IT IS holiday time, but Madrid's streets are unusually busy for August. As fear grips Spanish consumers, one half of madrile ños are hoarding euros and plan to stay at home to brave the cauldron of heat. Confidence has hit rock bottom, reflecting 25% unemployment and a double-dip recession that will drag on to 2013. Talk of an autumn bail-out and worries that this might spark a wider euro-zone meltdown make Spaniards glummer. Spain's painful deleveraging process may last for years. Among mature economies, it has the third-highest total debt as a share of GDP - behind only Japan and Britain. Many Spaniards wish they had saved more and borrowed less before a property bubble burst four years ago. But some who carefully shepherded their euros into savings instruments recommended by local bank managers are now wishing they had joined the big spenders. Many of these savers now look set to be hammered for lending to their banks in the form of risky hybrid "preference" shares. This subordinated debt is now in the sights of euro bail-out enforcers as Spanish banks take up to €100 billion ($123 billion) from rescue funds. Spain may have to impose losses on retail clients lured by high interest rates into buying products they now claim not to have understood. Struggling to find funds as they sank into a sea of toxic property loans, Spain's ailing savings banks sold preference shares aggressively. Branch managers cold-called lifelong clients. This complex and risky hybrid of debt and equity was sometimes sold as a safe investment. Tales abound of contracts signed by frail pensioners with poor eyesight. Courts and arbitrators have told some banks to hand the money back. The bailed-out Novacaixagalicia has offered a public apology, but losses may see furious customers abandon already fragile banks. Around 60% of subordinated Spanish bank debt, excluding the healthy Santander and BBVA, is held by retail investors. The number of small savers involved makes it different to bailed-out Ireland, where subordinated debt holders took losses of up to 80%. The economy minister says preference shares should never have been sold to retail savers but agrees that bank investors must bear some losses. The opposition Socialists want a distinction between savers (who should be saved) and investors (who should not). Not everyone is sympathetic, pointing to interest rates on the bonds of 7%. Any hit taken by small savers will be a further blow to the People's Party (PP) government of Mariano Rajoy, the prime minister, as it imposes more austerity to reduce the budget deficit. Support for the PP has slumped by eight points, to 37%, since the party won an absolute parliamentary majority in last November's election. That helps explain why Mr Rajoy's government is negotiating hard to soften the blow on preference-share holders - and why it has prolonged a temporary €400 a month payment to the long-term unemployed. Trouble is also building in the regions. Mr Rajoy threatens to take direct financial control of some of the country's 17 regional governments, which spend 40% of public money, if they fail to meet strict deficit targets. One region, Murcia, has already publicly admitted that may be impossible this year. Leaders of at least one other big region say the same in private. A decades-long process of regional devolution may thus go into reverse, changing the tide of Spain's democratic history. The Catalan leader, Artur Mas, a nationalist, has already threatened a snap election if the men in black arrive from Madrid to take control of his government's finances. Bond markets are asking when and how Spain will grow again. It may be holiday time, but Mr Rajoy cannot relax.