Protestors clash with police in Madrid

on 25/09/2012 21:02:19

Spain's government was hit by the country's financial crisis on two fronts today as thousands of protesters enraged with austerity cutbacks and tax hikes marched on parliament while its borrowing costs increased in an auction of its debt.

More than 1,000 riot police blocked off access to the parliament building in the heart of Madrid, forcing the bulk of protesters to stay in a nearby square.

Police used batons to push back some protesters at the front of the march as tempers flared.

The demonstration, organised with an "Occupy Congress" slogan, drew protesters weary of nine straight months of painful measures imposed by prime minister Mariano Rajoy.

Thousands of angry marchers yelled towards parliament, 250 metres away, "Get out!, Get out! They don't represent us! Fire them!"

"The only solution is that we should put everyone in parliament out on the street so they know what it's like," said one of the protesters, civil servant Maria Pilar Lopez.

Ms Lopez and others are calling for fresh elections, claiming the government's hard-hitting austerity measures are proof that the ruling Popular Party misled voters to get elected last November.

While Mr Rajoy has said he has no plans to cut pensions for Spaniards, Ms Lopez fears her retirement age could be raised from 65 to as much as 70. Three of her seven nieces and nephews have been laid off since Mr Rajoy took office, and she said the prospect of them finding jobs "is very bleak".

Spain is struggling in its second recession in three years with unemployment near 25%. The country has introduced austerity measures and economic reforms in a bid to convince its euro partners and investors that it is serious about reducing its bloated deficit to 6.3% of gross domestic product in 2012 and 4.5% next year.

The deficit reached €50.1bn, equivalent to 4.77% of GDP, through August, the government said today. Secretary of state for the budget Marta Fernandez Curras said the deficit "is under control".

Spain has been under pressure from investors to apply for European Central Bank assistance in keeping its borrowing costs down. Mr Rajoy has yet to say whether Madrid will apply for the aid, reluctant to ask since such assistance comes with strings attached.

Concerns over the country's public finances were evident earlier when the Treasury sold €3.98bn in short-term debt but at a higher cost.

It sold €1.39bn in three-month bills at an average interest rate of 1.2%, up from 0.95% in the last such auction on August 28, and €2.58bn in six-month bills on a yield of 2.21%, up from 2.03%.

The government is expected to present a new batch of reforms on Thursday as it unveils a draft budget for 2013.

A day later, an auditor will release the results of stress tests on those Spanish banks which have been hit by the collapse of the country's property sector. The government will then judge how much of a €100bn loan it will tap to help bail out the banks. Initial estimates say the banks will need some €60bn.