I find it amazing everytime I see a film based in Europe during the mid-20th Century ... how incredibly unstable the place was. It reminds me of the Middle East today with the fanaticism more on political ideaology and less on religion. In watching Pan's Labyrinth today, I had to do some quick research to remember how Spain fit in since the film was based during 1944.
The Spanish Civil War ended in 1939 and things were still chaotic in Spain during World War II. Franco was still president and had taken side with the Axis early in the war sending troups to fight the Soviets at one point. Hitler offerred Franco membership in the Axis. He asked for food, military equipment, Gibraltar and French Northern Africa in exchange. He, of course, was turned probably due to the fact that he really didn't have a lot to offer in exchange for this. Later, in the war, Spain did offer sanctuary to Jews fleeing Nazi occupation, particular those from Vichy France. After WWII, Spain was orginally barred from entering the UN due to their intial support of the Axis. They went through years of isolation after that.
Pan's Labrynth was a phenomenal film but is quite graphic. It showed the leftist rebels being to tortured by the Franco loyalists. A great film to see how a child might deal with such a world. Might be what kids in Iraq might be going through now.