THE Prado museum, lined with works by Goya, Velázquez and El Greco, is a sanctuary of peace in busy central Madrid. When the museum advertised for eleven gallery attendants recently, it also seemed the perfect refuge from Spain’s job-starved economy: 18,700 people applied.

As Spain timidly emerges from a blistering double-dip recession that has ripped 7% out of GDP over five years, job-seekers remain desperate. Unemployment is stuck at 26% and emigration is picking up. So will the recovery create jobs and send Spain into a virtuous cycle of increased domestic consumption, a higher tax take, healthy public finances and more jobs?

Presenting next year’s budget on September 30th, Cristobal Montoro, the budget minister, did not offer rapid relief. Projected growth of 0.7% next year falls short of the government’s own estimates for job creation. And with a planned deficit of 5.8% of GDP adding to an already worrying debt pile, stimulus spending is impossible.

Civil-service pay is being frozen for a fourth year in a row and pensions will not keep up with inflation, yet the public debt will still reach almost 100% of GDP. Spanish companies and households are busy trying to pay off their own debts. After taking a €41 billion ($55.6 billion) bail-out last year, Spain’s banks find it safer to lend to the government than to business.

Even so, Spain’s story is now one of hope. Mariano Rajoy, the prime minister, says the third quarter will show a return to growth. Deep in the real economy, exciting things are happening. Car plants are humming, taking work from less competitive factories in Europe. Retail sales figures are improving elsewhere. Even consumer credit has crept up in recent months. Recession inflicted a brutal cull on businesses, but those still standing are more efficient and productive than ever. Exports, spurred by Spain’s new competitiveness, should grow more than 5% both this year and next, doubling their pre-recession weight in the economy. With exports booming, the current account has swung into surplus.

Recovery in the European Union, Spain’s main export market, will help further. The stockmarket is soaring, with the Ibex-35 indicator gaining 11% in September. After a bruising 21 months in office, Mr Rajoy predicts economic happiness next year. His Popular Party (PP) has even seen a bounce in opinion polls.

But Javier Díaz-Giménez, of the IESE business school, warns that the recovery is anaemic, fragile and unlikely to create jobs. Average GDP growth of 1%, he points out, would not see Spain return to pre-recession levels until 2021. The IMF sees 25% unemployment through to 2018.

The danger, warns Angel Laborda of the Funcas think-tank, is relaxation. Already he worries that this year’s 6.5% deficit target will be missed. Overall fiscal pressure is relatively low for a country that wants a sophisticated welfare system. Structural reforms are still needed, he says, but Spain enters a two-year period of elections in 2014, sapping political courage. Overconfidence threatens to slow the fall in house prices, making it even harder to sell the 700,000 new homes left by the housing bubble that pitched Spain into recession. Fitch, a ratings agency, warns that at current rates of selling it will take six years to clear the overhang. Prices have fallen 30% or more from the peak, but Jesús Encinar of idealista.com, a property portal, sees a further 20% drop.

The next test for Mr Rajoy is pensions. A diet rich in olive oil, wine and fresh vegetables helps make Spaniards among the longest-living people in Europe. The baby-boomers will retire over the coming decade. By 2050, the number of pensioners will have leapt from just over 9m to 15m; and the social-security system already loses the equivalent of 1.4% of GDP. The previous government hiked the retirement age to 67, but that is not enough. “To claim that the current system is sustainable is like saying smoking does not cause cancer,” says Mr Díaz-Giménez. The government has made bold proposals to calculate pensions according to life expectancy and the size of the state pension pot. But Mr Rajoy is under pressure to backtrack. Even the employers’ federation has warned of pensioners’ lost spending power.

Labour reforms have helped to boost productivity, allowing employers and unions to opt for wage moderation rather than sackings. More may be needed if jobs are to be created. Lowering, or scrapping, the minimum wage might help. Taxes could also be cut, but only if public spending is cut. Luis de Guindos, the finance minister, says jobs will come when growth reaches 1%. Until then, the Prado museum remains a safe harbour.