Capital Letters: Giles Tremlett in Madrid

Paco, the balding, bespectacled man who sets out his wares on a Formica table on the pavement in Calle Goya, was doing a brisk trade yesterday in Franco cigarette lighters, Falangist bumper stickers and patriotic red and gold braces.

"It's the anniversary of the founding of the Spanish Legion," he said. "There's a Mass tonight and after that there's a party. They'll be drinking panther's milk."

Panther's milk, a lethal mixture of just about every bottle on the hard liquor shelf, was, he explained, the traditional way to celebrate the fighting spirit of General Franco and the Spanish Legion which provided the vehicle for his dictatorship.

September 20 is one of the hard right's handful of feast days commemorating the high points of the former dictator's life. Yesterday's clients for Paco's tacky goods included a man buying a tape of Cara al Sol (Face to the Sun) and other Falangist anthems, and, more surprisingly, three teenage girls debating whether to have their woven cotton bracelets in the colours of the Spanish flag, those of Franco's Movimiento Nacional or in those of the Falange party that supported him.

Visitors to Madrid often ask what happened to the hundreds of thousands of stiff-armed, blue-shirted Franco supporters who used to pack the Plaza de Oriente for his rallies. The answer, 25 years later, is that many are dead, most were only there for the free trip to Madrid and the rest are a powerless rump known simply as los nostalgicos , or the nostalgists.

While the rest of Europe experiments, once again, with the extreme right, 40 years under the Franco yoke have been enough to inoculate several generations of Spaniards against trying the same.

The last attempt to set up a vote-catching extremist rightwing party ended when its leader, Ricardo Saenz de Ynestrillas, was convicted of trying to kill a cocaine dealer who refused him credit outside a Madrid nightclub. His party headquarters were closed down because of the rowdy, drunken parties that lasted until the small hours.

Franco must have been turning in his tomb at the imposing, scary shrine he built for himself and his fellow nationalists in the Valle de Los Caidos (Valley of the Fallen) on the outskirts of Madrid.

The nostalgicos , however, are still with us. Don Emilio, the man whose flat we bought, was one of them and did not mind everyone knowing it. He liked to blame "that traitor", King Juan Carlos, for selling out to the democrats when he inherited the reins of state from Franco.

One of the last bastions of the nostalgicos is the Gran Pena - a wood-panelled gentleman's club on the central Gran Via where members erected a Franco bust in 1992, just as Spain was showing off its new, modern self at the Barcelona Olympic games.

The star speaker there at a recent Franco anniversary was Blas Pinar - the founder of the Guerrillas of Cristo Rey, a bunch of ultra-Catholic, rightwing thugs who terrorised Madrid in the 70s. His charismatic fusion of Franco hagiography, denunciation of "the Reds", quotations from the scriptures and references to the saints was rapturously received.

In the audience was a fragile, grey-moustached veteran of the Blue Division, a 40,000-strong corps of Franco volunteers who fought for Hitler in Russia. "We all still hold the same beliefs we had then," he confided afterwards. Aged, weak and powerless, the nostalgicos know they have been confined to history. Paco's stand is one of the last reminders that they still exist.