Spaniards are facing further government cuts and higher living costs.
The eurozone has promised a bailout for Spanish banks, but it will not give it without the government lowering its debt.
The goal is to reduce the budget deficit by almost $80bn in two and a half years, something which can only be achieved by increasing taxes and reducing government spending.
The announcement came as thousands of miners protested in Madrid.
Al Jazeera’s Tim Friend reports from the capital.