Spanish unions call walkout over labour law reforms at heart of austerity budget to be handed down on Friday

Unions in Spain have begun a general strike over economic reforms, challenging the country's new conservative government and joining other European workers venting their frustration at austerity measures.

The walkout in protest at changes to labour laws came ahead of a budget on Friday that is expected to include spending cuts of tens of billions of euros aimed at reducing Spain's deficit.

The Spanish government, which is less than 100 days old, is struggling to satisfy the fiscal requirements of European Union and international investors while avoiding the fate of Greece, Ireland and Portugal, which were all forced to accept a bailout.

On top of a round of spending cuts, tax rises and reform of the banking sector, the newly elected government of the prime minister, Mariano Rajoy, last month passed a decree on workers' rights. The legislation makes it cheaper and easier for companies concerned about their own productivity to lay off people, cut wages and modify other employment conditions.

Spain's unemployment rate is nearly 23%, a eurozone high, and nearly 50% among young people.

The country's two main unions are hoping for an enthusiastic turnout on Thursday, more than during a general strike in 2010 when a Socialist government enacted its own, less aggressive labour market reforms.

"The people will say whether they are resigned to accepting the reforms," said Ignacio Fernandez Toxo, head of one of Spain's main unions, known as CCOO.

The government has said it will persist with its austerity drive, calling the reforms essential to creating jobs and reviving an economy expected to contract 1.7% this year.

"The question here is not whether the strike is honoured by many or few but rather whether we get out of the crisis," said the finance minister, Cristobal Montoro. "That is what is at stake and the government is not going to yield."

Jose Ramon Pin, a professor of management at IESE Business School, said the unions hoped to hobble the country by limiting public transport at rush-hour. Major rallies are planned for Thursday evening in Madrid and other cities.

But unions face two problems, according to Pin. First, people who strike get docked a day's pay, which few can afford in these hard times. Also, Spaniards appear resigned to the fact that the country needs painful reforms to help the economy recover from the collapse of a property bubble in 2008.

The government – which came to power in December after the Popular party scored a landslide win over the Socialists – had a mandate to save the country from financial ruin, Pin said, and was unlikely to worry much about its popularity rating.

"There are two elements: Spanish voters and international investors and right now the government is governing for the investors," he said.