Protesters surround parliament in Madrid, while thousands take to the streets of Lisbon in new anti-austerity protests.

Thousands of protesters have again rallied in Spain, where the government submitted an austerity budget and said the public debt and deficit are set to rise far above earlier forecasts.

Chanting that politicians must resign, the demonstrators surrounded parliament in Madrid on Saturday evening, facing off with riot police and denouncing the conservative government’s deep budget cuts.

Rallied by the Indignants protest movement and organised on social media, the protesters held up signs that said simply “No”, “Resign” and “Democracy” and shouted toward the legislature: “They do not represent us”.

On Tuesday helmeted riot police fired rubber bullets and baton-charged protesters as thousands rallied near parliament in anger at the economic crisis in clashes that left at least 14 people wounded.

The crisis, blamed on the collapse of a speculation-driven real estate boom, has plunged Spain into recession, throwing millions out of work and many families into poverty. Unemployment is close to 25 per cent.

Amid the gloom, the government had more bad news on Saturday, when Budget Minister Cristobal Montoro said debt was now predicted to reach 85.3 per cent of gross domestic product in 2012 and 90.5 per cent in 2013.

The deficit meanwhile was revised to 9.44 per cent of GDP from 8.9 per cent and was predicted to hit 7.4 per cent instead of 6.3 per cent this year.

Growing anger

The budget approved by Prime Minister Marian Rajoy’s right-wing cabinet on Thursday tightens austerity in the teeth of the growing protests, easing the path to a widely expected sovereign bailout.

“The budget must act as a lever to overcome the crisis and restore confidence in Spain,” Montoro said on Saturday as the budget was submitted to parliament. “It must open the way to growth and job creation in the country.”

Montoro blamed the ballooning deficit on state aid to Spain’s fragile banks, which have been reeling from bad debts since the property bubble burst in 2008.

But Montoro added that Madrid expected this aid to be repaid, allowing Spain to make good on its pledge to the European Union to return the deficit figure for 2012 to 6.3 per cent of GDP.

Protesters say the policies of Rajoy’s conservative government, including pay cuts and sales tax rises to rein in the public deficit, hurt the poor unfairly.

The offer of a loan of up to 100bn euros ($125bn) by Spain’s eurozone partners to rescue the country’s stricken banks has fanned their anger.

Spain said on Friday after an independent audit that its banks need 59bn euros ($76bn) to fix their balance sheets, but may need to borrow “only” 40bn euros from the eurozone.

Portugal protests

Meanwhile in neighbouring Portugal, thousands took to the streets of Lisbon on Saturday in a new protest against austerity, stepping up their opposition to the country’s 78bn-euro bailout ahead of new spending cuts and tax hikes to be announced in the government’s 2013 draft budget.

The peaceful protest organised by the CGTP (General Confederation of Portuguese Workers) union came after the centre-right government ignited widespread anger this month with a hike in social security taxes that threatened to end Portugal’s so far high social acceptance for austerity.

Facing criticism from unions, opposition politicians and businesses alike, the government reversed the tax hike.

But it is now rushing to find alternative measures to adopt in its 2013 budget to ensure the country meets fiscal goals under its bailout from the European Union, European Central Bank and IMF, the so-called troika.

Protesters marched through downtown Lisbon, carrying banners reading “Out with the Troika and these policies”.

The protest in Portugal came after a week of similar anti-austerity marches in Greece and Italy as southern Europeans face increasingly grim economic conditions under hardship sparked by the euro debt crisis.