The middle-aged man sitting on a railway station bench protects a younger man by wrapping his arms around him as he shouts desperately at the helmeted, baton-wielding police officers running up and down the platforms at Madrid's Atocha station.

"Shame on you! Shame on you! Shame on you!" he bellows repeatedly in a video that shows how police charged into the station during violent demonstrations that shook Madrid last week.

On the other side of the ticket barrier a younger man is whacked with truncheons by two policemen. "I don't know whether he is a passenger or a protester," one of them admits. A third man who was waiting for a train is bundled down the platform by police officers as he asks: "And what have I done?" A youth points to blood running down his face. "What the hell is this?" he asks.

On Friday, police told a judge they had needed to chase a group of violent protesters across the railway tracks and had later arrested some in a nearby bar. They, too, had suffered injuries. "People who had been hurling stones at police tried to hide in the station, passing themselves off as normal passengers," a spokesman said. "We had to go in."

As Spaniards respond with dismay to the violence shown by demonstrators, who launched attacks on police, and the response of some riot police, during scuffles in the area around Madrid's parliament building last week, the long-running drama of the country's deflating economy has lurched into a newly confrontational stage, amid fears that there will be more violence to come.

While police and the conservative government of prime minister Mariano Rajoy were accused of authoritarian behaviour, radical protesters from both the far left and the far right were putting a hard, street-fighting edge on to the once peaceful protests of the civilised but ineffectual indignados.

Cristina Cifuentes, the government delegate in Madrid, had warned before the protests that they were being infiltrated by violent members of Spain's far right and were attracting the country's most radical leftwingers. But protesters later pointed to a group of undercover policemen who, they claimed, had been at the front of the protest waving red flags and encouraging others to violence.

Other police certainly thought their undercover colleagues were troublemakers, and there is also film of one of them being dragged out of the crowd to be arrested and shouting: "I am a colleague! I am a colleague!"

On Saturday, a 72-year-old man was among some 30 demonstrators who had been accused of attacking police and given bail. "But I was sitting down when they arrested me," he said.

The radicalisation came amid worries that the ratings agency Moodys would downgrade Spain's creditworthiness, reigniting the pressure on its debt and sending the interest rates that it must pay spiralling up again.

Ministers have said that €10bn (£8bn) of cuts and tax increases must come in next year's budget just to cover a leap in interest payments. On Friday night, they said a coming round of bank bailouts, paid for by the eurozone rescue fund, would send the country's debts soaring by some €50bn. Spending is to be cut by 7% next year, bringing another wave of cuts in health, education and other welfare services. Yesterday, Spain's civil servants heard that, for the third year running, their wages were being frozen.

A period of calm in Europe's more troubled economies created by the European Central Bank president Mario Draghi, when he announced plans to buy the debt of countries who asked for bailouts in the future, also seemed to have come to an end. And with the threat of Catalan separatism adding to worries about Rajoy's ability to control events in Spain, many now expect him to ask for a full bailout for the country – placing it in the hands of those who have forced Greece, Portugal and Ireland into round after round of spending cuts.

Budget minister Cristóbal Montoro presented an austerity budget to parliament on Saturday, with analysts widely seeing it as an attempt to pre-empt the conditions that Spain would have had imposed on it anyway for the bailout. "Reducing our budget deficit is essential," he said.

With unemployment at 25%, however, and the economy already set to shrink for the next two years, Spaniards see no end to the tunnel of misery.