Spaniards pin their hopes on a ticket to better times

This could have been the year when 70-year-old Joaquin Rodríguez didn't play the Christmas lottery. It would have been the first time he skipped the world-famous "El Gordo" gamble in 50 years, but stranger things have happened in Spain recently. The left-leaning prime minister turned his back on the unions to appease investors, for instance. And earlier this month, the government declared a state of emergency for the first time since General Franco and placed the fate of the country's air traffic in the hands of the Spanish military.

Even stranger in this topsy-turvy world, Mr Rodriguez, a retired taxi driver, didn't win a thing last year, not even one meagre break-even prize in the world's largest payout. He bought €400 worth of losing tickets.

But in hard times, tradition beckons. Two of Mr Rodriguez's six children are unemployed, and all of them are "up to the neck" in debt. So on Thursday, Mr Rodriguez doled out €300 for 15 tickets.

"I wasn't going to buy at all this year, but this guy over here led me to the path of vice," he said, winking at a crony standing in the long line at a state lottery vendor in the Puerta del Sol. "I'll give them to my children to lift them out of the crisis. It's a foolish hope, very foolish, but I keep hoping."

The state lottery offices are one of the few places where Spaniards can find a glimmer of hope this holiday season – and even those face an uncertain future after the government announced that it would sell off a 30 per cent stake to private investors, one of many recent moves to calm market fears that Spain could need a Greek-style bailout.

Spirits are usually high in the run-up to Christmas and Three Kings Day, the gift-giving holiday on 6 January. But this year, the season looks far from jolly in Spain, with record unemployment of 20 per cent, a barely contained sovereign debt crisis, government cuts to rein in the deficit and unpopular labour market reforms.

The collective ego has been wounded. Just a few years ago, Spain was lauded as a shining example of growth in Europe, a land blossoming with designer architecture and luxury retirement villages for sun-worshiping northerners built with the cheap labour of a sudden stream of eager immigrants. Now, with the property boom gone bust and regional governments strapped with debt, nervous investors have thrust Spain into the spotlight once again – this time as the EU's worst potential nightmare, a country too big to fail but also too big to save.

A sign of the troubled season: the man in the Santa Claus suit outside El Corte Ingles department store in Madrid is an unemployed caterer from Mexico who is trying to raise a few coins to buy a plane ticket home. Scrooge takes the form of tax hikes for alcohol and cigarettes and 5 per cent wage cuts for public employees, a large chunk of which is inconveniently carved out of December's "extra pay".

At a café in debt-strapped Madrid's historic centre, which this year has toned down its Christmas lights, Soledad Yécora, an insurance agent, gulps her coffee and says: "In my office they posted a notice on the bulletin board that reads, 'The Merry Christmas sign has been moved. We can not attend to it at this time'."

The air controller's strike last weekend set the grumbling tone. The strike left 700,000 passengers stranded at airport counters at the start of Spain's busiest five-day weekend, the Puente de la Constitution. Nearly 5,000 flights were cancelled, causing chaos and tears. Couples arrived late for weddings and honeymoons. Mourners missed funerals. A baby with a tumour had to be transported by a special flight from the Canary Islands to Malaga for a scheduled operation.

It should have been a foretaste of the Christmas ski-or-surf escapes to come. But instead of lounging on the beach, travellers slumped on suitcases or sprawled on the floor of Madrid's Barajas airport beneath cheery red Christmas decorations.

"My dream trip to Vienna was ruined, but I've seen worse things," Isabel Molina, a 52-year-old factory worker, told reporters at Barajas airport at the start of the strike. "I've seen a boy cry because his trip to Euro Disney was cancelled and a woman who couldn't go to her mother-in-law's burial."

Things are back to normal now. But Spain's tourist industry, which generates 11 per cent of the country's wealth, is reeling from the strike with an estimated €350m in losses from hotel cancellations and package reimbursements. Airlines have reported losses of about €100m. The industry was counting on December to compensate for a slow year.

"We had hopeful predictions and we took a beating," said Pedro Garcia, president of the Association of Andalusian Travel Agencies.

The industry worries that Spain's international image has been damaged for the coming holiday season.

"With the current economic crisis, a country like Spain can't afford the luxury of turning everything upside down in an instant. It's like handing a silver tray to competing markets," said Santiago Padilla, a spokesman for the Seville Association of Hotel Owners.

And the fun isn't over. The military is still controlling the air towers to ensure the striking controllers remain at their posts – not the best incentive to plan a New Year's trip.

Remon den Bode, a Dutch social worker, told the Las Palmas Daily as she awaited a flight home: "I don't think I'm going to return to the Canary Islands if they can hold hostage entire families in the airport without information. A little paradise turned into a true hell."

The spin doctors at Prime Minister Jose Luis Rodriguez Zapatero's office are not merry either. The popularity of his Socialist Party has hit historic lows. But much anger has been targeted at the air controllers, who balked at a government decree that sliced their wages and, they say, effectively left them without basic worker rights like paid breaks or sick leave. Spaniards are pinching pennies to buy gifts and traditional foods this year, and so they find it hard to muster sympathy for people who earn an average of €200,000 a year.

"They have no right," said María José Romo, a 56-year-old insurance company worker whose salary was cut by 5 per cent. "We attend accident victims in hospital. What would happen if we went on strike?" She said her daughter's planned holiday in Cadiz was ruined because of the air controllers' stoppage. Now she's crossing her fingers that air traffic flows normally at Christmas, when another daughter is supposed to fly home from Dublin.

"It doesn't look like a very good season," she said, adding that the family had slashed its gift giving budget. "Instead of having to buy gifts for everyone, we picked names out of a sack for a Secret Santa."

Many Spanish families are planning to give less expensive gifts and less extravagant dinners, with fewer prawns, crabs and crayfish or lower grade Iberian ham, traditional holiday fare.

"We're all cutting down even if it doesn't look like it," said Pedro Azpiri, a 63-year-old pensioner, while joking with his wife and friends over a mid-day coffee on Madrid's museum row. "You know, the humour is the last thing to go."

"Spaniards are like that," chimed in his friend, pensioner Mariano Sanchidrian, who supports the government's plans to raise the retirement age and other pension reforms to quiet market jitters.

Amparo Illan, a retired nursery school teacher from Valencia, said she hadn't noticed the pinch this season, but that was because she had always counted every peseta and euro cent. We're workers: we've always lived on a budget," she said while waiting to tour the Spanish Parliament building. "It's the ones who have lived above their means that are crying now."

Beatriz Aguirre, a 23-year-old university graduate, will spend the holiday looking for a job. She studied tourism in the wine region of La Rioja, where many bodegas once planned to build luxury hotels like the one designed by Frank Gehry. "Now everything is paralysed," she said.

Ms Aguirre was lucky to find a two-day assignment leading a tour group to Madrid. "I'll earn €170, which is great, but then it's over and who knows when I'll find something else."

At least the money will help buy gifts. "I live at home," she explained sheepishly. "At least I have to buy something for my parents."

Stores and restaurants, usually smug at this time of year, are begging for business with pre-holiday discounts. Even Casa Mira, a 160-year-old sweet shop that sells traditional almond nougat known as turron for €43 a kilo, was nearly empty on a recent weekday. "People are delaying their purchases," the manager explained.

Miguel Angel Garcia, a father of three, is handing out luncheon-menu fliers on a rainy street corner, a waiter's uniform under his coat, but he doesn't mind. He had been out of work for eight months until he found a job at La Caserola restaurant in Madrid, where business is slow.

"This is the first time in 35 years in the restaurant business that I've had to do this," he says. "It doesn't bother me because what I want to do is work, and if the owner says to hand out fliers, I do it."

Damaging statistics

20 per cent: Unemployment rate for the last 12 months – double the Eurozone average

43 per cent: The youth unemployment rate – also double Eurozone average

€2,500: Cash benefit to new mothers – which is about to be cancelled

€426: monthly subsidy for the long-term unemployed – about to be cancelled

67: The new retirement age, two years older than previously

0.7 per cent: Projected growth rate for 2011 after a contraction of 0.6 per cent this year

11.1 per cent: Deficit as proportion of GDP. The government hopes to reduce it to 3 per cent by 2013

5: Number of Spanish banks found to be vulnerable to economic stress by a European study this year – out of just seven across all of Europe

€2.3bn: Prize money of hugely popular national lottery, El Gordo – 30 per cent of which is being sold off