Madrid Protesters March Again as Spain Braces for Cuts

Spanish protesters marched for a second night in Madrid, calling on Prime Minister Mariano Rajoy to reverse austerity measures as his nine-month-old government prepared its fifth package of budget cuts.

Demonstrators gathered near parliament after clashing with police at the same site yesterday. As Greek police in Athens dispersed protestors with tear gas, Rajoy played down the rally in Madrid, telling a conference in New York that the “immense majority” of Spaniards aren’t on the street and his government still has three years to pursue its economic overhaul.

Rajoy risks renewed criticism tomorrow when the Cabinet approves the 2013 budget and presents measures to bolster the shrinking economy. The premier is struggling to persuade European peers, voters and investors that he can tackle the crisis, as Spain’s bond yields surge amid rising investor expectations that Rajoy will delay asking for external aid.

“Rajoy is likely to face a very tough end-of-year in terms of social discontent,” said Antonio Barroso, a political analyst at Eurasia Group in London and a former Spanish government pollster. “Protests are likely to continue in the future, and the overall degree of mobilization could increase if trade unions decide to call for a general strike.”

Spanish bond yields rose the most this month as a second night of violent protests loomed. The yield on the 10-year benchmark climbed 32 basis points to 6.06 percent, while the benchmark Ibex stock index slid 3.9 percent.

Catalan Defiance

The premier’s efforts to restore investor confidence and voters’ faith in his leadership suffered a new setback yesterday when Catalan President Artur Mas called early elections to push for “self-determination” for the country’s largest regional economy. Rajoy hasn’t responded to the challenge, saying only that he respects the regional government.

“Spain is increasingly slipping out of his hands,” opposition Socialist leader Alfredo Perez Rubalcaba said today in parliament. “There are clear fractures in Spain and the one I’m most worried about is social fracture.”

Suffering Spaniards

Rajoy didn’t mention Catalonia at a speech to the Americas Society in New York, where he focused instead on his government’s efforts to overhaul an economy that is suffering from its second recession in three years and an unemployment rate of 25 percent. He praised Spaniards who put up with austerity and hardships without protesting.

“They are the people who suffer, who are seeing huge difficulties and face many problems, that immense majority of Spaniards are working, if they can, and giving their best to meet the great national goal of ending the crisis,” he said.

They may be asked to accept deeper cuts tomorrow as the government presents a spending plan designed to reduce the deficit to 4.5 percent of output next year from 6.3 percent in 2012. As part of those efforts, Rajoy said yesterday he will create an independent fiscal authority, following European recommendations.

The Cabinet will also approve a package of measures to jumpstart the economy that Economy Minister Luis de Guindos pledged to European peers earlier this month. While the government has already rewritten labor-market rules, changed tax structures and taken steps to reduce bureaucracy and regulation, the European Union and International Monetary Fund have called for additional moves to make the economy more efficient and better able to export its way out of the crisis.

Peer Pressure

Rajoy is also facing criticism from European peers for delaying a decision on whether to seek a bailout from the euro-region’s rescue fund that would allow the European Central Bank to prop up the nation’s bond market. The premier, who has spent two months saying he will consider it, said yesterday in comments to the Wall Street Journal that were confirmed by the office that he would “100 percent” seek help if bond yields remained too high.

The ruling People’s Party faces elections in Galicia, Rajoy’s home region, and the Basque Country on Oct. 21, as polls show voters are turning away from the PP in favor of smaller parties. The largest opposition group, the Socialist party, has failed to capitalize on Rajoy’s losses.

Opposition politicians criticized today the police response to yesterday’s protests. The Socialists accused officers of using “excessive” force and Cayo Lara, head of the United Left party, called for an investigation into the police’s conduct as he said video images indicated officers may have infiltrated the crowd.

Interior Minister Jorge Fernandez Diaz said the demonstration was an “illegal” effort to occupy parliament and police acted “splendidly.” People’s Party deputy leader Maria Dolores de Cospedal compared the demonstration this week to an attempted coup in 1981 when civil guard officers stormed the legislature.

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