in their companies; they are simply a way to generate profits, and they will do whatever they need to do to maintain profits, even if that means selling the land their factories are built on. The business world is controlled by finance; there is no point any more even being a shareholder, it is all about moving money around: 15-M has to find a way to offer people an alternative."

De Bonis says that since October of last year, 15-M has changed from simply being a protest movement to being one that offers solutions. "Unemployment is a huge problem, but it is also an opportunity: we can create an alternative and parallel economy. The quarter of the workforce that is unemployed can help us to achieve this," he says.

De Bonis has been working over the last year with others in 15-M to design the so-called Synergies Cooperative, which has set up a network of local, alternative economies in neighborhoods like San Blas throughout Spain.

Reflecting a growing perception that the labor unions are standing by doing nothing while the government presses ahead with labor market reforms that make it easier for businesses to sack employees, on May 1, 15-M set up an initiative to protect the interests of people who are having to work on short-term contracts, grants, bogus training schemes or on a self-employed basis to save their employers from having to pay their social security. The idea is to encourage more people to work together through cooperatives, as well as to use social networks and other media to report companies that are taking advantage of high unemployment to impose abusive working conditions.

Arguably the most visible of 15-M's myriad activities over the last year has been its campaign to stop banks evicting people unable to pay their mortgages. This has been led by the Plataforma de Afectados por la Hipoteca (PAH), a nationwide network set up in 2010 to draw attention to the plight of people who had lost their jobs and, unable to meet their mortgage repayments, now face the loss of their home, as well as a legal requirement to pay back the bank loan they used to buy it in the first place. Under Spanish law, simply turning over your property to the bank does not cancel the debt. Close to half a million families and individuals have lost their homes through mortgage foreclosures in the present crisis.

In reality, the PAH has been able to prevent only a tiny proportion of evictions and foreclosures going ahead - around 250. The PAH now works closely with 15-M, which has greatly increased its effectiveness. "In the early days we had to hire buses to move people around," says Ada Colau of the PAH. "But once 15-M got involved, things changed very quickly. Working within the 15-M movement has created a network."

By concentrating on creating neighborhood groups, 15-M says it has become much more effective at preventing evictions and, where that is not possible, at finding alternative accommodation, often by squatting in empty properties. "The neighborhoods themselves organize their own anti-eviction groups," says Lidia, a Madrid-based activist barely in her 20s. "The PAH provides the lawyers; and our groups arrange for accommodation in our areas," she adds.

Lidia helped set up a housing office within 15-M that brings together people who have lost their homes and helps them find somewhere to live. She says one of the main achievements of 15-M has been to raise awareness about homelessness and successfully defend the occupation of empty buildings. "Until now, squatting was seen as wrong by many people. But there is a growing understanding that while occupying a building or an apartment may not be right, there are situations when it makes sense," she says. Violeta, aged 60, who also works in the housing office, adds: "Occupying empty properties has become widely accepted. People see it as a basic right." She also says that the 15-M movement has increasingly attracted older people like herself, which has helped calm many potentially violent situations. "When the police come up against a wall of older ladies, like me, they take a very different approach than they would if they were facing a group of lads with dreadlocks."

Sociologist Miguel Martínez, who has spent many years researching social movements in Spain, says that the 15-M movement has revitalized the country's neighborhood associations: "We are starting to see similar structures to those that emerged in the late 1970s, after Franco died." He also points to the impact that it has had on mainstream politics.

15-M has not only blocked evictions but also successfully lobbied Congress to debate protective measures for mortgage holders, such as legal reforms to approve dación en pago - walking away from a mortgage by handing back the keys and the property in exchange for the bank discharging all mortgage debt. That said, the proposal was rejected by all of the major parties.

But the protestors have managed to get some banks, such as Bankinter, to accept the solution to all mortgage loans, while Banco Santander has offered a three-year mortgage payment suspension for clients who have lost their jobs or families who have seen a 25-percent drop in monthly income.

"Of course the movement has achieved some things," says Jaime Ferri of Madrid's Complutense University political science department. "The most significant of which is that there is a new collective awareness of the importance of the fact that a large part of the population is demonstrating its discontent and taking action."

Víctor Sampedro, who holds the Juan Carlos University chair in public opinion, describes the impact of the 15-M movement on Spanish politics as "astonishing," saying it has not only raised debate about walk-away mortgages, but also awareness of the role that banks played in inflating property prices. He points to the government's recent decision to introduce greater transparency into public life, along with widespread public protests against education and health cuts and attempts by the regional government in Madrid to privatize the publicly owned water company. "We are seeing a widespread questioning of the way that this crisis is being handled by our social democratic and conservative parties: new voices, new ideas," he says. "The pacts of silence that were agreed during the first years after Franco died have finally been broken. The problem is that our political class is still looking at events in the second decade of the 21st century through a mid-twentieth-century prism."

Another victory by 15-M was to prompt a debate on the need to reform the country's election laws - which favor the large political parties - in order to increase social participation in decision-making.

Members of the conservative Popular Party, such as Madrid regional premier Esperanza Aguirre, are now defending the use of open lists of candidates, while the Socialist Party has proposed reforms inspired by the German system, with a more proportional distribution of seats.

15-M has barely started. It is not interested in power, but in redefining the way that Spain's political parties operate, and principally in making them much more accountable. For example, it has organized a citizens' audit of the country's debt, aimed at clarifying where responsibility lies. It is also about to announce a popular tribunal that will offer the electorate a chance to judge the decisions being made by our leaders. The longer-term goal of the initiative is to have any evidence it collects eventually recognized in law, and that could be presented as part of a case brought against a government for negligence in its mishandling of the economy.

"We are in the middle of a new phase of democratic evolution, in which society is much more politicized, but not under the direction of the political parties," says sociologist Miguel Martínez. "15-M is a success story: it has managed to retain its solidarity-based approach, it is open and transparent, and the minutes of every meeting are on the internet."

This Saturday will see marches throughout Spain as part of a series of events to mark 15-M's first anniversary. The organizers are determined to see them pass off peacefully, but say they are worried at how the marches will be policed. "The police already have their lists of names and photographs of our activists - for example, people who have either prevented the arrest of migrants, or filmed such arrests," says Juan López, who took part in last year's two-month occupation of the Puerta del Sol. He says there will be no attempt to retake the square this year, and that all those taking part in marches have been told to take every measure to keep the events peaceful.

Last week it emerged that a police unit normally assigned to monitoring terrorist groups has been given instructions to put some of the higher-profile 15-M leaders under surveillance. "Putting these kinds of stories about is clearly an attempt to use the media to create a climate of fear," says Aitor, who belongs to the Real Democracy Now (DRY) organization, which spawned the 15-M movement. "They want to convert what we are doing into a public order issue." He blames the Popular Party administration at the central and regional level of trying to prevent people from using public spaces to protest.

Víctor Sampedro is also concerned about the PP's response. "They are clearly trying to categorize 15-M as a radical movement that wants to overthrow the system."

As the 15-M movement approaches its first year of existence, the question is how to keep its momentum going. Will it face the same problems as DRY, which has been plagued by internal disagreements for months now? Last month, two of its founders, Fabio Gándara and Pablo Gallego, decided to formally register DRY as an association, prompting a storm of protests on social networking sites such as Twitter.

Gándara has been arguing for some time for the need to change the group's structure, in an effort, among other things, to speed up the decision-making process at assemblies, where members have demanded full consensus before taking a decision.

The other faction, however, says that DRY would lose a lot of its broad representation if it were to change its status from a loose grassroots group to a fully registered organization. While some in DRY are looking at making the group more operational, others want to study ways to improve its internal methods to attract greater participation.

Of DRY's 29 constituent groups, only two support the pair's initiative, say critics of the move.

Faced with coordinated and widespread opposition to the idea of DRY becoming something akin to, or that could develop into, a political party, Gándara says he will support it - but not as its leader.

With the shouts of 50 15-M protestors demanding an alternative politics echoing outside his party's 13th Basque Congress in Bilbao, the PP leader made it clear to both those on the street and to an increasingly aggressive opposition that he made his decisions with the backing of the absolute majority won at last November's elections: "Fortunately, the Spanish people have taken their decision and has told the government to govern."

"This country is going to get out [of the crisis] if the government continues making reforms and doesn't tire of making them and the government is not going to tire," he continued. To set up those reforms, he said, he would go on taking decisions "every Friday."

Rajoy's message echoed the one given at the Madrid PP Congress on April 29, two days after announcing a rise in VAT and with protests in 55 cities against cutbacks. "Every Friday, reforms; and the one after that as well," he said in reference to weekly Cabinet meetings.

Nevertheless, Rajoy made an effort to avoid charges of insensitivity: "We are absolutely conscious of the situation that millions of Spaniards are going through. We know perfectly what they are going through." Rather than resort to statistics, he preferred to quote the many letters he has received at Moncloa as sources. The prime minister also recognized that his government was taking decisions it said it would not take and that it would have liked not to have taken, but he repeated that there was no other choice.

During their weekly conference, the justices in Washington last Thursday studied Odyssey’s appeal along with several others filed against Spain, including petitions by the Republic of Peru and some of the descendants of the passengers of Nuestra Señora de las Mercedes, who said they were the rightful owners of the coins.

The top court didn’t give any reasons as to why it wasn’t taking up the case, only posting a succinct “denied” in the Supreme Court docket on Monday.

“All of the team is very pleased by the decision today, which makes our victory absolutely final,” said James Goold, the Spanish government’s lawyer who led the US federal court battle to get the coins and other treasure after Odyssey plucked them up from the bottom of the Atlantic in early 2007.

“The Supreme Court rejected three petitions claiming that the decision for Spain was contrary to US, Spanish and international law. Spain’s position that unauthorized looting of our underwater cultural heritage, in the case the historic frigate Mercedes, is illegal has been upheld at every level and today’s decision eliminates any possibility of any further challenge to our victory,” Goold said in an email message.

There was no immediate reaction by Odyssey lawyers.

On February 26, Spanish military cargo planes airlifted the coins back to Madrid after the Supreme Court refused to stop the transfer while it was considering the appeal. The US Appeals Court in Atlanta had already ordered Odyssey to turn over the mostly silver currency after rejecting Odyssey’s arguments.

The Culture Ministry has said that it will put the coins and other artifacts on display at different museums.

A Tampa judge has also ruled that Odyssey must turn over another part of the trove that has been stored in a warehouse in Gibraltar.

The Mercedes was sunk by the British navy off the coast of Portugal in 1804 when as it was sailing from South America toward the port at Cádiz.

It said it had notified the Fernández administration of the existence of a dispute under the Investment Promotion and Protection Treaty between Spain and the Latin American country, which is expected to result in arbitration by the World Bank’s International Center for Settlement of Investment Disputes.

Prior to the case going to arbitration, Repsol and the Argentinean government have six months to try to reach a negotiated settlement. Repsol claims that Argentina has violated a number of regulations stipulated in the bilateral treaty signed with Spain.

“With this notification, Repsol has formally announced the immediate start of legal actions under international law for [the seizure of YPF] to be declared illegal and for Argentina to be ordered to return [it] and/or make full reparation for damages and harm that may have been caused,” Repsol said in a statement.

The government last month seized a 51-percent stake in YPF held by Repsol. The Spanish firm retains a further 6.4 percent of the company. Repsol is looking for compensation of about eight billion euros for the loss of the stake, but Argentina has disputed this figure.

Her speeches can be peppered with veiled threats and wry references, as was the case when she announced the expropriation of the Spanish oil firm Repsol's stake in the local YPF affiliate, and on a previous occasion when she opened a box of Milka chocolate bars to celebrate the fact that the popular European brand was now made in Argentina. Many correctly viewed it as a hint at the nationalization of YPF, which occurred the following week.

Together, the speeches she has made since November 9, 2012 would fill 600 sheets of paper. Her manner of promoting her own government's image is never questioned, not even by her ministers who, much like her, don't give interviews. But when they speak about President Cristina Fernández de Kirchner, they always refer to her as "the Lady."

A lot of Argentinean journalists have become rather like "Kremlinologists," studying her every move and gesture to see whether they can make some sense of what direction she will take. If there wasn't a peep from Fernández de Kirchner for many weeks while her new Vice President Amado Boudou was being investigated for alleged influence peddling in the Ciccone case printing-press scandal, it was because she was ready to drop him, they figured. This would explain why she gave him a cool greeting during the opening of the congressional term on March 1.

Peronist insiders say that "the Lady's" son, Máximo Kirchner, head of the powerful youth organization La Cámpora, had it in for Boudou after he learned that the vice president referred to his mother as la gorda (the fat one). It looked like it was all over for Boudou. But one day Boudou appeared before the press, attacking the judge and prosecutor in the Ciccone case, if refusing to take questions. A few days later, the chief prosecutor resigned and the judge was taken off the case; "the Lady," without saying a word, offered Boudou her protective shield.

It appears the Argentinean electorate doesn't really care whether their president holds Cabinet meetings or press conferences. One staunch Kirchnerist, the philosopher José Pablo Feinmann, says: "The question about the lack of Cabinet meetings hints at whether we are being governed by a caudilla. But the answer is: she has another style of governing. Menem had Cabinet meetings but then again he sold off the entire country."

There are millions of people who share Feinmann's views - people who are convinced Fernández and her late husband, the former President Néstor Kirchner, have introduced policies to push Argentina away from having to rely on traditional markets. There are others who are proud of what the president has accomplished, such as the introduction of gay marriage during her mandate and demanding the country's former military rulers stand trial for crimes committed during the 1976-83 dictatorship.

Her public shows of compassion have also made her popular. After 51 people died and dozens were injured during a commuter-train accident on February 22 in Buenos Aires, the president not only met with the survivors and family of the victims, she went into mourning for six days.

"Don't expect anything more from me during this painful period. I know what death entails. I know what it is to be in pain, and I don't tolerate those who want to take advantage of this huge tragedy and so much pain," she said.

Last year, Fernández de Kirchner won a second mandate with 54 percent of the vote, breaking the 51-percent record held by Raúl Alfonsín, who won the first election after the return to democracy in 1983. Feinmann says Fernández reminds many Argentineans of Evita Perón. "They used to insult Evita, calling her 'the old mare;' they say the same about Cristina. But this is because of the macho attitude that still prevails here. A lot of upper-class women are resentful of her because they know they will never accomplish what she has accomplished, be as pretty as her, or ever become president of the republic," he adds.

A month later and the train tragedy and ongoing investigation were pushed to the back pages - there were more pressing matters to report, ones that could have deep implications for Argentina's future investment climate. The governors of 10 provinces began retaking concessions from Repsol in fields within their jurisdictions. They had long complained, echoing the central government's concerns, that Repsol was not pumping in enough investment or hiking production to meet energy demands.

A concerned Repsol chairman Antonio Brufau flew to Buenos Aires but was kept waiting at the door of Casa Rosada; "the Lady" refused to meet him. But just days before, she was keen on receiving singer Roger Waters and actor Sean Penn. "The ministers and governors tell you: 'the Lady likes this, the Lady doesn't like this," Brufau complained just days before the expropriation. "But when you asked them if they have personally spoken to the Lady, the answer is no. Hardly anyone speaks to her, except her son Máximo and [deputy Economy Minister] Axel Kicillof."

After the popular expropriation of YPF from Repsol, the only thing that could darken "the Lady's" horizon would be if Hugo Moyano, the boss of the all-powerful Peronist CGT union, called a general strike, as he has threatened, to demand salary increases. She didn't invite Moyano to a massive political rally held last week at a Buenos Aires stadium.

"We have seen many presidents come and go," said one advisor close to Moyano. "The Lady is now acting as if she were a goddess of some sort. But it would be wise for her to learn something that all union officials have learned early on: before you start a war, you have to see what armaments you have, as well as to know when to call off the war."

Saturnina Martínez, the town councilor tasked with coordinating the reconstruction, says that the task of assessing the full extent of the damage has revealed that many more buildings than was originally believed have been damaged.

The town hall admits that in the last year, just three permits have been granted to build apartment blocks, and 30 for individual houses. No work has yet begun. Residents say the bureaucracy involved in getting permission to repair their homes is a nightmare.

Aside from the 250 buildings demolished, home to 1,164 families, a further 160 properties are yet to be assessed, but cannot be inhabited. If they are to be demolished, it hasn't been decided who would pay for it. Two schools have been knocked down, and 11 others are under repair. Lorca's two hospitals are still not functioning properly.

The failure of the authorities to deal with the situation is already having an impact, says Catalina Lorenzo, a health official, who says that there has been a sharp decline in births, and some 10,000 people have moved away. The longer it takes to begin rebuilding, the less likely they are to return, she adds. Local shopkeepers say that they are close to ruin, with around 10 percent of stores closed permanently.

Tourism has been hit hard, and most of the city's historic buildings are still closed after suffering serious damage. All but one of Lorca's 16 churches are also closed.

After the disaster, the central government set up a special commission to oversee reconstruction. Inmaculada García, who heads the commission, apologizes for the inaction: "We have been working very hard and we have achieved a lot, but I'm sure that we could have done a lot more than we have and we could have done it more quickly."

Residents in parts of Lorca have decided after more than a year to return to their homes, even though they have not been repaired. Many say that they still have not received money from a special fund set up by the regional and central governments to help them face the cost of repairs. Most have no choice after being told by their insurance companies that they will no longer pay for rented accommodation.

"This is madness. We still don't know if our homes are to be demolished, rebuilt, or simply repaired," says local resident Juan Luis, adding that he has yet to be given any money by the commission set up to help people rebuild their homes.

"They told us not to worry, even if we didn't have insurance. But it's been a year now, and this is getting me down. We are living in a ruin, and I spend all my time fighting with the town hall and the damage assessors," he says.

"We've lived here for 30 years, surrounded by friends and family; these are our streets, our shops," says one resident, who has had to leave rented accommodation because the local authority will no longer pay her rent. She adds that she has been told that the building contractor tasked with repairing her apartment block has been deliberately delaying work so as to be able to charge more. "They have tricked us, and not kept any of the promises they made," she says of the local authorities.

The Cabinet will send a bill to Congress making changes to the Penal Code that will also create a new type of crime involving tax fraud on amounts over 600,000 euros, which is mostly aimed at organized crime groups or those who stash away their money in offshore accounts to avoid paying the Spanish treasury. Maximum prison sentences on such cases will be hiked from the current two years to six years.

The government also wants to raise the statute of limitations for tax fraud cases from the current five years to 10 years in order to help combat public corruption. In recent high-profile cases, such as the Gürtel kickbacks-for-contracts scheme, prosecutors were unable to file a host of charges against some Popular Party (PP) officials because the statute of limitations had run out. A similar situation surfaced in the fraud investigation into former Castellón provincial administrator Carlos Fabra and his wife María Amparo Fernández, who are accused of embezzling some 1.2 million euros.

“The objective of this reform isn’t aimed at raking in more money for treasury,” a government source said.

Some weeks back, Deputy Prime Minister Soraya Sáenz de Santamaría said that prosecutors are trying to track down some six billion euros from tax fraud cases.

Atlético Madrid's sterling second half to the season, which brought the Europa League and a fifth-placed Liga finish to the south of Madrid, has benefited Juanfran, Adrián and Álvaro Domínguez. The last time Atlético was represented in the Spain squad for a major tournament was the 2006 World Cup, when Fernando Torres, Antonio López and Pablo Ibáñez traveled to Germany.

Whether any of the three players called up on this occasion will make the final cut remains to be seen, but it is a minor coup for a club that currently features no players capped by Spain besides López, who retired after the final game of the season.

Also involved in the preliminary list is Betis midfielder Beñat, who has shone for the Andalusian side this season, and Benfica midfielder Javi García. In a more cosmopolitan squad than usual, Champions League side Málaga is represented by Santi Cazorla, Nacho Monreal and Isco, the latter receiving his first full national call-up, while relegated Villarreal have provided Bruno Soriano for the national cause.

Del Bosque will name a second list on May 21 ahead of his definitive selection, to be announced on May 27. In preparation for the European Championships Spain is to play three friendly matches, against Serbia on May 26, South Korea on May 30 and China on June 3.

The latter two matches will likely be contested by a more familiar squad with Barcelona, Athletic Bilbao and Chelsea players available after the Champions League and King's Cup finals. One of the greatest headaches Del Bosque faces is whether to risk calling up Barça's David Villa, who has not played since breaking a shinbone in the Club World Cup last December.

Also uncertain is whether Torres, who Del Bosque dropped for the first time since 2006 earlier this year, has done enough in recent weeks to warrant a recall. Certain inclusions after the cup finals are Athletic's Fernando Llorente and Javi Martínez. Young winger Iker Muniain featured in the last squad and could make the plane after a sterling season, while Óscar de Marcos, Markel Susaeta and Ander Herrera have all done their chances no harm after a swashbuckling run in the Europa League.

Chelsea's Juan Mata is also a surefire inclusion after a fantastic first season in the Premier League. Barcelona will provide the usual suspects but Carles Puyol has been ruled out. One azulgrana not assured of his place is Pedro, with Sevilla's Jesús Navas and Muniain in the running for the right-hand slot.

Preliminary Spain squad for the European Championships:

Goalkeepers: Iker Casillas, Pepe Reina, David de Gea.

Defenders: Raúl Albiol, Jordi Alba, Álvaro Arbeloa, Álvaro Domínguez, Nacho Monreal, Sergio Ramos, Juanfran.

Midfielders: Isco, Xabi Alonso, Santi Cazorla, Beñat Etxeberria, Javi García, Bruno Soriano.

Forwards: Adrián López, David Silva, Jesús Navas, Álvaro Negredo, Roberto Soldado.

Villarreal was less fancied to go down but a chain of events combined to condemn the Yellow Submarine to Spain’s euphemistically titled “silver league” for the first time since the 1999-00 season. On that occasion, Villarreal immediately won promotion back to Primera en route to great feats at the European level. At home to Atlético Madrid, Miguel Ángel Lotina’s side had only to avoid defeat to stay up and until the 88th minute it seemed it had done just that. Atlético was playing at half-steam, aware that Málaga was leading Sporting in La Rosaleda and therefore had the final Champions League place in its grasp. However, Radamel Falcao clearly thought it was worth bagging one just in case and stunned El Madrigal.

Meanwhile, in Madrid, the news filtered through to Rayo’s support and the game was afoot. If the suburban side could sneak a goal against Granada, it would escape the chop. With seconds remaining Raúl Tamudo, the veteran scorer of some of La Liga’s most decisive goals, popped up to head home and the stadium erupted in rapture. Two things about the goal will not please Villarreal: first, Tamudo was offside, and later Rayo midfielder Michu admitted in a radio interview that the home side had asked Granada’s players to look the other way for a moment — the Andalusians were already safe as a result of events in Vila-real.

Zaragoza, too, escaped a return to Segunda but far from leaving its charge until the final day, the Aragonese club has been beating all-comers for weeks to cling on to Primera status. In mid-March Zaragoza was rock bottom and nine points from safety. Manolo Jiménez’s team has since won nine, lost twice — to Barça and Sevilla — and tied one. As promised, Jiménez and his players were to pay homage Monday to Nuestra Señora del Pilar, Zaragoza’s patron saint, for their salvation.

Levante had spent the first half of the season repeating the mantra that survival was its only goal, but during the latter stages even the most pragmatic of people at the tiny coastal club must have started to wonder. Only twice since week six has Levante been out of the European places — most recently last week — and its 3-0 win over Athletic sealed continental competition for the first time in its 103-year history. A little over two years ago Levante almost disappeared entirely due to financial woes and still has the smallest budget in Primera.

Villarreal will now have to keep its wallet in its pants as it adjusts from being a Champions League team to a Segunda outfit. Players like Giuseppe Rossi and Nilmar are too luxurious to retain but old warhorses Carlos Marchena and Marcos Senna may stick around to help their side in its attempt to bounce back at the first time of asking.

The Swiss maestro has now claimed four titles so far this year and, despite the surface in the Caja Mágica this year being anything but a traditional clay court, he will have noted with some satisfaction ahead of Roland Garros that Rafael Nadal and Novak Djokovic are each far from firing on all cylinders.

Nadal lost in the third round to compatriot Fernando Verdasco in a heated contest during which the controversial blue clay was as much a protagonist as the two players. Nadal slipped during his customary pre-start jig to the baseline, drawing a rueful smile; later Verdasco, who was competing against his own combustible temperament as well as his opponent, skidded across court on a retrieval, performed a sardonic dance on the much-berated surface and punched a courtside clock in a fit of pique. But the real hammer blow to clay-court king Nadal was delivered Sunday by Federer, who in victory also robbed the Mallorcan of the number two ranking.

The Swiss was unflappable as ever during his semifinal against Janko Tipsarevic, easing to victory in two comfortable sets to oust the Serb, who had caused the upset of the week in dispatching his countryman Novak Djokovic on Friday night. The change to the Madrid tournament's courts, which Nadal made plain earlier in the week is detrimental to Spanish interests, suits Federer perfectly. The 16-times Grand Slam champion has never been the Caja Mágica's greatest fan due to the effect of altitude and heat on the behavior of the ball.

But with the current courts as close to hard as to clay, Federer was in his element throughout the week. Berdych put up a valiant fight in his effort to claim a first Masters title but there was a sense of inevitability that this would be Federer's tournament when both Nadal and world number one Djokovic made earlier-than-expected exits.

Federer now has 20 ATP Masters titles to his name, matching Nadal's career haul. More importantly, the number two ranking means that Nadal will now step into the Swiss' shoes as Djokovic's projected semifinal opponent until such time as the Spaniard can claw the spot back.

This will serve Federer well in Rome, the next major stop on the ATP Tour, where he was a losing finalist in 2003 and 2006. Since 2005 Nadal and Djokovic have converted the tournament in Italy's capital into their own personal Coliseum but at least one of them will not be in the final this year.

Federer may well be waiting on the other side of the net. After a week of players turning the air blue on Madrid's experimental courts, a volte-face by the ATP may be required before another Spanish red letter day is etched onto the clay of the capital.

The letter was given to British Ambassador Giles Paxman on Tuesday by Santiago Cabanas, director general of foreign policy and multi-lateral issues. The prince and his wife plan to visit Gibraltar between June 11 and 13 as part of Queen Elizabeth II’s Diamond Jubilee year celebrations.

When asked by reporters beforehand, Foreign Minister José Manuel Garcia-Margallo had responded cautiously that the government would no doubt file a protest.

Nevertheless, Spain’s Queen Sofía will travel to London next Friday to attend a luncheon given by Queen Elizabeth to celebrate her Diamond Jubilee.

Dívar was practically an unknown. The Málaga-born judge wasn't recognized for any important decisions; he had never issued a written opinion. Serving seven years as chief judge on the national High Court, he had never been on any multi-judge panel that ruled on high-profile cases - another important requisite for anyone named to preside over the Supreme Court. His role was more that of an administrative judge.

The other justices on the Supreme Court were upset by Zapatero's decision because they felt that the appointment should have been made from within. So it comes as no surprise that no other bench member rushed to his defense this week when a fellow CGPJ member filed a complaint against Dívar with Attorney General Eduardo Torres-Dulce for alleged misuse of public funds.

Dívar was first accused of charging 5,658 euros to the judiciary to pay for six long weekend getaways in Marbella between September 2010 and November 2011. A complaint filed by José Manuel Gómez Benítez, a CGPJ member, alleges that none of the four-day trips were for official business.

Then on Thursday, Gómez Benítez expanded his complaint when he discovered 14 other trips Dívar took from 2008 until March of this year, with a grand total of 18,654 euros charged to the judiciary.

Dívar stayed in a luxurious hotel in Puerto Banús, and charged expensive dinners for two to the judiciary's coffers, the complaint states. Even though he took the AVE high-speed train, riding in business class, the judiciary had to pay for lodgings and meals for his bodyguards, and also dispatched official vehicles to Marbella for his use.

In a radio interview on Wednesday, the chief justice denied that he misused his expense account, explaining that there was a difference between personal expenses, which he says he paid out of his own pocket, and official expenses, "which are perfectly documented and justified," and were submitted to a government accountant for review. He called the 5,658-euro amount in question "chicken feed."

Nevertheless, the Attorney General's Office said that it would make a decision by next week whether to file charges against Dívar with the Supreme Court, which by law has the power to investigate and try him. The entire affair has cast a bad light on one of the nation's top judicial officers, who considers himself upright and deeply religious.

The 70-year-old chief justice didn't have any enemies before coming to the Supreme Court bench. After studying law in Deusto and Valladolid, he served as a judge in Castuera (Badajoz) and Orgaz (Toledo) and was later appointed to the High Court, where he served for 28 years investigating organized crime and terrorism. But journalists who have covered the court for three decades say that Dívar's work never produced any big news.

But in 2009, he finally made headlines when he broke a historic deadlock among the members of the CGPJ over Zapatero's proposed abortion bill by voting against it. Sources at the CGPJ at the time said that it was Dívar's religious convictions that prompted him to cast his vote against the relaxation of the law submitted by the government. One of the most controversial points was to allow 16-year-old girls access to the procedure without having to obtain the consent of their parents. The bill was redrafted by the executive.

A lifelong bachelor, Dívar doesn't belong to any professional associations but engages in activities where he can express his strong Catholic convictions. He makes trips to the Holy Land, often returning with wooden rosaries for his co-workers.

Like many who have served on the High Court, Dívar was on terrorist group ETA's list of targets. Some years ago, on May 13, an ETA commando unit placed a car bomb along one of the two routes Dívar usually took to get to the High Court in Madrid. But that day he went a different way, and the bomb was discovered and deactivated before it went off.

The judge has since attributed this failure of this attempt on his life to a miracle performed by the Virgin of Fatima, because it was her feast on the day of the incident - a parallel interpretation given by Pope John Paul II after the pontiff barely survived an assassin's bullet on the virgin's feast day in 1981.

Dívar has given religious conferences at the Madrid Archdiocese concerning how to be a good Christian while leading a public life. In a paper posted on the Brotherhood of the Valley of the Fallen's website entitled "Justice and John Paul II," the judge touches on such themes as divine justice, God's law, judicial independence, matrimony, family and abortion.

In the end he writes: "You will find the only true justice by solely loving God and letting him love you while leading a coherent and upright life."

In an administrative order dated May 4, the Madrid government began restricting illegal migrants from accessing medical services just 10 days after the central government issued a decree proposing changes to Spain's free-treatment-for-all policy as part of a series of budget cut measures.

The order has already been criticized by patient associations, such as the AIDS advocacy group Seisida.

According to the internal document, which was given to EL PAÍS, any migrant who cannot present a residency card will be denied free healthcare.

Beforehand, migrants only had to show that they were registered on municipal rolls in order to apply for a health card.

"They will continue to receive medical treatment," insisted Mato in statements to the state radio station RNE. "Health services are guaranteed because we all hold that right; the royal decree does not change the current legislation and therefore the General Health Law [which talks about the universal right to healthcare] remains applicable 100 percent. [...] All regional governments are planning to reach agreements with organizations that assist immigrants outside the system, so they can also receive primary care assistance."

But Mato and Echániz did not clear up what will happen to people who require HIV medication, which is only available at hospitals. Neither health spokespersons nor Popular Party sources were able to explain how this issue might be handled.

Currently, antiviral drugs (which have a price tag of around 8,000 euros a year in their simplest combination) can only be purchased at hospital pharmacies. Even if someone had the means to pay for them, they could not buy them at a regular pharmacy.

What's more, the drugs need to be taken for the rest of the patient's life, not only because of their beneficial effects for the individual, but also because this is the best way to prevent the virus from propagating.

And it's not just HIV drugs. Some cancer treatments are similarly inaccessible, although these normally only need to be taken for a period of months.

In order for people without a health card to continue having access to such medication, a method needs to be devised to let them obtain the drugs directly from hospital pharmacies, but this has never worked so far.

The government's announcement has drawn criticism from HIV support groups. On Wednesday, over 300 organizations protested simultaneously in seven cities over the cuts, and criticized the fact that the conservative government has not yet appointed a head for the National AIDS Plan.

Meanwhile, Madrid's regional authorities have already started denying health cards to immigrants who cannot provide proof of legal residency.

Catalonia, on the other hand, has defied the central government and announced it will continue to provide basic health care to illegal immigrants.

Sources in the Catalan regional government said that "all measures must be adopted to put a stop to health tourism and to contain spending in order to guarantee the sustainability of the system."

But this, it said, did "not include excluding from primary care and public health a community that is on the local rolls and therefore guaranteed the health card and access to the health system."

Otegi, a longtime spokesman for the political wing of terrorist group ETA (variously known as Herri Batasuna, Euskal Herritarrok and Batasuna), has been in and out of prison for decades on various convictions connected with terrorist activities, including the kidnapping of a Basque businessman. He has also been an member of the Basque Parliament. In recent years, Otegi became the leading figure in a move by radical Basque sectors to distance themselves from ETA and pursue their goal of sovereignty through legal means.

Some critics viewed this merely as an attempt to get former members of the outlawed Batasuna back into politics in time for Basque elections last year, in which Bildu, a coalition that included Batasuna members, effectively won the most votes.

The High Court originally sentenced Otegi (and his colleague Rafael Díez Usabiaga) to 10 years for terrorist association and for being "authorized spokesmen" for the Basque radical left as decided by ETA in a coordination committee. Within this committee, Otegi and Usabiaga were "the driving forces" behind ETA's new strategy, which favored political methods over military ones, but without actually renouncing their weapons.

Otegi has already served three years of that sentence. However, the Supreme Court now rules that "there is no difficulty in considering them part of the terrorist group ETA" since the criminal organization put them in charge of "the job of negotiating and bringing together the pro-sovereignty forces in the Basque Country," acting under ETA's aegis and direction.

But, says the court, "this coordination does not justify his classification as a leader." Instead, both Otegi and Usabiaga are seen to have held similar positions as other defendants in the same case. In Otegi's case, he was basically the "visible face for the media of the new strategy conceived by ETA."

The man who promised to get explanations in the courts about the multi-million pension of disgraced former president Teddy Bautista - arrested last year on embezzlement charges - didn't hesitate to dedicate himself exclusively to his new role, and lowered his salary to a sixth of his predecessor's (around 60,000 euros) will now lead Spain's most important copyright management organization for the next four years.

That said, the fight for the SGAE crown has been a tough one... and it can't be ruled out that it may go on being so.

The 37 members of the supervisory board who attended the meeting on Tuesday arrived around 3.30pm. The tension was palpable and the different factions clearly identifiable.

Perhaps the most relaxed of those who went in to vote were the publishers, who as soon as they arrived announced, via Álvaro de Torres of Warner, that they were thinking of supporting the Reixa block. Their philosophy, they said, was not to change the majority feeling of the authors and that handed victory to Reixa, leader of the Aunir group of candidates. That solved part of the mystery. But in the house of the authors you never know.

Although secret, the vote revealed a pronounced tendency. The new president obtained 24 votes: the 13 that he put forward at the meeting, eight from the publishers and three more (presumably from the candidacy led by Jaume Sisa, which comprised six representatives).

José Miguel Fernández Sastrón got 11 votes: nine that were his plus two more. The two abstentions came from Manuel de la Calva (who put himself forward with the Centrados candidacy) and a member of Sisa's group.

"We have defended the past in a self-critical manner. Now a new SGAE is born," declared the new president elect, clutching the piece of paper bearing his notes. It was a statement he had time to think about. Over a long week of deal-making and meetings, even when it wasn't so clear that he was going to get it, he must have imagined the moment thousands of times.

"We want a discreet, not a presidential SGAE, whose management collects to the maximum," he continued. "You [journalists] can come here every week, but not out of morbid curiosity. Morbid curiosity is finished with."

Reixa went on to list his priorities: to revise the 2012 budget; to carry out an efficiency plan; to resolve the problem of the organization's Arteria network of theaters; to reduce the president's powers; and to revise the statutes.

That last aspect could be key to making its president more relaxed. That's because an hour before entering the room it wasn't clear if Reixa was going to be able to be appointed to the role owing to one of the articles in the new regulations.

According to the section ast issue, the validity of which Fernández Sastrón has defended this week (legal reports were exchanged in the meeting), Reixa would not be able to sit on the management board.

The argument still needs to studied by lawyers, but it didn't convince the majority of the board, whose members in private have shown themselves to be tired of trouble and obstacles in recent days and decided to give their support to the head of the list of candidates with the most representatives.

"The board of directors is hoping for anything apart from a legal row," said the president elect.

Reixa now has to form a management team and allow himself to be advised by SGAE employees, who have remained refined and impartial in the background. He thanked them several times on Tuesday.

Javier Vidal, the head of SGAE's northwest delegation will be his cabinet leader. For the post of director general - the most important below that of the president of an organization that brings in 250 million euros a year - his candidacy says the intention is to organize a public tender to find an independent executive.

SGAE now takes on the difficult task of burying the past and devoting itself to its problems. Among other things it will have to negotiate compensation to authors for private copies made of legally purchased versions of their works; actively participate in the reform of the Intellectual Property law; and define its role in the application of the now passed "Sinde-Wert" Law, which aims to combat illegal internet downloading.

Most importantly, it will have to try to clean up its damaged public image through more transparent management and a better relationship with its clients (those who receive payment for the use of their copyrighted works).

But all this is to come - after the next time Reixa gets up on stage. It will be this Saturday, in Ourense in Galicia, to celebrate 30 years of his group Os Resentidos. An old punk has entered SGAE.

Under regional premier Eduardo Zaplana, the Valencia government not only linked the architect's fee entirely to the cost of the project, but also modified contracts that had been signed between Calatrava and the former leader of the region, Socialist Joan Lerma. The changes saw the percentage of total costs he was due rise to 12 percent, when originally he was due to receive 3.5 percent of total costs and 4.5 percent of the management of the project.

The project was first approved by the regional government in 1991 but construction didn't begin until late 1994. The City of Arts and Sciences was inaugurated on April 16, 1998. The Valencia government ended up spending 1.282 billion euros on the entire project.

Last week, Ignacio Blanco, a deputy with the Valencia United Left coalition (EUPV), denounced that the renowned architect collected more than he should have from the regional government, calling the project "a waste" of public money.

Calatrava, who reportedly received 94 million euros for the project, defended his fees in a statement issued on Sunday, saying that some lawmakers were taking advantage of the current financial crisis in Valencia to bring up the issue. He said that he had never been questioned about his earnings in the past.

Among the contracts that were modified after they were signed, according to Blanco's documents, was the construction of the 17,500-square-meter Umbracle and the Palau de les Arts, which was the most expensive part of the entire project, costing 478.5 million euros.

Another contract, for the construction of the Pont de l'Assut de l'Or, was signed after the project was completed, according to Blanco.

"All of this is unacceptable and presumably illegal," the lawmaker said. "This shows that there was favoritism and irresponsibility on behalf of the [then-] government."

Blanco's complaints have caused a stir among Valencians, who view the City of Arts and Sciences as their crowning architectural treasure. A website set up on Monday by the EUPV, with all the details of the contracts, received more than 47,000 hits in just one day, while the Twitter hashtag #calatravatelaclava (Calatrava will rip you off) became a global trending topic.

The United Left deputy has in his posession a contract signed in 1991 by Santiago Calatrava detailing the original plans for the City of Sciences, as it was known then. He also has its modification, signed in September 1996, which establishes the need to include a parking lot in the plan - which would eventually become the Umbracle esplanade and exhibition zone - as well as the fees for Calatrava, amounting to 7.5 percent of the total cost of this part of the project, plus 4.5 percent in fees for supervising its construction.

A similar modification was applied to another contract, signed in December 1992 by Calatrava and Antoni Birlanga, the then-economic commissioner and president of the public corporation, Valencia Science and Communications SA (Vacico), for a communications tower. In 1996, the contract was changed to scrap the tower and, in its place, construct the Palau de les Arts. It was at this point that the project's name was changed, from the City of Sciences to the City of Arts and Sciences. The percentage of the architect's fees was also set in this amendment, amounting to 12 percent of the final cost.

This period was followed by the Barcelona Olympic Games, which marked the beginning of the internationalization of larger Spanish companies and a period of economic development that turned Spain into a positive example for countries joining the European Union. Per capita income reached the EU 15 average, the population swelled by six million people, the number of universities skyrocketed and for 14 consecutive years, starting in 1995, the economy grew by an average of 3.5 percent a year. The grand finale was the housing boom, when international experts officially christened Spain's "economic miracle."

Now, Spain is in its fourth year of crisis, with 5.5 million people unemployed and a second recessionary dip. The economy is also witnessing the deterioration of the intangible: its brand. This can be seen in concrete figures in the financial markets but also in more indeterminate aspects, such as the reemergence of the old clichéd images of wine and flamenco, or in the disdain of European leaders such as Nicolas Sarkozy and Mario Monti for their Spanish neighbor. Spain is no longer in vogue; Spain is trading low.

"Nobody wants to be like Spain now. Spain is only good for flamenco and red wine," Richard A. Boucher, the deputy secretary general of the Organisation of Economic Cooperation and Development (OECD), said a few weeks ago. He made the comments at a seminar in Marseille organized by NATO's Parliamentary Assembly, and in the presence of Socialist lawmaker Diego López Garrido, the Spanish representative in the forum. "At a cocktail gathering later, representatives of various countries, including Canada, Germany, Portugal and France, approached me to express their condemnation of his words, and Boucher later sent a letter of apology. There is a disparity between Spain's economic woes and the deterioration of the country's international image, of its credibility, and this loss of prestige is costing us a lot of money," says López Garrido, former secretary of state for the European Union. Garrido called for greater "non-partisan solidarity" in defense of Spain.

Along with the bursting of the credit bubble, trade relations have also been marked by a feeling that there has been some kind of rupture in Spain's golden image, following a period of economic fortune that even included sports victories.

"In the past, we let ourselves get carried away by euphoria; we were the apple of the world's eye. But now we are at the other extreme," says Miguel Otero, director of the Leading Brands of Spain Forum, an institution formed by the government and large Spanish companies. But he doesn't approve of half-measures. "What needs fixing is not the country's image, but its real problems; with what is happening here, it's difficult to go abroad and change perceptions."

In 2008, the Financial Times included Spain in the PIIGS countries, an acronym for Portugal, Ireland, and later Italy, Greece and Spain, and wrote that the flying pigs were now mired in the muck. "It wasn't an insult, it was a classification, and the problem wasn't that they called us that, but that we were in the group," says Otero.

He stresses, however, the need to highlight the positive aspects of the economy in order to prove that not everything was a mirage, such as the global expansion of big groups such as Inditex and Mango. Unfortunately, these highly publicized commercial successes mask the fact that, in general, the Spanish business world, which is comprised mainly of small and medium enterprise, still has a long way to go in terms of its internationalization. "Exports per capita in Spain total $5,400 [3,300 euros] versus $9,500 in Italy [5,800 euros] and $16,000 [9,800 euros] in Germany," Otero points out.

Selling Spain today is not easy. And nobody checks the faint pulse of flagging international confidence more often than those in charge of investor relations departments, who are tasked with promoting the benefits of Spanish firms abroad. "We are taking a beating. Even though your company is on a solid footing, you are penalized for the Spain name. Even if you offer a fantastic deal, you are penalized by investors. The worst part is that they don't consider Spain a country suitable for investment; they have ruled out the possibility of putting money into this country," says the head of investor relations for one large Spanish corporation.

International investment funds have changed their tune significantly over the past few years. "Now, 60 percent of our meetings are focused on macroeconomic issues; we bring analysts who specialize in these subjects with us to meetings. Nobody wants to hear about investment returns in 2014; there is a lot of mistrust with regard to the medium term," he adds.

The finger of blame for this mistrust can be pointed in a very specific direction: the stock market and government bonds. The Spanish bourse has fallen more this year than it did in all of 2011 (more than 18 percent), placing it among the worst-performing in the world. And 10-year government bonds are currently trading with a yield of six percent, more than 400 basis points (or four percentage points) above the benchmark German bond. In 2007, Spain's risk premium - which acts as a barometer for measuring the creditworthiness of a country's economy - averaged 8 basis points.

Daniel Gros, director of the Brussels think-tank, CEPS, warns that "the international perception of Spain has suffered a blow because the country's government avoided acknowledging the extent of the housing bubble. Initially, the banking sector had a very strong image, but this has also been tainted because there are new losses every year." Moreover, "the new government botched the communication of its fiscal adjustment plans."

For Gros, "the banking system must be cleaned up as soon as possible; realistic housing prices must be set, ones that are lower than the current ones; the labor market must apply the reforms; and the government must fulfill the promises it has made to its partners."

The Ministry of Foreign Affairs also believes the moment has arrived for economic diplomacy. The agency plans to present a new marketing strategy aimed at polishing up Spain's tarnished image abroad in an official act presided over by the king. Ambassadors are to receive new training in foreign trade, and embassies will be instructed to provide greater attention to Spanish companies abroad. "The idea is that all the different bodies and all their activities are aimed at promoting the Spain brand," sources at the ministry explain. The project also includes the appointment of a special commissioner for the Spain brand. Originally scheduled for a couple of weeks ago, the presentation was postponed due to the budgetary debate in parliament. Now the government is waiting for the king to recover from his hip operation before going ahead.

The Elcano Royal Institute, which has just published its first global presence index (based on 2010 figures), says that Spain ranks ninth in the world as a foreign investor. The Ministry of Foreign Affairs has just witnessed Argentina's nationalization of Repsol's subsidiary in that country, YPF, and not long after, Bolivia announced the nationalization of the subsidiary of Spain's national electric company there. When announcing her country's move, Argentinean President Cristina Fernández de Kirchner made a mocking reference to an elephant's trunk, in light of the scandal over the king of Spain's hunting trip to Botswana, where he ended up breaking his hip.

Madrid is, undoubtedly, going through a rough patch with its partners. During his failed re-election campaign, Nicolas Sarkozy used Spain as a bad example several times. "Look at the state of Spain after seven years of socialism," the then-president and candidate declared at the beginning of April. Sarkozy also spoke of "the major crisis in confidence that the great country of Spain finds itself embroiled in now," adding: "There is not a single French citizen who wants to go through what Greece did, and what Spain is experiencing right now." More friendly fire came from a country also experiencing serious budgetary imbalances: Italy. The country's prime minister, technocrat Mario Monti (who is becoming more political with each passing day) blamed Spain for Italy's risk premium problems.

Raphael Minder, Spain and Portugal correspondent for The International Herald Tribune, lived in Spain in the 1990s, returning again in April 2010. "I don't think that Spain is an isolated case, but due to the size of its economy, it causes more concern than Ireland, for example," he says. "But north-south stereotypes are not really useful in this matter: Holland has also stirred doubts," he says, in reference to the Liberal-Christian democrat government losing the backing of the far right for cuts designed to help the country reach its budget deficit target.

Spain's economic instability is not an issue of perception. But it is a reality, and the economic figures refuse to budge. "The perception abroad is really no different than that in Spain: optimism is fast disappearing," adds Minder.

It's true that the crisis of confidence is also palpable inside Spain's borders: consumer spending is in free-fall, credit has dried up, and Spaniards, a society already given to self-flagellation, are seeing that their economic splendor had feet of clay.

Víctor García de la Concha says he has not noticed a fall in Spain's prestige. Since he was appointed to head up the Cervantes Institute more than two months ago, he has receiving countless invitations to set up centers in other countries. "There is no indication of a negative country image at all; it is buffered by the general European crisis and the fact that there are still bugs in the EU system that need to be worked out," he says. He adds, however, that "there is a need to transmit a new, different message in Latin America, which is based on common culture and interests."

"Spain's reputation, which can be understood as admiration, respect and trust toward our country by citizens of the G8 countries, fell between 2010 and 2011, but it is still quite strong, and comparable with neighboring countries such as Great Britain and Italy," says Fernando Prado, Spain director for the Reputation Institute, a global reputation management consultancy. He warns, however, that though Spain "is still strong in soft qualities such as lifestyle, friendly people, and leisure, entertainment and cultural offerings, there are weaknesses in hard qualities such as innovative capacity, technological development, brands, and well-known and successful companies."

Which is to say that there is a need now, like the one Verdú described in 1985, for Spain to put a new spin on what it has to offer, one that brings it back into the global embrace and puts it in vogue once more. Marketing and diplomacy, however, need the backing of an economy that regains its ability to inspire confidence.

Conversations like these are increasingly common on social media. Big-name companies, who started off using social networks as just another marketing tool, are now afraid of the damage that an angry customer can cause with his or her comments on open communities. In response, they have opened accounts on the most popular networks, especially Twitter and Facebook, in order to address doubts, complaints, claims and even insults. Experts believe this is a growing trend, and praise the advantages of these new channels over traditional customer service phone lines, which often involve long waits, ineffective automatic voice menus and high calling costs.

The key is to make the customer feel like the company is listening. "We aren't used to getting answers," says Enrique Dans, professor of information systems at IE business school. "Some people post their complaints on the networks as a last-ditch effort - more as a way of venting rather than in any real expectation of getting a response. But then suddenly someone responds and shows concern over the problem, and this creates empathy. For starters, this contributes to transforming negative attitudes toward the brand. Another advantage of these channels is that they eliminate the long waiting times you have on the phone while the operator attending to you is working."

The new social media forums also help keep the conversation short and to the point. As Dans points out, "on Twitter, you have to say what you want to say in 140 characters." He stresses, however, that it is not enough for a company to try to appease a dissatisfied client with a brief phrase; in addition to comprehension, the customer also expects solutions. It's about using the networks, says Dans, to help the consumer, and not to inundate them with hundreds of marketing messages, which can be counterproductive. He gives the example of US cable operator Comcast, a pioneer in the use of Twitter for providing customer service. Until a few years ago, the company ranked at the bottom of customer satisfaction surveys. Indeed, for a time there was a surge in critical pages such as ComcastMustDie.com, and one user even went so far as to post a video on YouTube of one of the company's technicians sleeping on his sofa while he was kept on hold by his own company.

Consequently, one of the company's employees, Frank Eliason, opened a Twitter account in April 2008 under the name @comcastcares. His aim wasn't to improve the company's tarnished reputation, as Comcast's competitors were doing on social media at that time, but to offer specific solutions. People were initially skeptical of the initiative, believing it to be just another marketing ploy, but little by little the company proved it was coming good on its word and today Comcast is the operator with the highest customer satisfaction ratings in the United States. Comcast's success motivated other companies to follow suit, and today almost all of the larger US brands offer customer support through Twitter and Facebook, which is often integrated into their traditional call-center activities.

In Spain, this trend is still in its early stages, but it is on the rise. A study of 75 big brands by tech consultants IZO in March 2011 showed that the majority of them were still using social media as marketing spaces. Though 76 percent had Twitter accounts, 23 percent of the companies had not posted anything in the previous two weeks, and 30 percent had not responded to a user in over a month.

Nevertheless, according to IZO's findings, the rate of reply is increasing every year. This is most prevalent in the telecommunications sector in Spain, above all because this is the sector that receives the highest number of complaints. According to a recent report from the Federation of Independent Users and Consumers (FUCI), 50 percent of the complaints the agency received in the first two months of 2012 concerned telephone and internet operators. Movistar, which launched on social media two years ago, now has 50,000 followers on Twitter and more than 100,000 on Facebook. The cellphone company uses these channels to offer special promotions, clarify doubts and provide additional product information - but its success stems mainly from the fact that it always responds to comments and incidents.

"Our users really appreciate the fact that we listen to them. There are many cases of people who were initially upset but who changed their perception of us just because they felt they'd been listened to on social media. But more than anything, clients value the fact that we make note of criticism and take action in order to change things," says Paz Noriega, director of National Communications for Telefónica.

An image crisis that originated on the internet led Vodafone España to increase its activity in these spheres. At the end of 2009, one of the company's customers, using the pseudonym "grankoala," wrote the following on a chat forum: "I called Vodafone's 122 line about a problem with my number, and a young lady asked me to hold while she looked into it. I have now been on hold for 50 minutes, listening to music. What should I do? Hang up or wait?" The other users advised the customer to wait and 27 hours later, after the developing story had gone viral without the company noticing it, grankoala wrote: "I regret to inform you that the phone company has just hung up on me!"

"We learned a lot from that. It really made us stop and think, and it was a catalyst for our social media launch," says Ignacio Casado, head of Vodafone España's Online Department. Today the company boasts 34,000 followers on Twitter and 170,000 on Facebook, in addition to having a dedicated chat forum on the corporate website.

Politeness, quick response and a more informal register than that used in the other means of customer service are the principles guiding the majority of the teams who work on the social media accounts of the larger companies. They try to keep conversation polite at all times, although this is not always an easy task. "You have to carefully navigate through some intense moments with people who are really ticked off," says Jonathan Jiménez, community manager for Vodafone. "Being insulted is no fun, but we try not to lose control because part of our job consists of precisely that: calming down people who are upset. We try to offer quick solutions if possible, and if not, we redirect people to the appropriate departments."

Although companies try to answer every request, this is not always possible either. Sometimes, they must be prioritized. "It's clear that if a complaint comes from a customer who has a lot of followers, the company in question is going to reply more quickly, because a lot of people are able to see complaints on these public channels; they are no longer confined to the more private arena of a telephone conversation," says Enrique Dans.

The launch of Spanish airline Iberia on social media was also precipitated by a crisis: in that case, the ash cloud caused by the eruption of the Icelandic volcano Eyjafjallajökull, which led to the cancellation of thousands of flights in Europe in April 2010. "We were still in the initial stages, looking for consultants and deciding which was the best strategy for us, when suddenly the volcano erupted and people began filing claims and talking about it on social media. We immediately got to work, without having clearly defined our strategy and without the help of experts in the field. We were driven by the need to inform and the desire to help those affected. We couldn't solve every problem, obviously, but clients picked up on our willingness to help, and all of a sudden we had a lot of followers. It was the space the company used to face up to the situation, to explain the problems and to try and help," says Margarita Blanco, the airline's deputy director of media and internal communications.

Though a willingness to help is fine, customer service is not provided through good intentions alone. "At the end of the day, the problem is the same as that with telephone service or personal attention. Providing assurance on the internet isn't worth anything if strong interdepartmental relationships that allow customers' problems to be solved quickly and effectively do not exist. A greater degree of internal integration and communication is needed for that, and in that regard, we still have a way to go," says Carlos Molina, vice president of innovation at IZO.

Consulting companies like IZO provide ever more sophisticated technology to help companies more efficiently manage their online claims. There are tools for tracking every comment posted about a brand in social media or forums on the internet. Other programs automatically generate responses to frequently asked questions and, while still slightly out of reach, some companies are trying to develop a program that can group comments as negative or positive. "Language is full of ironies and complicated twists that machines cannot yet properly decipher," explains Jason Vitorino, technical director at E.Life, another company specialized in social media management and follow-up. "Moreover, nobody likes talking to a robot, and dialogue is particularly important on social media. Even though we use technology for many things, we have to avoid mechanical interaction."

The information gathered by comment tracking is not just good for improving customer service. "It's really valuable data that, when properly cross-referenced, is also useful for determining consumer preferences and needs and for developing new campaigns for marketing and attracting new customers," says Enrique Burgos, a social media expert and marketing director for advertising agency QDQ. He gives an example from personal experience: "One evening I sent a tweet saying that I was about to see a ballet in the Madrid Royal Theater. A few seconds later, I received a reply from a nearby restaurant suggesting that I have dinner there afterwards. I liked the look of it so I immediately sent another tweet to reserve a table."

Does the fact that their comments are being tracked create distrust among users? "It's true that we track blogs, chat rooms, and social media, but if we see that we can't help, we don't interfere. It's not about persecuting people. We try not to become involved in conversations except when they may lead to something else or when we can help," an Iberia representative says.

"In any case, people don't mind when a problem is solved for them, even if they haven't asked for help. A pleasant surprise doesn't usually bother people," says consultant Jason Vitorino.

"There has been a cultural change. People were afraid of ATMs at first, and online shopping too. Also, the internaut is free to post what he or she wants; nobody is forcing them to write anything," says QDQ's Enrique Burgos.

Evidence that internauts do not seem to be overly concerned with companies sniffing around their profiles can be found in the case of a KLM campaign launched two summers ago. The airline searched the accounts of its passengers on two different social media sites, Twitter and Foursquare, in order to find out their likes and dislikes and the circumstances under which they normally traveled. While these passengers waited, bored in airport lounges, for their flights, the company presented them each with a gift: a bottle of champagne for a pair of newlyweds, an electronic distance measuring tool for a running enthusiast, first class upgrades for a woman with two small children, and even a small first aid kit containing hangover remedies for a group headed out on a bachelor party. The campaign was a success and bothered nobody - those who received the gifts were delighted, and none felt as if their privacy had been invaded.

Moreover, while all eyes are trained on the economy, other problems keep popping up to worsen affairs: Argentina's expropriation of Repsol affiliate YPF, corruption scandals, trouble with the monarchy, and above all, a growing concern over the degree of social change taking place: are healthcare and education cuts temporary measures, or actually a new social model that is being ushered in with no public debate under the pretense of the crisis? Is the constant pressure on regional governments to comply with budget restrictions simply camouflage for ulterior motives concerning Spain's territorial model?

The voice of calm in moments of deep crisis is normally the prime minister - the person in whom citizens have deposited their trust. And in Spain right now, Mariano Rajoy enjoys an uncommon advantage: he has four years of parliamentary majority ahead of him and a clear political path, circumstances that his European counterparts must envy, given that many of them are facing upcoming, and uncertain, elections. Despite this, the prime minister's image has not been consolidated at home nor abroad during these, his first 100, anxiety-ridden days of power.

People close to the prime minister believe that Rajoy is genuinely surprised by the lack of backing his measures have received in the international markets and by the intense and relentless pressure they are exerting on Spain. Rajoy complains that "some people," especially outside Spain, do not appreciate the unusual strength of his position, and he cannot understand why the Italian prime minister, technocrat Mario Monti, who does not enjoy the same level of political power, is able to instill more confidence than Rajoy.

"I, and this government, can pass whatever austerity measures we feel are called for at any given moment," he bragged to a Socialist politician. And it's true that there are few European governments who could manage to get both personal and value-added tax hikes approved, while simultaneously shaving 10 billion euros from healthcare and education, without causing major tremors in their respective parliaments.

Yet those in the Spanish prime minister's camp are wondering how to stem the rapid loss of popularity he and his government are experiencing - eight percentage points in less than 100 days. It won't be easy, not only due to the harshness of the government's austerity measures, but also because citizens see them as improvised and forced, brought in under the pressure of foreign markets and ratings agencies. They watch baffled as the government says one thing one day and another thing the next, without any plausible explanations from the prime minister that might help convince them that decisions are well-thought-out steps and not just deplorable stop-gap measures.

Rajoy's own personality does not do him any favors. The 57-year-old Galician, who has had a long political career, has always preferred ambiguity and little public interaction. He has never bothered to improve his communication skills with citizens nor has he based his leadership on his ability to persuade. Nobody can remember a press conference where Rajoy made more than just a superficial appearance. In essence, he has presented himself as a long-distance runner - one with the ability to govern.

His trademark talent for using indecisiveness to his advantage is floundering in this new setting, one much more difficult than normal in which Spaniards are rejecting uncertainty and demanding reassurance. And it's still too early to even consider a cabinet change that would pave the way for an economic leader who can convey greater strength and leadership than Cristóbal Montoro and Luis de Guindos are able to offer or to turn to the Socialist opposition, which has not yet recovered from its catastrophic electoral defeat.

Given this situation, various members of the Popular Party (PP) are urging the prime minister to put his characteristic remoteness aside and to establish a greater presence - beyond the obligatory and sporadic parliamentary sessions.

"Rajoy is a conservative in the strict sense of the word: he's averse to change, somebody who has always believed that if you don't do anything, you can't do anything wrong. And he has taken over a country in the middle of the worst economic crisis in its democratic history, a situation that requires constant changes from him, and at breakneck speed. This is the opposite of his nature," explains one PP politician who worked alongside the prime minister in the party and who is not optimistic about the chances of him changing his political ways now to bridge the gap with the electorate.

Still, he believes it's unfair to attribute to the prime minister a secret desire to unleash the full extent of the PP's austerity plan on citizens. "On the contrary, Rajoy is constantly saying that he does not like what he is doing at all. He doesn't talk about economic models or trimming Spain down but of a series of separate and unpleasant measures that are necessary in order to move forward. In a way, you could say that he is legitimizing what he is doing."

"While it is true that the austerity measures are not based on some liberal ideological discourse," says a veteran PP deputy with Christian democratic leanings, "the policies that are being passed tend to lean in that direction." He feels that the economic reforms are not so much products of Rajoy's own ideology as they are the result of his desire to provide quick responses to Germany's demands, which the prime minister sees as a way of recovering the confidence he longs for, in addition to the wide berth the prime minister allows his ministers, "many of whom have their own ideological prejudices."

The prime minister's opacity and the difficulty in knowing what he is thinking, as well as what type of social and state model he wants (beyond one that is efficient and economically stable), is the cause of constant confusion. Alarmed by statements made by Madrid premier Esperanza Aguirre, also of the PP, about the sovereignty of regional governments, Rajoy took advantage of his appearance in the Senate to state that he has no intention of redefining Spain's federal system. His brief statement did nothing, however, to stem the countless incursions made by ministers and deputies in this area, especially with regard to the situation in Catalonia.

Overwhelmed by economic issues, the prime minister doesn't seem to be paying a lot of attention to the evolving state of affairs in the northeastern region, where the CiU Catalan nationalists have managed to center debate on the so-called "fiscal pact" (an economic plan similar to the Basque Economic Agreement). Catalans feel that they have become guinea pigs for cuts in social spending, and, according to opinion polls, are increasingly convinced that their difficulties stem from their lack of economic sovereignty.

This push for economic freedom has many experts worried, especially given the weakened state of the Catalan Socialists as an integrating force. The PSC, after failing in its attempt to position Carme Chacón as general secretary of the Socialist party, has some tricky political footwork ahead of it. "They won't even give Carme a glass of water in Madrid," declares a deputy who supported her candidacy. "Neither does she have a role to play in Barcelona, but some people hope she will eventually organize a new platform." The fact that the new PSC secretary, Terrassa mayor Pere Navarro, is not a member of the Catalan parliament makes the regional party's reconsolidation even more precarious, something that deeply concerns them given the possibility of premier Artur Mas moving regional elections ahead to 2013.

Those close to the prime minister say he is "completely absorbed" by economic issues, and that "political" matters are being handled by the deputy prime minister, Soraya Sáenz de Santamaría, who has not yet carved out her own identity within the PP, opting for the time being for an administrative role. This allows her a great deal of power in daily affairs, but limits her influence over the party and its internal trends and movements.

That's why, says a former PP leader, that Javier Arenas, a close confidante of the prime minister's and a skilled negotiator, is likely to come back to Madrid from his role as PP leader in Andalusia. Rajoy wants Arenas close by so he can manage the PP, without this meaning the removal of Dolores de Cospedal from her position as general secretary. Arenas could also control movements within the party, in which to date only one "prime ministerial" candidate has emerged: Alberto Ruiz-Gallardón. "A proposal as ideologically combative as the one he presented in the Justice Ministry is more easily explained in terms of an internal maneuver than an authentic government proposal," says a former PP minister of Gallardón's proposed legal reforms.

He believes that Mariano Rajoy is right in saying that there isn't any other European leader right now with as free a hand as he has. The only upcoming elections that could prove challenging for Rajoy are those in his native Galicia in the spring of 2013. Nor are there any other European leaders who face such a weak opposition party.

The new government's abysmal start (something openly acknowledged within the PP) has not cost them more political capital because the Socialists have not yet regrouped. Though the Andalusian and Asturian elections killed a bit of the pain for Alfredo Pérez Rubalcaba - who is still somewhat blurry-eyed after the battle for secretary general and the first few regional congresses - the party is still inwardly focused and not yet operating with its full force. Furthermore, the pact in Andalusia with United Left has created more problems than the Socialists will admit, because it reveals what a "leftwing government" is capable of realistically achieving under the current economic circumstances.

For the Socialist and Popular Parties alike, the main concerns are the evolution of the economic situation and the sweeping effects of spontaneous social movements. The PP in particular has been waiting with bated breath for a possible student uprising over steep hikes in university fees and education cuts.

Neither party really wants any type of economic pact, except for maybe a discreet solution to the capital-challenged financial sector. In all other areas, neither the Socialists nor the PP believe there is any benefit in mutual solidarity or in the possibility, at least for now, of steering clear of arguments over basic economic issues. But "the two main parties should be careful," warns sociologist Belén Barreiro, "because right now the PP's loss is not the Socialists' gain, but fodder for smaller parties, as has happened in Greece."

In fact, none of those consulted in the PP or the Socialists even believed in the chance of a cross-party pact that would boost the prestige of embattled Spanish institutions such as the Constitutional Court or the General Council of Judicial Power, let alone the possibility of reaching an agreement on state broadcaster RTVE. Indeed, everything points to months of new confrontations and back-and-forth accusations.

"The Socialist party must focus on its parliamentary life and internal restructuring," says a Socialist deputy. Indeed, parliamentary debate must play a strong role in this government, but the first few sessions have been notable for the exact opposite. "Our current parliament has a lower level than previous ones," various veteran PP and Socialist parliamentarians plainly admit. This was evidenced by the deplorable budgetary debate, which the PP managed to reduce to a mere string of accusations against the previous government while the Socialists were incapable of escaping from the trap.

"We need a lot more gray matter," says one Socialist deputy. Rubalcaba, whom everybody in the Socialist Party believes will be the next candidate for prime minister, given the lack of a credible opponent, is planning three conferences. The first, which will focus on the party's relationship with society, including holding primaries and how to improve relations with supporters and voters, will be organized by party secretary Óscar López. The second, on subjects strictly political, such as the regulation of the monarchy, relations with the Church and the defense of democracy, will be organized by former cabinet minister Ramón Jáuregui.

The organization of the third, which will not be held until after elections in Germany and which will be given over to economic policy, has not yet been assigned to anybody. This could be because Rubalcaba has not yet decided if he wants to have a strong economic advisor, who can lead the debate over the next few months, or if he, like Rajoy, will take on that role himself. Many Socialists prefer the designation of an economic spokesperson as they fear Rajoy's silence may be passed onto Rubalcaba or, in the best of the two cases, that their secretary general may become entrapped in a never-ending debate with the sector's two ministers.

The prime minister said on April 13 that it was "not possible" for the EU to rescue Spain: "If we don't meet the deficit targets, they will stop lending to us, and if no one lends to us, they will have to rescue us. Because the government rules out the possibility of a rescue and intervention, that's why we're implementing reforms."

Determined to fulfill the constitutional amendment agreed last year with his predecessor José Luis Rodríguez Zapatero that obliges the government to balance its books well ahead of its 2020 deadline, the prime minister's goal for this year is reduce the deficit to 5.3 percent. He says he can do so without reducing pensions and unemployment benefits or cutting civil service salaries, which collectively make up 40 percent of government spending.

Few, including the Bank of Spain, believe that Rajoy can pull it off without going back on his word.

"It is extremely unlikely that the current budget will enable him to reduce the deficit by 3.2 percentage points of GDP: spending has been cut by just 1.1 percent on last year," says José Ignacio Conde-Ruiz of the economic research group FEDEA. "To reach his goal we will have to make the biggest cuts in modern history, and that can only be done by taking the knife to major items like salaries, pensions, and other welfare benefits. Then there is the question of whether doing so would be a good idea at a time of deep recession."

"Reducing the deficit needs to be done more gradually: austerity in itself is not enough," says Antoni Castells, an economist who advised the previous Catalan regional government. "Spain is being forced by Brussels to push ahead, and anything it says to the contrary will only undermine its credibility further," he adds.

Santiago Lago, a professor of applied economics at the University of Vigo, says the government's revenue estimates are overly optimistic, particularly its controversial one-off tax amnesty for individuals and companies hoarding cash and undeclared assets. "Research into past amnesties of this kind in Spain suggest we should be very cautious," he says.

The Economy Ministry says that its calculations are "cautious and reasonable." Revenue for this year is estimated at 119.2 billion euros, 14.28 percent up on last year, and which includes 12.2 billion in assorted tax hikes."

Meanwhile, the Bank of Spain is also pessimistic about Rajoy's deficit estimates. "The projected course of total revenues in the budget is subject to downside risks," The governor of the Bank of Spain Miguel Ángel Fernández Ordóñez told a parliamentary committee this month. Fernández Ordóñez said revenue estimates should be "prudent" as he confirmed the economy is now suffering its second recession since 2009. The economy will shrink 1.8 percent this year, according to the International Monetary Fund's latest forecast.

The government's plan to raise 2.5 billion euros from a tax amnesty is "particularly uncertain," Fernández Ordóñez told lawmakers in a session to discuss the budget, which was approved by the Cabinet on March 30 and is making its way through Congress.

Spending linked to unemployment benefits may also be more than forecast as the nation suffers the highest jobless rate in the European Union, at almost 24 percent, the governor said. If additional measures are needed, indirect taxes should be increased and temporary tax measures may have to be replaced by permanent ones, he added. Fernández Ordóñez also said the decision by the government not to present the 2012 budget until March 30 had further undermined international confidence.

"The doubts on the deficit goal created enormous worry as well as the presentation of the budget three months into the year, which was probably justified, but the markets didn't see it as justified," he said.

The IMF stirred up new doubts about Spain's current targets this week when it forecast a Spanish shortfall of six percent this year and 5.7 percent in 2013, almost twice the three percent pledged by the Rajoy government for next year.

Pensions: Rajoy's Achilles' heel

Earlier this year, the Social Security department announced that it would probably break even this year. But even if the Social Security's current account does go into the red, it doesn't mean that pensions and unemployment benefit will stop being paid. The system has savings of its own and access to other resources to a total of more than 70 billion euros.

The biggest doubt hanging over the Social Security's accounts is its ability to keep paying out pensions to retired people. Of the some 115 billion euros set aside for pensions, around 102 billion euros goes to contributory pensions, and many economists say that this isn't enough.

"It is an underestimation," says Miguel Ángel García of the CCOO labor union. The Social Security department estimates that this portion will increase 2.9 percent on last year, and around 2.3 percent on top of total spending. According to his calculations, the difference is more likely to be 4.5 percent, in line with the increase in the first months of the year, and taking into account that inflation could reach around 1.5 percent for this year.

García's figures are closer to those of Social Security itself, which puts the contributory outgoings at 104.9 billion euros, with inflation running at two percent. With those figures, Rajoy will find it hard to balance the books unless he does something that he criticized Zapatero for while in opposition, which is to freeze pensions, something that would further erode his already fast-waning popularity.

Calculating how much the cost of paying pensions this year will be involves three variables: inflation (pensions are indexed); the increase in the average pension; and the number of pensioners. The Social Security estimates a relatively low increase of 2.9 percent. The government announced a one-percent increase in pensions in its first Cabinet meeting. If inflation hits 1.9 percent by year-end, as most studies suggest, that leaves the government with just nine tenths of a point to play with. It seems not to have taken into account that there was a 1.5-percent increase in the number of pensioners in 2010, followed by a 1.4-percent rise in 2011.

The Economy Ministry says that for this year it expects an increase in the number of pensioners of just one percent, even though the Social Security's own figures estimate an increase of 1.6 percent. The Economy Ministry says nothing about the average increase in pension payments, which the Social Security puts at around 1.7 percent, nor does it take into account the possibility of higher inflation.

There are other causes for concern, for example the money required to pay people who take early retirement now that it is easier for loss-making companies to sack workers.

But Conde-Ruiz of the economic research group FEDEA says that the government need not worry unduly about payments to those forced into early retirement. "Early retirement will decline. It is clear that when the stock market falls or pension plans no longer offer high yields, workers delay retirement. What's more, if your children are without work, you are less likely to think about retiring."

At the same time, the worsening crisis has seen a sharp decline in the amount of money being paid into the Social Security system: at the end of 2011, there was a shortfall of 2.5 billion euros. Things are not looking much better in 2012, with employment set to rise by a further 3.7 percent.

As a result, the government says that there will be a 3.7-percent drop in payments into the Social Security system this year. The starting point is not the 105.3 billion euros collected in 2011, but the 110.4 billion it plans to spend on pensions. The government foresees collecting 106.3 billion this year, despite there being 630,000 fewer people working. If it had based its calculations on spending, the result would have been 101.4 billion euros.

The Secretariat of State for Budgets says that it estimates an increase in contributions of 850 million euros because it predicts a fall of 1.9 billion euros due to a drop in the number of contributors, which will be made up for by the 949 million euros that will come from increasing the contribution rate, along with 1.8 billion euros generated by combating fraud.

"This budget has been calculated as though we were still in September, and not in March, with spending already underway. We got it wrong in 2010," says the former secretary of state for social security in the Zapatero administration, Octavio Granado.

Based on the above figures, the Social Security system looks set for a shortfall of around 6.8 billion euros, around 0.7 percent of GDP; if inflation can be kept at 1.5 percent, and salaries are kept in line with government forecasts, the figure might be lowered to 5.5 billion euros.

Unemployment payments

The Social Security department is also responsible for unemployment benefit payments. In 2010, it paid out a record 32.2 billion euros, a figure that fell last year to 29.6 billion euros. The government says that the figure for this year will be 28.5 billion euros. "The figure reflects a reduction in spending on unemployment that began in 2011," says the Economy Ministry, adding that it is not due to paying out less money to the unemployed.

The figures show that applications for unemployment benefit increased by 18 percent in February this year.

Miguel García of the CCOO labor union believes that outgoings for unemployment benefit payments for this year will match those for 2011 because growing numbers of people's payments will run out in the coming months. Other analysts are more pessimistic, suggesting that the government faces a shortfall of three billion euros.

The tax amnesty

Officially called an "extraordinary regularization process," the government is offering a no-questions-asked amnesty to tax cheats allowing them to launder their money or assets by making a one-off payment of 10 percent. The government says that this will flush out 25 billion euros, and thus bring in tax revenue of 2.5 billion, but has failed to say on what basis it has made its calculations.

"Getting at hidden assets is very difficult, as previous efforts have shown," says the academic Juan José Rubio. Most economists tend to agree that the government's move will probably not generate much cash, based on the experiences of other countries. In 2003, Germany offered a similar tax amnesty, with a 25-percent payment. It estimated that some 100 billion euros would surface; in the end the figure was a fifth of that. In 2010 Italy offered tax cheats fines of between five and seven percent if they reported hidden cash. It raised five billion euros from 104 billion previously undeclared wealth.

The government announced the tax amnesty at the last moment, also offering businesses with money stashed offshore the same opportunity, with a one-off payment of eight percent that the government believes will add an additional 750 million to its coffers.

"I don't understand how the government reached the figure of 25 billion euros because it isn't based on any other amnesty," says Luis del Amo. The Economy Ministry admits that it is difficult to make estimates based on what goes on in the black economy, and points to the experience of other countries that have declared similar amnesties. Last week the government announced that it had another plan to combat tax fraud that it says will raise more than eight billion.

How to raise 47 billion from VAT without a hike

Finance Minister Cristóbal Montoro has so far put off raising the value-added tax rate. But the government's forecasts of raising more than 47 billion euros in VAT this year, 3.3 percent less than the previous year, are looking increasingly shaky as the economy slumps yet further into recession.

Last year saw a 0.4-percent increase in VAT takings due to the hike in the rate in 2010 from 16 percent to 18 percent, along with 0.7-percent GDP growth that year. But this year a fall of 1.7 percent is forecast. Consumption is in sharp decline, and is forecast to shrink by 3.1 percent. Rajoy's estimate is that he will have 2.3 billion euros in VAT revenue this year. Rubio believes that the prime minister is being overly optimistic: "With the job market worsening, and consumption and house purchases down, that VAT calculation makes no sense," he says.

Will corporate tax generate revenue?

The government hopes to bring in 19.5 billion euros from corporate tax, almost three billion more than last year. Where will the money come from? Corporate tax reform has limited deductions on expenses and imposed other measures that the government says will squeeze an extra 5.3 billion euros out of businesses. Del Amo says that the government's calculations in this regard are probably realistic.

Revenue from corporate tax rose in 2011 by 2.5 percent, or 413 million euros, after a three-year decline following changes to the law.

The government has factored in a drop, but things are much worse than in 2011, so given the circumstances, the estimate is probably too high," says Juan José Rubio. He also warns that provisions to strengthen the banks' capital requirements will cost around 50 billion euros, meaning that "they won't be paying any tax."

And then there is the regional question...

Spain's regional governments have incurred the ire of Brussels, as well as the international financial markets for failing to meet their spending limits last year. And the 17 semi-autonomous governments remain a great imponderable when trying to put a figure on spending for this year.

Before looking at their accounts, the European Commission wants to know why the regions overspent last year. The government's Fiscal Policy Council meets with regional finance chiefs in May, and will be looking to reach agreement and a commitment to stay within budget for this year.

Juan Rubio-Ramírez of Duke University asks why the government is to reduce transfers from the central government to the regions by 61 percent, "when the regions' own budgets foresee only a 12 percent fall in capital revenue."

State investment in the regions is being cut by a quarter and money for employment, health and education will be cut by almost 45 percent. The regions face some tough decisions, and will find it hard to decide where to make cuts: 60 percent of what they spend goes on health, education and social services.

Professor Antoni Castells, a former economy chief in the Catalan government, says that blaming the regions for the size of the deficit is "unfair and disproportionate and is simply about playing party politics."

The Economy Ministry points out that it is "essential to remember that any agreement on spending has to take into account that more than half of public spending is managed by regional governments." It adds that measures such as raising income tax will help local authorities. Rajoy has also said that regional governments that do not stick to their budget guidelines will have their finances taken over by Madrid.

The cost of borrowing

Spain will spend some 28.8 billion euros this year on interest payments to maintain its debt, equivalent to around 2.75 percent of GDP, and 5.3 percent more than last year. José Luis Martínez Campuzano, a strategist at Citi, argues that "this is a reasonable increase, and one that will not likely change, given that the estimates were based on the average bond maturity rate for 2012," which is 3.47 percent.

Yet doubts persist about the volatility of the markets and the short-term costs of borrowing. When the government approved the budget, the spread Spain was paying on 10-year bonds over the German equivalent was 3.5 percent. But recent weeks have pushed it as high as 4.3 percent, with yields close to six percent. When rates go up in the secondary market this pushes yields higher at debt tenders. The impact of this is not fully felt until the following years in terms of paper with a maturity of over 12 months but has a direct effect on short-dated bills.

"This is a wartime budget," is how Foreign Minister José Manuel García-Margallo has described the deepest spending cuts in Spain's recent history: 27.3 billion euros. The question now is whether the government has got its numbers right, because if not, we will be looking at even deeper cuts next year.

From Madrid and the son of Claudio Sánchez-Albornoz, an eminent historian and president of the Republic in Exile, the 84-year-old has taught at various universities throughout the world. He is Professor Emeritus at New York University, and was the first director of the Cervantes Institute. Today, he lives in a house overlooking his home city, where he wandered as a member of FUE (Federación Universitaria Española, or Spanish University Federation), which grouped together dissatisfied students in the post-war period. Until the police caught up with him and his colleagues in the anti-Franco fight, that is. Their capture ended in unreasonable sentences, doubled in length by the brutality of the time. The escape of Sánchez-Albornoz and his fellow prisoner Manuel Lamana from the slave labor practiced at Cuelgamuros in 1948 was one of the legends that most damaged Franco. The prisoners were aided in their escape to France by anthropologist Paco Benet (brother of Spanish novelist Juan Benet), American journalist Barbara Probst Solomon and Barbara Mailer (sister of Norman Mailer).

In the democratic era, the escape formed the basis of a film by director Fernando Colomo (Los años bárbaros, or The Stolen Years) and of a book by Probst Solomon, along with many other publications. As a consequence, Sánchez-Albornoz didn't want his book, (Cárceles y exilios, or Prisons and exiles, published by Anagrama) to revolve around this episode. But it is in there. Above all, the book is an expression of anger: Cuelgamuros, the Valley of the Fallen, was a major symbol of Franco's desire for vengeance - he wanted to humiliate his adversaries. It is there where our conversation begins.

Question. You write: "The Franco regime never conceived of peaceful co-existence among Spaniards without political exile."

Answer. That is clear. There was a war, and the victors had to finish it off. That may mean brutalities and persecutions but the victor is always abusive. What happened with the Franco regime, however, was that this went on systematically for 40 years after the war. In World War II, there were also victors and the vanquished, but two years later, it was all settled. Why couldn't Franco settle up in two years?

Q. Why not?

A. Because he was a bitter man who was not interested in a peaceful existence for Spaniards, but in maintaining power.

Q. And he continued the executions until the end.

A. There were different stages: the period from 1939 to 1942, for example, in which, according to reports from the time, more than 100,000 people were executed. But my account is not from that time as I didn't experience it firsthand. My account begins in 1947, and I am sure there were still firing squads then because I lived through it. The executions lasted until Julián Grimau in 1962. Supposing that the Allies still had reasons for killing people, they did so quickly. That didn't happen here. In Spain, Franco kept killing after the war. Grimau was executed for war crimes.

Q. When you finish your book, you are left with the feeling that our history has been ill-fated. How did you feel writing it?

A. I was at peace. As far as ill-fated goes... no, it's not ill-fated. The history of Spain would have been very different if this intrusion had not taken place. In its economic history, it is clear that Spain was more or less gaining ground. And then the war came, and the Spanish economy went into rapid decline, not returning to its 1927-1928 levels until 1956. And this same deterioration took place in social relations and cultural life. Without the war, for those 40 years that the Franco regime lasted, Spain would have had a much higher level than it did in 1976.

Q. The regime ended. But when your father returned from exile in 1976, then Interior Minister Manuel Fraga Iribarne prohibited a formal dinner in his honor. So, the regime was still there.

A. And it is still here today. There is a de facto group, which stands for everything that fuels that dark side of a segment of the Spanish population. But they are not Spain. Spain is something different. I think it's clear that if Spaniards had been left alone, Spain today might not be the most brilliant country, but it wouldn't have been that of the Franco regime.

Q. How did you and your father feel when Fraga prohibited that dinner?

A. At the time, we weren't happy about it, but neither were we surprised. Fraga was a person who was very involved with the Franco regime, a conformist. I state several times in the book that the only thing that allowed the Franco regime to exist was conformism. The regime established certain rules, which were very cruel at first, and after it had to survive in a world that had turned its back on it because Germany had lost the war; so the regime tried to conform, while remaining as true to its original line as possible. But it couldn't maintain it in all aspects.

Q. Given what you say, as well as the controversy over the sentence handed down to Judge Garzón, what do you think should be done regarding Historical Memory?

A. First, all the cards should be laid on the table. Everything must come out, and that's what we have historians for. The post-Franco state has taken great care to ensure access to government and military sources has been closed. Historians have made great strides but they haven't managed to clarify everything. First, the truth has to come out and after that it must be made public. Finally, the descendants of the victims must be given closure.

Q. The issue of Historical Memory and the Garzón case prove that Francoism is not dead. In that sense, the judge is a new victim.

A. Of course. Although I would change your wording ever so slightly. It's true that Francoism has not died out, but you have to add that what remains just represents a segment of the population, because other groups will not have it. Unfortunately, it is quite a large segment that is still very active in the social and political apparatus of the country. But it must be acknowledged that the majority of Spaniards are disgusted by these things, and in general, Spaniards are much better than those nuns who stole the babies.

Q. Your book counters the image of Franco as an austere man.

A. The entire system was corrupt. Franco's authority rested on two elements: death and punishment, and corruption. To me, this is evident and I would like people who weren't there and didn't live through it to understand this. Everything was based on corruption.

Q. You said that Spanish society is better than the Franco regime. But are there significant residues of Francoism in our society?

A. Yes, of course, starting with the justice system. And the Church. I don't have a lot of evidence, but I have one piece that I will mention: when the head of police at Porlier prison had finished reading a list of people who were to be executed the next day, the priest there asked, "There aren't any more?" One of the prison staff told the story later; this same corrupt civil servant who dabbled in the black market was taken aback by the priest's dehumanization. There are witnesses in the Church to the hierarchy's collusion with the Franco regime. The pressure the Church exerted on social life was monstrous. It's what [Archbishop of Madrid] Rouco is missing, because though he might be saying mass, nobody is paying any attention.

Q. You have written that "Memory is not restricted to the past, but is a guarantor of the future." That is at the root of your book.

A. I took that from the comments of a Polish Jew who had emigrated to Canada and was speaking about the situation in Poland today. He found that because things had not been spoken about, national integration and, in part, the integration of Jews within Polish society were weakened. Memory is not just an act of remembrance. Full memory is also necessary to reestablish peaceful relations among citizens. And it's the future that matters, not just knowing the truth, but it is something that is necessary for national co-existence. This contrasts with Franco's previously mentioned desire to prevent co-existence - because in order to live together peacefully, knowledge of the past is needed. Franco was not interested in having that past revealed, and he tried very hard to taint the image of the past. So the question that must be considered is whether we are interested in the peaceful co-existence of Spain's various groups or not.

Q. You were the son of a Republican, and consequently, a communist. After the police arrested you and you were tried, what were you thinking when the sentence that would send you to prison for eight years was read? Did you say to yourself, "No, I don't want to spend that time in prison?" What went through your mind?

A. I have managed to reconstruct events in detail. There was a first request sent to the prosecutor. Later, a second request was sent for him to reduce the sentence even though the Council of War was being held. They didn't tell us the verdict right away, maybe because the international press was there, and it was 1948. The moment of truth came at eight in the evening: the sentence was brutal, even harsher than the one the prosecutor had requested. I became enormously angry, and decided that I was not going to stand for it.

Q. And the idea of the escape was hatched...

A. A friend of mine, Luis Rubio, spoke about it to the CNT, which had begun planning escapes. The truth is that the CNT were very good to me, and they included me in a plan they had drawn up.

Q. It must take nerves of steel to escape from Cuelgamuros...

A. Yes, or a lot of youthfulness, or will to live. Fernando Olmeda says in his book that there were 44 escape attempts, including ours, and ours was the only successful one. The rest of them ended up going back to their home village, and they caught them there. We went abroad, that was our plan. We were very quiet about it, not many people knew. We waited at the gate; we were two young men, Lamana and myself, and two young foreign women, Barbara Probst and another Barbara, Norman Mailer's sister, in a car that was very apparently American. It wasn't a group that would raise the suspicions of the Civil Guard.

Q. There was a period in your life when you founded the publishing company Ruedo Ibérico along with José Martínez, which was historically significant in terms of reconstructing how to tell Spain's story.

A. I set it up it for two reasons. We reached the conclusion that the regime at the time had created an ideology that had successfully spread. People might not agree with the Franco regime, but it had soaked through even into their language. They spoke easily of the glorious uprising, and they were talking about the communists. They might insult Franco, but they had swallowed all of the Franco regime's propaganda. So we saw that there was territory there that could be worked by publishing stories that could open their eyes. I think that with Ruedo Ibérico, we managed to do that. It was a success because these books immediately had a large following and an impact in Spain.

Q. Exile allowed you to get to know that migrant Spain in which your father was already living. France, Argentina, America... What were your impressions of this world and how did yoou find your father?

A. In Buenos Aires, I met a lot of people that I had previously heard or read a lot about. Rafael Alberti, for example, in Cuatrecasas' house. There were thousands of Republicans in Buenos Aires. They held talks, they shared and talked about their own experiences, and that kept the Republic and the Civil War very alive there. It was useful for learning about what was not being spoken about in Spain. But the Spain of that time was not very present. They had created their own world, but they had little knowledge of what I had left behind. So I soon began to circulate with Argentinean students, whom had had experiences much more similar to ours.

Q. How did your father's relationship with his adopted country develop?

A. He never stopped longing for Spain. He even kept a watch set to Spanish time in one pocket, and one set to Argentinean time in the other. And his students and colleagues kept him up to date, not so much politically, but culturally. He also knew what was going on through his contact with other Republicans in Mexico and France, who wrote to him or sought his opinion.

Q. And your return in 1976? You came back together.

A. It was a very emotional moment because all of that longing could be finally satisfied. He jokingly said he had run a race against Franco, and Franco had won. He was quite advanced in years when we returned, and at that age, it's hard to give up the life you have built. What's more, he had his students, his magazine, and it was hard for him to give that up, which is why he returned to Argentina.

Q. And how do you feel in this country?

A. Looking back, and I think that is what the book does, I feel good. It's not the Spain that I knew; we are going through a period right now that won't shine in the history books, but even so...

Q. How do you see this current period?

A. There is a global economic crisis led by the financial system and its abuses, which in the case of Spain has been worsened by a dreadful economic policy created by the PP in its last government to give free reign to the real estate sector, which resulted in a certain level of euphoria at the time. And Zapatero didn't put a stop to it; he didn't know how to burst the bubble. What is alarming in the current situation is the level of improvisation. The government doesn't know what to do so it is improvising. Improvisations and dehumanization... There is a return to certain Francoist roots in society, and that is worrying. A very unpleasant Spain is surfacing. The big difference from the Franco regime is that an authoritarian regime designed by a party was imposed, and so far in Spain, the principle of free elections is being upheld. So at least there is some hope.

Q. Do you think the Republican spirit still lives on?

A. There are two Republican spirits: one is evocative of the Republic, and the other is a new kind of Republican spirit, found in people who were not Republicans in 1931 and may ignore the period from 1931 to 1936, but most certainly question why that man should be king. It's a rediscovered republicanism.

Q. You have had a very long life. Notable moments?

A. There have been a lot. My return to Spain was very moving, of course.

Sources close to the Royal Household say Juan Carlos was shaken by the media and public's response to his accident. After all, the trip was a private affair, and was meant to be kept that way. Recent proposals for legislation to improve transparency in Spanish political life will not include the Royal Household. When told that the king was off to Botswana to kill wild animals at the invitation of an unnamed multi-millionaire, Prime Minister Mariano Rajoy, like his predecessors before him, raised no objections.

But in reality, under Spain's arrangements governing its constitutional monarchy, the government is supposed to oversee the king's activities, whether private hunting trips or public engagements. The prime minister has said that from now on, he will be coordinating more closely with the king.

The Royal Household was also embarrassed earlier this month when the king's 13-year-old grandson Felipe Juan Froilán, son of the Infanta Elena, literally shot himself in the foot while using a gun below the legal age.

The incidents have sparked unprecedented criticism of the royals in a country where the press has traditionally treated the House of Bourbon with kid gloves, avoiding British-style reporting on their private lives, even when foreign magazines have run stories on the king's alleged lovers.

The accident was initially kept secret for 36 hours, until finally, when Juan Carlos had returned home and was about to undergo an operation on his hip, a brief press note was released. Any hopes that the affair would pass unnoticed soon proved ingenuous. The media seized on the key points - luxury safari, Botswana, hunting elephants at 15,000 euros a pop - and even dug up a photo from a previous excursion there showing the hapless monarch standing somewhat stiffly before a magnificent pachyderm that he had just pumped full of lead slumped head first against a tree. And all this in a week when Spain's borrowing rates went through the roof, and of course not long after the king, the honorary president of the Spanish branch of the World Wildlife Fund, had expressed his concern about the country's 50 percent unemployment rate among young people and called on the business community to put its shoulder to the wheel. Talk about the perfect storm.

The king and his advisors could do nothing as the taboo of respecting what the monarch does in his private life was broken once and for all. Over the following five days, as he recovered in hospital and the domestic, and then the international media, indulged in a feeding frenzy of hunting- and firearms-related headlines he came to the conclusion that either he fessed up, or he was finished, a figure of ridicule. Because there was no way the two main parties could continue to support him otherwise. So, as he hobbled out of hospital, a weary looking Juan Carlos spoke to the media: "I am very sorry. I was wrong, and it won't happen again."

The king's supporters like to say that he has always been able to gauge the mood of his subjects, which explains his popularity after 36 years on the throne. Bearing in mind that in October 2011 his popularity fell for the first time to below 50 percent, and that support among those under 35 years old has been declining steadily for 20 years - a drop that will probably accelerate as the scandal involving his son-in-law's business dealings continues - it is puzzling that he failed to foresee the likely consequences of his African sojourn.

Sources close to the Royal Household say that the king is less and less interested in affairs of state, and that he is tired. In May 2010, surgeons removed a tumor from his lung. Last year he underwent two more operations, on his knee and ankle. In 2010 he sent Prince Felipe to attend the final of the World Cup in South Africa, making it clear that from now on he would be spending more time on leisure activities.

At the same time, he has made it equally clear that he has no intention of standing aside to let Felipe take over. After his post-accident request for forgiveness, the king noted: "I am very well, and looking forward to returning to my obligations," among which is a weekly meeting with the prime minister, which was duly held.

"If the king decides to abdicate, it would be due to illness, and certainly wouldn't be in response to a perceived crisis, or a scandal, or outside pressure. Apart from anything else, abdicating under those circumstances would contaminate Felipe's succession," says a senior figure in the Popular Party.

That said, Felipe has been taking on a more public role in recent years, for example, attending presidential inaugurations in Latin America, a policy that is eroding the influence that the king once exercised in the region.

A new generation of leaders is emerging in Latin America that barely knows the king, and has little reason to respect him. The famous incident in 2007 when he told Venezuelan President Hugo Chávez to "shut up" may have raised smiles at home and in Europe and the United States, but failed to amuse the region's leaders, who are increasingly distanced from what was once the motherland. Argentinean President Cristina Fernández de Kirchner's joke about the similarity between the country's oil output curve and that of an elephant's trunk was a less-than-subtle hint that the king should keep out of the decision to seize Repsol's stake in YPF. Juan Carlos was in Botswana when the oil firm was renationalized.

In the meantime, Prince Felipe is trying to forge links with the next generation of Spain's leaders, aware that his father's popularity was in large part due to the perceived role he played in protecting the country's transition to democracy. But Felipe is unlikely to be given the opportunity to defuse a military overthrow, as his father did in 1981.

As his father did before him, this will mean reaching out to politicians whose party affiliations put them on the side of the anti-monarchists, a policy that angers many on the right, who see Juan Carlos as too close to the Socialist Party already. The future of Felipe relies on the continued support of the Socialist Party; the minute it starts to wane, there will be no stopping a widespread debate on the future of the monarchy. Felipe is well aware of the activities of the pro-Republican movement, he knows which town halls are controlled by the Communist Party-led United Left, and he has personally met its leaders, as well as kept abreast of anti-monarchy groups within the Socialist Party. His is a very different approach to his father's hail-fellow-well-met line: he is respectful, professional, and attentive, but there is no backslapping.

The government and the PP's concern at the moment is disagreement between the moderate right and the monarchists. A recent article by the former editor of ABC by the monarchist newspaper's former editor, José Antonio Zarzalejos, upset the apple cart when it accused the king of having squandered his popularity and undermining the hard work of Prince Felipe.

The succession isn't the problem. For the moment, Prince Felipe is managing to protect his image. The problem is with the institution itself, and talking to Spain's politicians and royal pundits, the monarchy's image problem goes back much further than Juan Carlos' poorly timed trip to Botswana, which has been dubbed the "straw that broke the elephant's back" by some.

Far worse has been the damage caused by the media coverage of the investigation into one of Spain's most serious corruption cases, involving the king's son-in-law, Iñaki Urdangarin. While Juan Carlos was in hospital, emails were published showing that Juan Carlos himself had personally intervened on behalf of Urdangarin to the then head of the Valencian regional government, Francisco Camps, who himself had to step down as he faced trial over corruption allegations. When the Urdangarin case first broke at the end of last year, the king implemented a damage limitation exercise to exclude Urdangarin and Princess Cristina from official events, as well as announcing that the Royal Household's accounts would now be made public. The king also said that he had asked Urdangarin in 2006 to cease his business activities with the foundation at the center of the scandal. The meeting with Camps was subsequent to this.

The scandal shows no signs of going away any time soon. Urdangarin is now locked in a battle of mutual accusations with his business partner, Diego Torres, who is threatening to publish allegedly compromising emails and other documentation that supposedly shows the king's involvement in his son-in-law's nefarious activities. If such evidence exists, and it emerges, the monarchy could face a serious crisis.

One business leader puts it in the following terms: "Strangely enough, the uproar over the elephant shooting has distracted attention away from the Urdangarin affair. This, and the still considerable groundswell of support the king enjoys, has allowed him to carry on regardless, when it might reasonably be the moment to start thinking about other questions, such as the succession."

It's hard to assess how much damage the Urdangarin affair and the hunting trip have done to the king's popularity. But there is no denying that he remains an important asset for Spain. Not just because of his experience, but above all because of his international contacts, built up over the course of his almost four decades as head of state. He also enjoys close friendships with other monarchs, particularly in the Arab world, who control their countries' key businesses. Juan Carlos played an important role in helping the consortium of Spanish companies win the contract to build a high-speed train between the Saudi Arabian cities of Medina and Mecca, seeing off a bid backed personally by the French President Nicolas Sarkozy. This kind of influence is rarely made public, but is well understood by politicians.

The head of one of Spain's largest corporations, who spoke on condition of anonymity, says: "The country's most important business leaders often ask him to lend a hand in their overseas expansion, or in paving the way toward winning a big international contract. Any damage to his reputation will damage Spain's business interests. Obviously, this incident has created problems, but I don't think that it will affect his credibility, especially after he apologized, which is a very unusual thing to do."

Another business leader suggests that the king ought to "explain what he does" to the public. There is widespread concern that any loss of prestige could reduce his ability to open doors for Spain's businesses. All cite the Saudi contract, with some saying that the hunting trip was part of the behind-the-scenes protocol, involving senior Saudi figures. Others say he should have known better: "Especially after saying that he couldn't sleep at nights, and after having met with business leaders to encourage them to create jobs; then it emerges that he has gone on safari. It looks bad."

The gaffe couldn't have come at a worse time. Aside from the worsening economy, there is the regional question. The monarchy is not popular in the Basque Country or Catalonia, and with nationalist parties in control in Catalonia, and the possibility that next year a coalition between the Basque Nationalist Party and leftist pro-independence grouping Bildu could win power, is a cause for concern for the government.

Prince Felipe, who for the moment is standing in for the king at official acts, will experience the less-than-fond regard many in the Basque Country and Catalonia hold for the monarchy when he attends the final of the King's Cup on May 25 between Barcelona and Athletic Bilbao.

Some observers say the pace of change in Spain has outrun the monarchy, pointing to the emergence of a generation now approaching middle age that doesn't take into account the king's perceived role in defending the country's democracy in the years after the death of Franco: for them, the failed coup of 1981 is ancient history. "If somebody had told you 15 years ago that there would be an institutional crisis because the king had gone elephant hunting in Spain, you wouldn't have believed them. He has always done as he thought best. I can remember many occasions when nobody knew where the king was. He hasn't changed, he might have slowed down a bit, but Spain has changed, and the powerful are under a lot more scrutiny than before," says one veteran politician.

"This reminds me of what happened in 1975, when Franco was dying, and the Moroccans decided to march into Western Sahara. When a country is seen abroad as weak, others will take advantage. This will affect our business dealings. The king has always been involved in representing Spain's economic interests, particularly regarding energy; you only have to look at the number of trips he has made to oil- and gas-producing nations. This is a deep-rooted crisis that will have much wider repercussions than you might initially think, and it should be resolved, one way or the other, as soon as possible," says another senior politician.

The king has said that "this won't happen again." He can be sure from now on that every move he makes will be under scrutiny. Some commentators have suggested that apologizing was a mistake, and that if he is seen to make another error of judgment, there will be no second chance. And recently, the king's sense of judgment has been under question. He more or less ordered the Queen to be quiet at an event earlier in the year, and then lost his temper with journalists who had accused him of exaggerating his health problems, saying: "You've got it in for me, you're always getting at me."

Those close to the king say that he is aware of the gravity of the situation, and will be listening more closely than has been the case recently to his advisors, even if he is not prepared to give up his private life. He now knows that the pact of silence that has protected him for the last 36 years has been definitively broken, at least as far as the Spanish public is concerned. There is no going back.