Spain’s Prime Minister Mariano Rajoy announced yesterday a €65-billion austerity package to avert financial collapse as protesters against mining cuts clashed with police.

Mr Rajoy, interrupted by howls from opposition members as he outlined the steps, performed a U-turn by raising value added sales tax after having promised he would not do so, and took an axe to state expenditure.

“These are not pleasant measures but they are necessary,” said the Premier, as outside the building protesters against mining subsidy reductions threw rocks at police, who responded with batons and rubber bullets.

Mr Rajoy reminded Parliament that Spain is going through one of its worst recessions in history, with unemployment at 24.4 per cent and economic activity set to decline by nearly two per cent this year. He said new spending cuts and other measures, including notably a rise in value-added tax, would bring in €65 billion by the end of 2014 to help trim the annual deficit.

The EU had demanded a VAT rise along with a series of other tough measures as it gave Spain an extra year to bring its bulging public deficit back to agreed limits. Worries about the economic outlook for the eurozone and Spain mean that the previous austerity package would still likely fail to raise the promised revenue.

However, street protests are already mounting over austerity measures and during yesterday’s protest march, tens of thousands strong in the Spanish capital, some young men threw rocks and firecrackers at riot police who beat them with batons and fired rubber bullets.

Clashes between protesters and charging police resulted in 23 light injuries, emergency services officials said, as frustration driven by Spain’s recession and worsening financial woes boiled over.

Five people were arrested, police said.

Violent clashes had already broken out between miners and police in weeks of protests in northern mining towns over Madrid’s decision to slash coal industry subsidies this year to €111 million from €301 million last year.

Unions say the cuts will destroy coal mining, which relies on state aid to compete with cheaper imports, and threaten the jobs of some 30,000 people directly and indirectly employed by the sector, including 8,000 coal miners.

Meanwhile in neighbouring Portugal, a eurozone country which has been rescued by the European Union and International Monetary Fund, doctors began a two-day strike against cuts in the budget for health services.