Any country that has recently seen its unemployment rate fall to the lowest for 30 years, has enjoyed a growth rate of around 3.8 per cent and has witnessed an unprecedented housing and construction boom would count itself lucky. But Spain, which over the past 20 years has had an extraordinary sustained rise in living standards matched in Europe only by Ireland, is gripped by anxiety. Spaniards fear that the good times are ending. As a result, the economy has dominated the election campaign, so that the vote on Sunday may be influenced as much by economic factors as by the other issues - immigration, social liberalism, Basque separatism and terrorism. What, then, is the state of the economy?

A bad-tempered debate between José Luis Rodríguez Zapatero, the Socialist Prime Minister, and Mariano Rajoy, his Popular Party (PP) challenger, this week turned largely on opposition accusations that the Government was “ignoring reality” over the downturn. The figures are certainly worrying. Yesterday the Labour Ministry announced that unemployment last month rose by 2.3 per cent compared with January, with the overall rate last year up to 8.6 per cent, the first annual increase since 2003. Rising interest rates, the international credit squeeze, the slowdown in the building industry and mounting debt have taken their toll on consumer confidence.

In this deteriorating atmosphere, the argument has sharpened on other issues worrying voters: the large number of immigrants, especially from Africa, Latin America and Eastern Europe, and lingering fears of Islamist terrorism; the collapse of negotiations with Basque separatists after the Madrid airport bombing in 2006 and the continuing sporadic violence by Eta terrorists; and the backlash, especially among older voters, to liberal legislation on same-sex marriage, abortion and easier divorce.

Mr Rajoy's attacks, however, have failed to make inroads. The latest opinion polls - the last that can be published before the election - showed Mr Zapatero finally pulling ahead, with a lead of four percentage points. On terrorism, the Opposition is still struggling with accusations, voiced again during the television debate, that it willfully blamed the wrong culprits, Basque separatists, for the 2004 Madrid train bombings. Earlier attacks on Socialist “surrender” to the separatists have been blunted by the Government's new tough line. And the blatant attempt by Spain's alienated Catholic hierarchy to steer voters towards the PP in protest at gay marriage and divorce laws has backfired: many Spaniards, especially the young, are angered by what looks like an attempt by the Church to reclaim the political and moral sway it held in Franco's day.

For Britain, the ballot poses a paradox. British policy on Iraq, Afghanistan, the EU and market liberalism would find more in common with policies espoused by the PP - especially its more sceptical attitude to European federalism. But on the single main irritant in Anglo-Spanish relations, Gibraltar, the Socialists' pragmatism and readiness for tripartite talks have considerably eased relations. Despite the current pessimism, Spain - which has overtaken Italy in economic standing - will play a larger role in Europe and the world. Pragmatism, for the British as they deal with the Rock, and for the Spanish facing a stony road ahead, is more important than party.