On the La Coruña road in Madrid's sedate northern suburbs lies the royal palace of El Pardo. On a scorching summer's morning, the royal hunting lodge, with its tapestries woven from cartoons by Goya and Bayeu and its magnificent oak-tree-lined grounds, is eerily quiet.

While detailing its association with the Hapsburgs and Bourbons, there is no mention in the English-language guide of the palace's most recent and long-standing resident: General Francisco Franco. After he emerged victorious from the three-year civil war in which 500,000 of his fellow countrymen perished, Franco set up residence at El Pardo. From here, he decided the fate of the Spanish nation for nearly 40 years.

With the 40th anniversary of the self-styled Caudillo's death this month, Spain will be forced - albeit briefly - to revisit a period in its history that the founders of its democracy agreed in the late 1970s was best forgotten.

That Franco's regime survived four decades is striking. That it survived in 1945 when - with the exception of his authoritarian Iberian neighbour, Portugal's António de Oliveira Salazar - all of other traces of fascist rule were expunged in Europe was more remarkable still. While officially neutral during the war, Spain's sympathy for the Nazi cause was ill-disguised and that neutrality did not save Franco from being seen as an international pariah in the late 1940s.

The exigencies of the Cold War - skilfully exploited by Franco's effort to portray himself as the anti-communist "sentinel of the west" - and the regime's carefully choreographed attempt to present itself it less as a fascist relic of the 1930s, and more as simply the guardian of traditional Catholic values, helped to ease the isolation to which Spain had been subjected. This was symbolised by the start of US economic and military aid in 1953 and Spain's admittance to the United Nations in 1955.

But central to Franco's effort to rehabilitate his image was the effort to recast Spain's role in the Second World War: instead of being the non-combative ally of those who had sought to annihilate European Jewry, it would depict itself as the nation that provided a vital escape route for those fleeing the Holocaust. Stung by Israel's 1949 vote against Spain being admitted to the UN - and the charge of its UN ambassador, Abba Eban, that it had aided and abetted Hitler's persecution of the Jews - Franco's Foreign Ministry rushed out its rebuttal. Over 50 pages, Spain and the Jews detailed how the heroic efforts of its diplomats had saved 50,000 Jews from the death camps.

For the dictatorship, this was potentially treacherous territory. Publicly, the regime's attitude towards the Jews was mixed. On the one hand, the Nationalists promulgated no legislation specifically targeted at mainland Spain's tiny Jewish population, or the rather larger number of Jews in its Moroccan protectorate. Indeed, Franco publicly denounced racism and antisemitism in Morocco during the Civil War and Jews served in his forces without official discrimination.

And while Franco reopened the Catholic churches, which his anti-clerical Republican opponents had closed and plundered during the Civil War, the synagogues, which they had also targeted, remained closed. But this, too, was not specifically antisemitic: Protestant ceremonies were not allowed, either. "The dominance of Catholicism in its peculiarly intolerant form," writes the historian Michael Alpert, was Franco's concern, not hostility towards a few hundred Jews. This apparent unwillingness to follow their fascist allies in Germany and Italy down the path of antisemitism reflected the fact that, as Franco declared in reference to the assimilation of most of its Jews in the wake of the Expulsion of 1492, Spain did not have a "Jewish problem".

On the other hand, antisemitic bile poured from the pages of the Falangist press and measures against Jews in occupied Europe - though not their mass murder - were reported with few signs of disapproval.

At his victory parade in May 1939, Franco vowed to remain alert to the "Jewish spirit which permitted the alliance of big capital with Marxism", while, a few months later, he severely criticised England and France and justified the persecution of "those races marked by the stigma of their greed and self-interest".

As Stanley Payne details in his book Franco and Hitler, on at least six other public occasions over the next four years, Franco used similar language.

Perhaps most ominously of all, on May 5 1941, Franco's Dirección General de Seguridad ordered each civil governor to compile a list of "all the national and foreign Jews living in the province… showing their personal and political leanings, means of living, commercial activities, degree of danger and security category". These lists of members of "this notorious race" helped to compile the Archivos Judaicos, which the regime maintained at least until 1944. In 2010, El Pais claimed that, as Spain negotiated its possible entry into the war on the side of the Axis powers, the list was handed to Heinrich Himmler.

Despite Franco's seemingly schizophrenic attitude towards the Jews - itself a reflection of his manoeuvring during the war as Germany's fortunes rose and fell - it is beyond dispute that many Jews escaped from the Nazis' clutches through Spain. That did not appear to be the regime's initial intention. On coming to power, foreign Jews - alongside freemasons and its political opponents - were barred from entry or passage through Spain. However, after the fall of France in 1940, an estimated 20,000-35,000 Jews did manage to cross the Pyrenees, defy the exclusionary decrees and, alongside other refugees, gain transit visas to Portugal and freedom. And, while the Spanish did return around 500 illegal refugees to the Germans during the course of the war, it did not do so specifically because any were Jewish.

But what of the fate of Sephardim, the descendants of Iberian Jewry who, scattered across parts of France and the Balkans, were, by 1943, imperilled by the Final Solution? Spanish policy oscillated between a desire not to see their persecution but a determination not to increase its permanent Jewish population.

As evidence mounted of the tragedy unfolding in the east, and Madrid came under pressure from abroad, Spain began what Payne terms a "painfully slow and halting" repatriation of Spanish Jews. Most notable was the case of the Sephardim of Greek Salonica, at least 550 of whom had Spanish papers. As Franco's Foreign Ministry prevaricated, its consul general in Athens, Sebastian Romero Radigales, mounted a heroic effort to save them, managing to move some to the relative safety of the Italian-controlled zone, and - despite their deportation to Bergen-Belsen - ensuring another 365 were brought to Spain by train in February 1944.

But Franco's embrace was hardly fulsome: all along, the regime insisted that Sephardim could move through, but not remain in, Spain. It was, in fact, Nicolas Franco, the dictator's brother and Spain's ambassador to Portugal, who showed more humanitarian concern for the fate of Jews, working with Jewish representatives in Lisbon to assist refugees.

In reality, the glacial pace of Spain's rescue of Sephardi Jews did not seem to quicken until it became clear that Hitler's fate was sealed. Nonetheless, it was at this moment that Spain's honour was probably saved when, after the Germans occupied Hungary in March 1944, it participated for the first time in the rescue of non-Sephardi Jews. That effort - while eventually approved by Madrid - owed much to the initiative of two Spanish diplomats: its acting chargé d'affaires in Budapest, Angel Sanz Briz, and, later, Giorgio Perlasca, an Italian fascist to whom Sanz Briz turned over the legation when he was ordered home as the Red Army advanced in the winter of 1944. Together, by issuing passports, letters of protection and placing Jews in rented buildings under the Spanish flag, the two men saved the lives of around 5,200 Hungarian Jews.

Sanz Briz was later honoured at Yad Vashem. But Franco, too, had reason to be grateful to the "Angel of Budapest" - for it was to his actions, and those of a handful of other Spanish diplomats, that the dictator clung after the war to drape a veil of respectability over his own inaction.