A molotov cocktail explodes beside riot police officers near Syntagma square during a 24-hour labour strike in Athens
REUTERS
Demonstrators clashed with police on the streets of Athens and Madrid on Wednesday in an upsurge of popular anger at new austerity measures being imposed on two of the euro zone's most vulnerable economies.
In some of the most violent confrontations, Greek police fired tear gas at hooded rioters hurling petrol bombs as thousands joined the country's biggest protest in more than a year, reports Reuters.
The unrest erupted after nearly 70,000 people marched to the Greek parliament chanting "EU, IMF Out!" on the day of a general strike against further cuts demanded by foreign lenders.
"We can't take it anymore - we are bleeding. We can't raise our children like this," said Dina Kokou, a 54-year-old teacher and mother of four who lives on 1,000 euros ($1,250) a month.
In Madrid, Prime Minister Mariano Rajoy faced violence on the streets of the capital and growing talk of secession in Catalonia as he moves cautiously closer to asking Europe for a bailout, aware that such an action has cost other European leaders their jobs.
In public, Rajoy has been resisting calls to move quickly to request assistance, but behind the scenes he is putting together the pieces to meet the stringent conditions that will accompany rescue funds.
Rajoy presents a tough 2013 budget on Thursday, aiming to send a message that Spain is doing its deficit-cutting homework despite a recession and 25 percent unemployment.
Spain appears on course to miss its public deficit target of 6.3 percent of gross domestic product this year, and the central bank said the economy continued to contract sharply in the third quarter.
Rajoy is facing intense pressure from euro zone policymakers to take tougher measures, particularly on freezing pensions.
On Friday, Moody's will publish its latest review of Spain's credit rating, possibly downgrading the country's debt to junk status.
On the same day, an independent audit of Spain's banks will reveal how much money Madrid will need from a 100 billion euro ($130 billion) aid package that Europe has already approved for the banks.
Rajoy is gradually shedding his reluctance to seek a sovereign bailout for the euro zone's fourth biggest economy - a condition for European Central Bank intervention to cut his country's borrowing costs.
He suggested on Wednesday that he would make the move if debt financing costs remained too high for too long.
"I can assure you 100 percent that I would ask for this bailout," he told the Wall Street Journal.
He also said he had not made his mind up on whether to allow pensions to rise in step with inflation, which could cost the government an extra 6 billion euros this year.
"We need to be sufficiently flexible in order not to create any further problems," he said when asked about pensions.
His remarks, coupled with the central bank's warning on the economy helped drive up Spain's borrowing costs, with the yield on the benchmark 10-year bond jumping to 6 percent, a level seen as unsustainable in the medium term. The index of leading stocks fell 3.46 percent to a two-week low.
The Spanish government's drive to rein in regional overspending as part of its austerity measures has prompted a flare-up of independence fervour in Catalonia, the wealthy north-eastern region that generates one-fifth of Spain's economic output.
Catalonia needs a 5 billion-euro bailout from Madrid to meet debt payments this year, but Catalans believe they bear an unfairly large share of the country's tax burden.
Artur Mas, the conservative president of Catalonia, announced on Tuesday he would hold early elections in November after Rajoy rebuffed his call for more tax autonomy.