Partying all night in the bars and discos that jam this city's rabbit warren of narrow streets and picturesque plazas is considered a fundamental right by Madrilenos, as capital dwellers are called in Spanish.

When the sun goes down and temperatures soften, revelers flood into the city center to fill the pubs and sidewalk cafes, ignoring the four or five stories of apartments above.

It's common for Spaniards of all ages to meet at 10 p.m. for a night on the town and not return home until dawn.

For the first time in years, government officials have thrown a dash of cold water - or the threat of it - on the party.

Madrid's conservative regional government has begun enforcing long-ignored official closing hours, imposing heavy fines on pubs that don't stop serving by 3:30 a.m.

While this deadline would fully satisfy the average fun-seeker in Paris, let alone Londoners who campaigned to get closing time postponed to midnight, it was greeted with horror by Madrid night owls.

''We are being forced to shut up at the very best moment, when the demand is highest,'' says Jose Luis Salazar of Madrid's bar owners association, which claims the new timetable will reduce earnings by 80 percent.

As the summertime party gets underway, the association is mounting a counteroffensive, claiming earlier closing not only threatens countless jobs, but also provokes street disturbances by frustrated revelers.

Worse, Salazar warns, Madrid's status as Europe's city that never sleeps could be lost to Lisbon or Amsterdam.

There is another side to the story.

For three old men sitting on a shady bench out of reach of the scorching sun - daytime temperatures hover in the 100s during July and August - living in a nighttime hot spot is far from fun.

''Every weekend is an inferno,'' says Santiago Garcia, 83, as he swaps morning-after stories of revelers' drinking, singing and shouting with his equally bitter friend Gregorio Rubio, 74. A friend dozes nearby, head drooping over his cane, perhaps exhausted from the noise the night before of others partying outside his apartment window.

While many residents in central Madrid protest the din, others seem to accept that a good time is more important than a good night's sleep.

''It's only a few old people stuck in the past that complain, people have to live life to the fullest,'' says 68-year-old Jose Calle Duena. ''I still stay up through the night.''

Some 50 intellectuals recently signed a manifesto defending the freedom to stay up until you fall down from exhaustion.

''Forcing the pubs to close is a barbarity,'' well-known author Jose Luis Sampedro, one of the signatories, told the daily newspaper El Pais.

Before local elections in June, the regional government appeared to be feeling the pressure and promised to rethink the regulations.

After the elections, the government hosted talks between the bar owners and the neighborhood associations that favor further restrictions. '

'It's just that you have to educate people a little about this habit of going out so late,'' says Jose Antonio Jimenez of Madrid's Federation of Neighborhood Associations.

Jimenez is convinced that the disgruntled neighbors will eventually win the battle of the barrio.

Sociologist Alberto Moncada is not so sure.

''No government, not even (the late dictator Gen. Francisco) Franco, has been able to stop Spaniards from partying through the summer nights,'' he said. Franco's 40-year dictatorship died with him in 1975.

Dragging a heavy shopping cart behind her, 60-year-old Angela Castilla says she supports stricter pub regulations, but gives it a second thought as she recalls her own youth.

''We Spaniards like to stay up late,'' she says. ''Our blood burns.''

Travel information for Spain.