The measures, announced on Wednesday, would add three percent to the already high value added tax (VAT), bringing it up to 21 percent, and would cut unemployment benefits, civil service pay and "perks", as reported by CNN. Spanish Prime Minister Rajoy said that "the new measures may have a negative impact on the economy in the short term before bringing back growth." Unfortunately for Rajoy, his unpopular but necessary proposals may be the only way Spain can continue to enjoy the benefits of staying in the European Union.
Spain has been struggling with a weak economy, a huge trade deficit, a real estate bubble and growing "family indebtedness", attributed to oil prices and the price of housing; some mortgages were extended for 40 or even 50 years.
"We will significantly reduce the number of public institutions," Rajoy vowed. His proposals include reducing government funding of political parties and labor unions by 20 percent, and decreasing the number of days off for public employees. Additionally, some state-owned businesses may become privatized.
There has been much debate over whether austerity "works" to stimulate the economy, as some controversial figures, notably Paul Krugman, have been adamant that spending equals growth. Although this is certainly true if done correctly, when one is borrowing money to spend more, there is a level of unsustainability.
One thing is for certain, excessive spending and entitlements have been devastating much of Europe, and have extended to the United States, particularly California, as Mammoth Lakes, Stockton and San Bernadino all recently declared bankruptcy.
The protesters must not agree with Rajoy's plan, as labor unions organized workers to take their rage into the streets, where they protested the measures, including a 63 percent decrease in subsidies given to coal miners.
Austerity is to be imposed as a condition for Spain to be kept in the Euro Zone, along with a 100 billion euro bailout of the Spanish banks.
Protests in the Streets of Madrid
The protesters came out en mass. Thirty three police officers and forty three protesters were injured. Eight arrests were made. One protester said, "We were walking peacefully to get to where the union leaders were speaking and they started to fire indiscriminately." Some protesters threw bottles and bricks at the police.
According to El Pais, the labor unions have organized similar protests to take place twice a day through July and August. The article reports that leaders of the unions 'promised the government "a hot autumn.'" One bone of contention was the Christmas bonus, which has been taken away.
One government employee "praised the security services for dousing the violent protests a day earlier and stressed that the majority of people detained had been 'anti-system radicals, some of them with numerous previous arrests for crimes against property.'"
She implored the unions to act responsibly and noted that the unions have "contributed to the [economic situation] ...by supporting all of the policies of the previous Socialist government that have brought us to this point."
Will the Madrid protests get worse? And if the United States does not get her fiscal house in order, should Americans brace themselves for similar scenarios?
Carlos Delclos, a sociologist at Pompeu Fabra University in Barcelona was critical of the Spanish government and spoke to RT, where he said in part, "If Mariano Rajoy had any sense of decency, or even a fragment of dignity that the miners and the protesters have, then he would resign, along with the rest of his government."
Watch his interview here: