As Madrid turns the austerity screws, in the provinces the separatists are making gains

Alasdair Fotheringham reports from Galicia on the eve of key regional elections

High in the Los Ancares region of Galicia, in the tiny hamlet of Quindous, a newspaper cutting on the wall of the main bar shows two Barcelona taxis parked outside its front door. The drivers – both relatives of Inés, the bar's owner – had been making a decent living in Barcelona. But the recession bit deeper and business dried up. So they got in their taxis and embarked on the 500-mile drive west, hoping to find work back home in Galicia.

Like thousands of others, their quest proved fruitless, and they joined the ranks of the unemployed. "People came back hoping to work on the land," Inés said. "But there's barely a living to be had at it now. For young folk there's barely anything to be had here at all."

Unemployment has hit 21 per cent in Galicia, and Inés is far from alone in her worries about her area's economic prospects. While once it was proud that Prime Minister Mariano Rajoy hailed from this far-western region, now he is seen as more of a liability as local elections near.

Tomorrow, Galicia and the Basque Country vote for their regional governments, and Spain's worst recession in half a century is likely to be the most decisive factor. How far Galicia strays from its once prodigal son is a telling indication of support for his harsh austerity policies. In the Basque Country, separatists are expected to make gains, further threatening the unity of the Spanish state after surging support for independence in Catalonia.

Eurozone leaders will also be watching the elections closely – there is speculation that Mr Rajoy has delayed asking for Spain's politically controversial banking bailout until after the polls.

Unai Larrea, a former deputy editor of Deia, one of the Basque Country's best-selling newspapers, said: "Here in my village" – Amorebieta, half-way between Bilbao and San Sebastian, deep in the Basque Country – "unemployment has doubled in the last four years from five per cent to around 10 per cent. All the surveys confirm it – it's the economy that matters most to people right now.

"It's like the world's turned upside down. The Basque nationalists' electoral strategy is mainly focused on slating the mishandling of the economy by the PP and PSOE," he added, referring to Spain's main political parties, Mr Rajoy's Popular Party and the Spanish Socialist Workers' Party, which currently rule in a coalition in the Basque Country.

The radical nationalist coalition EH-Bildu, which did not take part in the 2009 elections, is expected to gain more than a quarter of the 75 seats in the regional parliament and become the second biggest party. This comes only a year after the armed separatist group Eta signed the most definitive ceasefire to date. Since then, the radical nationalists have shifted away from violence and towards the democratic process.

A similar increase of the hardline and nationalist vote is expected in Galicia, where a new coalition bringing together communists, separatists and ecologists is forecast to gain about 10 per cent of seats.

The government's gravest concern, however, is Catalonia, one of Spain's wealthiest provinces. Its nationalist president, Artur Mas, has already announced a referendum on independence should he, as is forecast, be re-elected in local elections in late November. Yesterday it was reported that he and the Basque nationalist leader, Iñigo Urkullu, had agreed to work closely in their respective bids for greater sovereignty.

In Madrid, there are concerns that the rise of increasingly vociferous separatist coalitions in the Basque Country and Galicia will boost nationalist morale ahead of the Catalonia vote.

Despite Mr Rajoy's diminishing support, the PP is expected to hold on to its majority in Galicia, thanks to the personal popularity of the candidate, Alberto Núñez Feijóo.

But in the Basque Country, there is already a celebratory mood among nationalists for what is expected to be their best-ever electoral result. In the strongly nationalist town of Villabona, Karlis Mendrano, a photographer, said: "EH-Bildu have already reserved the bar here for Sunday to celebrate their victory. They know they're going to win."

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