Clashes erupted in the Spanish capital city of Madrid between riot police and thousands of demonstrators attempting to form a human chain around the parliament as a sign of protest against the government's handling of the financial crisis, media reports said Tuesday.
Well before the protests began, police had created a protective ring around the parliament building to prevent demonstrators from storming it. Tuesday's clashes reportedly began after the protesters attempted to tear down barricades set up by the police to block access to the parliament building.
Television footage showed police charging the protesters with truncheons in an effort to disperse them. Local media reported that dozens of protesters have been arrested in the police action. Several people, including police officers, were injured in the violence. Protesters, enraged by recent cuts to public salaries as well as health and education, are accusing the government of "kidnapping" the democracy.
The development comes amidst preparations by Spanish government headed by Mariano Rajoy to announce the 2013 budget on Thursday. It is said to include more painful austerity measures aimed at reducing the country's widening budget deficit by more than 60 billion euros by 2014.
Incidentally, Rajoy, who took office in December, had unveiled a EUR 65 billion austerity package on July 11, comprising tax hikes and spending cuts. Despite those harsh spending cuts, Spain is still struggling to meet the deficit targets, partly due to its deepening recession.
The country's economy contracted 0.4 percent quarter-on-quarter in the second quarter, following a 0.3 percent contraction in the first quarter. Annually, the gross domestic product shrunk 1.3 percent, more than 1 percent estimated preliminarily. Besides, Spain currently has the highest unemployment rate in the European Union. One in four Spaniards is out of work, with the youth bearing the brunt of the severe labor market crisis.
The Spanish government is currently facing the daunting task of reducing deficit amid high borrowing costs. Though recent positive comments from European leaders, including European Central Bank President Mario Draghi, have helped ease the borrowing costs, they still remain much higher compared to that of Germany.
Although the Spanish government has so far resisted seeking external financial assistance for shoring up its entire economy, there are concerns that Spain may soon be forced to seek an international bailout. Rajoy's government is reportedly hesitating to seek such a bailout because of the tough austerity conditions such a rescue would entail.
Notably, Eurozone nations have committed as much as 100 billion euros to a European assistance program specifically targeted to the restructuring of Spain's financial sector. Out of this, some 30 billion euros have already been approved. But the Spanish government insists that the 100bn-euro pledge does not constitute an international financial rescue.
In addition to the economic woes, trouble is rising on the political front for Rajoy with calls for secession increasingly spreading in Catalonia, which contributes a fifth of the country's economic output. Rajoy had rejected a request from Catalonia to run its own fiscal affairs last week, prompting the regional government to call early elections on November 25.
Many of Spain's 17 autonomous regions are struggling to handle their public finances and some have already sought help from the federal government. Valencia was the first Spanish region to request a bailout, followed by Murcia.
Catalonia has since requested for a EUR 5 billion bailout from the EUR 18-billion rescue fund, set up by Madrid to support its debt-ridden regions. The regional administration in Andalucia is also considering the central government for a 4.9 billion euro bailout.
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Market Analysis
December 12, 2025 15:14 ET Central bank decisions dominated the economic news flow this week led by the Federal Reserve. Trade data from the U.S. also gained attention. The Canadian and Swiss central banks also announced their interest rate decisions. Inflation data from China was in focus as the country released the latest consumer price and producer price data.