Austerity measures look set to become far more dramatic on Friday, when prime minister Mariano Rajoy delivers one of harshest budgets ever seen in Europe

This article is more than 8 years old

This article is more than 8 years old

With near-empty railway stations, shut factories, mass marches and occasional outbreaks of violence during a general strike on Thursday, Spaniards showed the first signs of rebellion against the reformist, austerity-preaching conservative government they voted in four months ago.

Police and pickets clashed in a handful of places, but it was a largely peaceful general strike in a country whose sinking economy, with 23% unemployment, has become the focus of worry about the future of the whole eurozone area.

Thousands of police officers remained on duty around the country on Thursday night as tens of thousands of flag-waving demonstrators flooded into city centres for protest marches against labour reform and austerity measures introduced by prime minister Mariano Rajoy's conservative People's party [PP].

Demonstrators brought the centres of Madrid, Barcelona and other cities to a standstill as trade unions claimed the strike was more widely supported than previous nationwide stoppages in 2010 and 2002. Rajoy's officials claimed, however, that the 2010 strike against a socialist government had received greater support.

Electricity consumption fell by 17%, suggesting the strike was impacting on major industries – though most shops appeared to be open in Madrid.

Street fires were set in both Madrid and Barcelona, where roads into the city were blocked, but there were few reports of serious violence.

The strike was most successful where Spain's big two unions, the General Workers Union and the Workers Commissions, are strongest – in large factories, the civil service and transport.

General Workers leader Cándido Méndez put average participation at midday at 77% but said that it was 97%in industry and construction.

"This strike has been an unquestionable success," he said.

Civilized protest looked unlikely to alter the determination of the government to drive on with reforms and austerity.

Rajoy has pledged not to backtrack on reform that has made it easier for employers to sack workers. And the austerity measures which strikers also demonstrated against looked set to become far more dramatic on Friday, when Rajoy is set to deliver one of the harshest budgets ever seen in Europe.

The general strike came on Rajoy's 100th day in power and at the end of a week that marks a watershed in political support for his party.

At the weekend he had seen support slip away in Spain's largest region, southern Andalucia, where the PP's share of the vote fell in a regional election from 46% to 41%.

The party also did badly in the northern region of Asturias, where it finished in third place in a Sunday vote.

Regional governments, which provide most welfare services and jointly failed to reduce their deficits at all last year, are seen as one of Spain's main problems.

The strike came amid growing concern about Spain in Brussels and the financial markets, which have put pressure on bond yields in recent weeks – though the Spanish government has had no trouble borrowing money to finance itself.

Yields remain below the levels at which bailed-out eurozone countries like Greece, Ireland and neighbouring Portugal were forced to seek help. Spain's national debt remains lower than in most eurozone countries.

Portugal's central bank cut its economic outlook on Thursday, warning the economy would be flat next year, where it had previously forecast a mild rebound of 0.3%. This year it expects a contraction of 3.4%.

With an economy that is twice the size of Greece, Portugal and Ireland put together, however, problems in Spain would have far-reaching consequences.

Rajoy held the budget back until Friday in order to avoid alienating voters in Andalucia, a strategy that has annoyed some commentators who believe he has wasted valuable time.

The European Union has set Spain a target of cutting its deficit from 8.5% of GDP to 5.3% this year, a net cut of some €34bn (£28.3bn).

As Spain falls back into a double-dip recession, however, economists say austerity measures will sharpen the fall. The government already predicts a 1.7% fall in GDP this year, with unemployment rising to 24%.

And with Spain entering a spiral of falling tax income, higher unemployment and recession, the real size of the cuts or tax hikes needed to meet the deficit target are much higher.

Economists have put the total adjustment needed to meet this year's target at between €52bn and €64bn – or well over €1,000 per Spaniard. The government has already covered €15bn of that with emergency measures announced in December.

Government sources said they were aware that Spain's credibility with the markets was on the line if it failed to meet the target, though some economists consider this impossible.

But Juan José Toribio, of Spain's IESE business school, said the country could no longer afford the welfare state built up during boom years and fuelled by a giant housing bubble that has since burst.

"We cannot sustain the current model of the welfare state," he said. "I am not saying we cannot have welfare, but we must seek a less expensive model."

Kathleen Brooks, research director at Forex.com, warned that the sight of protesters on the streets of several Spanish cities will prompts fears that the government might relax its fiscal plans, making sovereign debt a less attractive purchase.