Fiesta time in Algemesi amid Spain's economic woes

Girls dressed up as cakes
Image caption It's fiesta week and people are determined to have a good time, despite the cuts

It's lunchtime and a brass band is playing in the middle of the street. A man dressed as a boiled sweet is dancing with a woman sporting a 1970s-style afro wig.

There's plenty of eating and drinking going on because this is fiesta week in Algemesi - a chance for a little bit of celebration amid tough economic times.

"At least for a few days we can try to forget about the crisis," said Raul, as he stood on the pavement, beer in hand.

But the budget for putting on the fiesta in this small town near Valencia is down 20% this year. It's a fair indication of Spain's current woes.

And with the government in Madrid announcing further austerity measures and a timetable for far-reaching economic reform everyone knows that even more difficult times ahead.

"My salary's already been cut, and I've lost my Christmas bonus," said Isidre Pegenaute, a local primary school teacher sitting in a marquee with his daughter. "There's less money for books and more pupils in each class."

"People here are worried about their wages, about their pensions, and about whether all our brightest youngsters are going to leave and go abroad."

It's not all doom and gloom. There's no doubt that Spain has some economic strengths - unlike in Greece for example, exports are doing pretty well.

Image caption Have paella, will party - Algemesi gets ready for its annual fiesta, despite budget cuts of 20%

But unemployment is dangerously high and key elements of the local economy in this town are struggling - agricultural prices are falling, construction has pretty much ground to a halt. A local furniture company shut down this week because of a lack of business.

"We certainly feel the effects of the crisis," said Carmen, as she served coffee in a local cafe.

"People spend less money, and we're going to have a couple more bad years."

"But hopefully," she said, as a volley of firecrackers burst outside the door, "things will eventually get better. We have to go through this."

Saving face

One of the big frustrations, though, is that many people fear they are no longer in control of their own destiny, and neither is their country.

Spain has already accepted tens of billions to bail out its banks. The big issue now is whether, or perhaps when, it will have to ask for more general financial assistance in the form of loans from Eurozone bailout funds.

A figure as high as 300bn euros ($385bn, £238bn) has been mentioned.

The European Commission, France and others are saying get on with it, the sooner the better.

Germany, as ever, is more cautious - why hurry? It is reluctant to take on further liabilities.

But here's the catch - only after a formal request for assistance will the European Central Bank step in and buy Spanish bonds to bring its borrowing costs down.

And the markets are becoming impatient again.

So the Spanish government may have limited room for manoeuvre. For now, by announcing a timetable for more reform, it is trying to pre-empt any conditions that might be attached to extra aid.

It is partly an exercise in saving political face. Prime Minister Mariano Rajoy doesn't want a bailout with strict conditions attached. He'd like to persuade people that his reform programme is home-grown.

"I don't believe him," snorted Joaquin Jordan, a pensioner who grew up in Algemesi. "He doesn't even believe it himself."

Joaquin's face grew emotional as he described his disdain for the political class. Public trust is wearing thin.

"Solidarity within families is what keeps people going here in Spain," he said.

"That's why I'm worried about what they might do to my pension. Because I'm the last safety net for my children and grandchildren."

Take the pain?

A lot of people understand that change needs to come, but the pace of reform and the extent of austerity has become punishing, and - some would argue - counter-productive.

"The problem is we've been doing things badly for 15 years," argued Professor Vicente Pallardo of Valencia University. "And now we have to correct it all in two or three years."

Image caption Protests over cuts have brought thousands out onto Madrid's streets

"That's a very difficult balance to be honest."

So how much pain can people take before their faith in the political system is stretched beyond the limit?

Sporadic violent clashes outside the Spanish parliament this week - between protesters and the police - are one warning sign.

More significantly, early elections, to be held in November, have just been announced in Catalonia, which accounts for 20% of the Spanish economy.

The vote will test the level of support for much greater Catalan autonomy or even independence. Financial disagreements with Madrid have suddenly brought matters to a head.

In the words of one government minister it adds "a crisis on top of a crisis" at a time when recession is deepening.

So the state of the Spanish nation is troubled.

It didn't feel that way in the late afternoon sun in Algemesi, as revellers in fancy dress trooped into a temporary bullring.

But some basic questions about economic and political structures are now being asked in a country in the midst of rather profound - and therefore uncertain - change.