The draft law would oblige street sellers to pay an "economic activities" tax plus insurance and social security contributions that traders fear could amount to pounds 180 a month. But many make so little from their stalls that they would be driven away, according to the Independent Association of Rastro Traders that represents the majority of the stallholders.
"We work only on Sundays and for most of us it is the only income we have. Some people have been coming for 30 or 40 years, artisans selling their own handicrafts, and we can't afford to pay extra taxes. The authorities are treating us as professional traders, but most of us are not," says the traders' president, Mario Agreda.
Mr Agreda believes the regulations would break a traditional bond between the people of Madrid, international visitors for whom the Rastro is as essential a port of call as the Prado, and the workers of the area. "They are squeezing us with a vile garotte, so that we will disappear, trying to make us into dinosaurs, an extinct species," Mr Agreda said yesterday.
At present, Rastro traders pay only an annual fee for the right to occupy a spot on the street. There is no actual street called the Rastro. The area, a focus of informal trading for centuries, covers a vast sprawl of streets in what used to be known as the "low quarters", a nod to the area's working class origins and its low-lying situation.
It fans out from the Plaza Cascorro, dominated by a monument honouring a soldier from a nearby orphanage who volunteered for a suicide mission against Cuban rebels in 1890. Up to half a million people cram through on a summer Sunday. The area is studded with tapas bars, which as lunch time approaches become filled with those seeking wine, prawns and respite from the sun that spears you in the face. These bars "would all die" warns Mr Agreda.
The head of the UGT union's trade and restaurants division, Daniel Prieto, says the regulations are inspired by business interests. "Street trading accounts for huge sums of money, and big companies want to push the little antique dealers or jewellery makers or quill pen collectors out of this traditional centre, so that they can move in themselves," he said yesterday.
Eugenio Morales, a Socialist on Madrid's city council, which is run by the conservative Popular Party, said his group would propose the opening of a consultation process at the council meeting next Tuesday. "Any new regulation must arise from discussions among those affected, the traders and neighbourhood associations, everyone involved in the Rastro. You can't impose a law that no one wants, or you'll have trouble," he warned yesterday.
Those responsible for the proposals say the Rastro would have to comply, but amendments will be considered. Carmen Caballero, head of trade and consumer affairs for the regional government, said yesterday:
"We are preparing a law that will regulate street trading in general, and the Rastro is one of many street markets. Our aim is to dignify the profession of street trader and protect the consumer. But if the Town Hall asks us to make an exception for the Rastro we are prepared to consider their request."