Miners and their supporters marched through central Madrid for a second time Spanish PM Mariano Rajoy has announced a sales tax rise as part of austerity measures aimed at cutting the public budget by 65bn euros (£51bn; $80bn).
VAT will go up almost immediately from 18% to 21% and there will be a 3.5bn euro cut in local authority budgets.
EU officials welcomed the changes, made in return for a eurozone bank bailout and an extension to Spain's deficit reduction targets.
But thousands of miners are protesting in Madrid against government measures.
Eurozone finance ministers have agreed to provide 30bn euros (£24bn) for Spain's troubled banks by the end of the month and to give Madrid an extra year - until 2014 - to hit its budget targets.
Rajoy's austerity plans
- VAT increase from 18% to 21%
- Rise in reduced VAT rate on public transport, hotels and processed foods from 8% to 10%
- Basic goods VAT on bread, medicine and books stays at 4%
- Christmas bonuses suspended for public sector workers
- Unemployment benefit cut from sixth month out of work
- 30% cut in councillors in some areas
- Subsidies to be cut by 20% in 2013 for political parties and unions
The prime minister, interrupted several times by opposition MPs, told parliament that the measures he was announcing had to be adopted without delay.
The package of tax rises and spending cuts would cut the budget by 65bn euros over two-and-a-half years, or 6.5% of GDP, he said.
"The excesses of the past are being paid for right now," he said, adding that Spaniards had never before experienced such a recession.
Without a cut in Spain's budget deficit, public services would be put at risk, he said. Savings of 3.5bn euros will be made to government administration budgets, with local authorities banned from offering services they cannot afford and the number of councillors reduced by 30% in some areas.
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The measures will test further the patience of the Spanish people - pledges only recently made have been broken”
The door had been opened to a new EU model, he said, and the summit agreements had committed everyone equally.
Spain's unemployment is running at more than 24% and analysts say European leaders want to see a credible Spanish plan for viability and deficit reduction.
"What animates us is the five million people out of work," Mr Rajoy told parliament.
The European Commission praised the Spanish government's "determination" and swift action.
"It's an important step to ensure that the fiscal targets for this year can be met," spokesman Simon O'Connor told reporters.
Mass rallyAs Mr Rajoy's speech came to an end, miners marched through the centre of Madrid in their thousands towards the industry ministry to protest against big cuts in subsidies.
Crowds lined the streets of Madrid to welcome the coal miners "It's just cuts and more cuts," David Menendez, a miner from Asturias, told Associated Press news agency. He and his colleagues had been further angered by the latest round of tax increases and spending cuts.
Many of the workers had walked hundreds of miles on a "black march" since 22 June from northern Spain, where demonstrations outside coal mines have resulted in clashes with police.
They were greeted late on Tuesday night by thousands of supporters as they arrived on Madrid's Gran Via, wearing their miners' helmets.
Unions said they were hoping that the second mass rally would draw at least 25,000 people.
The miners are angry at plans to slash coal industry subsidies from 301m euros last year to 111m euros this year.
Unions say the cuts threaten 30,000 jobs and could destroy their industry.
The Spanish government argues that it pays disproportionately high subsidies to a small and unprofitable part of the economy.
Overnight the miners streamed down Madrid's streets with their helmet lamps shining in the dark.
Crowds lined the streets, chanting support.
"We didn't expect such a big welcome," said Roberto Quintas, a miner of 22 years from Villablino near Leon.
"The fact that people are coming into the street and mobilising is a good sign."
Manuel Cinoceda, a retired miner from the Aragon region, added: "The fight is for something just, we are just coming to claim what is ours."
Spain's 30bn-euro bank bailout will be the first instalment of a package worth up to 100bn euros agreed in June.
Eurozone ministers must get approval from their own parliaments and hope to make the payment by the end of July.
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