"Exiled in Cambodia" read the banner the molecular biologist carried at a protest in Madrid against government cutbacks. Back on leave from Phnom Penh, the 30-year-old researcher plans to head for Latin America if her present contract in Cambodia is not renewed. She sees little chance of finding work in Spain.

Bolanos and other scientists say sharp cuts in Spanish state spending on research and development, part of efforts to lower the national debt, leave them little choice but to go abroad. And they worry the cuts put Spain's competitive future at risk.

"There are two problems," said another demonstrator, Amaya Moro-Martin, 38, an astrophysicist with a prestigious Ramon y Cajal fellowship. "One is that there isn't enough investment. The other is that the investment there is isn't efficient."

She returned to Spain after 11 years in the United States but Moro-Martin, who carried her infant daughter on the march, said there was no chance her contract in Spain would be renewed at the end of this year and she will probably go abroad again.

Spain's modest place in the world of scientific research is far from new. Moro-Martin's fellowship is named after one of just two Spaniards ever to win a Nobel science prize.

And while state spending on R&D, even since the financial crisis hit, is comparable to that of wealthier EU governments such as Germany, private research by Spanish firms trails their northern rivals: current total national R&D spending is only about 1.4 percent of Spain's GDP, half the level in Germany.

But what particularly worries Spanish scientists who fret for their jobs, and economists who see research spending as an engine of growth, is that far from redoubling efforts to catch up, Spain now risks falling even further behind its competitors.

The government chopped fully 25 percent off its research and development budget last year and will trim a further 7 percent in 2013, leaving it at under 6 billion euros ($8 billion). The German government, by contrast, is increasing spending on R&D by over 6 percent this year to close to 14 billion euros.

With an economy just over 40 percent the size of Germany's, Madrid is still spending a comparable amount to Berlin, but the government's critics fear it is not doing enough to make up for a historic lag in investment, especially by private firms.

An official at the Economy Ministry, which swallowed up the science ministry after conservative Prime Minister Mariano Rajoy took power a year ago, insisted the government was doing what it could: "In the current circumstances we are keeping the system going and preparing for the future, to guarantee that every euro spent is well invested," the official said. "We have to create the best conditions possible so our scientists come back."

Spain is not alone. As France, Britain, Germany and others in the north fund more research to fend off competition from Asia, Italy has also scaled back its government R&D budget, prompting Roberto Natalini, a mathematician at Italy's National Research Council (CNR) to warn: "We will pay for this in the medium term, not immediately. We will lose our competitiveness."

TWO-SPEED EUROPE

Without more private R&D spending, Spain, Italy and others in the south may continue to lag. But critics of government cuts say these risk creating a vicious circle, discouraging business:

"Public money attracts private sector money," said biologist Antonio Baraber from Spain's National Oncology Centre. "You can't just hope people will invest if there's no base."

In 2010, OECD figures show, only 242 international patents were filed from Spain, compared to over 5,600 from Germany. Where the private sector accounts for over two thirds of total German R&D spending, in Spain it provides less than half.

All the more reason, Spain's researchers say, for their government not to be cutting while competitors invest more:

"There's a crisis everywhere but other countries aren't cutting off the lifeline," said Ester Artells, a 36-year-old Spanish biologist based at Marseille University in France.

The German government has raised its R&D budget by 6.3 percent this year and France is finding 1.2 percent more. After cutting back, Britain too is adding investment in science.

Venture capitalist Francisco Marin, whose Ambar fund invests in Spanish technology firms, said Madrid's failure to catch up in generating ideas to drive new businesses was a big risk for a country where one worker in four is already out of a job:

"Employment and wealth come from the creation of new companies," he said. "Existing companies don't create employment, they keep it at the same level."

Carlos Andradas, the mathematician who is president of the Spanish Confederation of Scientific Societies (COSCE), says it will take years, if not decades, to bridge the widening gap Spain has allowed to open up with its northern competitors.

"When you fall behind in a race, catching up is very hard," Andradas said. "It will take a long time for Spain to catch up, starting from a position of insufficient development."

Protesting astrophysicist Moyo-Martin believed her country had begun to improve its international performance in research in recent years, half a century after New York-based Severo Ochoa became the last Spaniard to win a Nobel science prize.

Now, however, it was back in a "very precarious position", she said: "The problem is, what's happening now isn't reform - it's just cuts."

(Additional reporting by Naomi O'Leary in Rome and Gareth Jones and Michelle Martin in Berlin; Editing by Chris Wickham, Fiona Ortiz and Alastair Macdonald)

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