After demonstrating outside the Ministry for Employment earlier in the day, in the evening protesters banging drums, blowing vuvuzelas and chanting "Unemployed, wake up!" marched towards Madrid's Puerta del Sol, a central square that has seen hundreds of thousands demonstrate against government austerity.

They were joined by members of the "Indignados" (Indignant) movement, which has organised sit-ins at the square for more than a year.

"This is our home!" the crowds sang as they spilled into the square. Many bore banners railing against the markets squeezing Spain's finances, with slogans such as "Debt is modern-day slavery" or "Unemployed against the risk premium".

Violence erupted at a miners' protest earlier this month and police used teargas and rubber bullets.

The government is trying to avert a full-scale bailout after being forced to ask euro zone leaders for up to 100 billion euros to help ailing banks in the zone's fourth-largest economy.

Rajoy has pushed through the 65 billion euros of spending cuts and tax rises to meet deficit targets set by Brussels that are widely blamed in Spain for pushing the economy back into recession for another year.

One of the government's most controversial cuts will affect unemployment benefits, set to be reduced for the newly jobless.

Spain's borrowing costs have continued to climb to record highs, reaching a peak on Friday after the Valencia region asked for financial help and the government unveiled gloomy economic forecasts.

The economy is likely to remain stuck in recession next year and unemployment will drop only slightly in the next three years, the government said. — Reuters