* Smoking banned in all closed public spaces
* Bars and restaurants fear loss of trade
By Blanca Rodriguez
MADRID, Jan 2 (Reuters Life!) - Bar and restaurant owners in Spain, until now one of Europe's most smoker-friendly countries, fear that a ban on smoking in public places that takes effect this weekend will hit them hard and worsen the economic crisis.
"This will affect our business because people who come here like to have a coffee and a cigarette," said Fidel, a waiter in his 50s in a smoke-filled cafe in Madrid. "It's not the right time to change the law. We can change it when (the economy) improves, not now."
The ban, which took effect at midnight on Jan. 2, is one of Europe's toughest, stopping smoking in all closed public spaces and in open spaces such as children's play areas and outside hospitals. Fines for breaking the ban range from a modest 30 euros to 600,000 euros ($40 to $802,000).
"We should remember that more than 70 percent of Spain's population are non-smokers. So it is logical to think they will be more comfortable in bars when there is no tobacco smoke in them," Health Minister Leire Pajin told parliament when the law was approved earlier this month.
The Spanish Federation of Hostelry estimates the new law could lead to the loss of up to 350,000 jobs -- unemployment is already 20 percent -- as many Spaniards will stay at home rather than go without a cigarette with their coffee or beer in a bar.
At the same time the government, struggling to pay off a huge deficit during an economic slowdown, seems to be hoping the ban will not stop too many Spaniards from smoking.
Last month, among a battery of austerity measures, it announced a rise in tobacco tax which it hopes will bring in an extra 780 million euros a year.
Spain's Institute of Economic Research estimates bar turnover could fall by 10 percent as a result of the ban.
The hostelry sector accounts for 7 percent of gross domestic product and the government, trailing the main opposition party by about 15 points in opinion polls, can ill afford such losses as it struggles to create jobs and revive the economy.
Until now, bar owners could decide whether to allow smoking, depending on the size of their premises, while larger bars and restaurants had to have a designated smoking area.
Similar legislation in Ireland has had a limited economic effect.
Many Spaniards may well be inspired to try to give up smoking, but some, such as 50-year-old barman Julian Escudero, believe any effects will be short-lived or negligible.
"Maybe at the beginning there will be a downturn (in business) but later things will stabilise," he said. (Writing by Elisabeth O'Leary, editing by Tim Pearce)