Spanish lawmakers passed 39 billion euros' ($52 billion) worth of unpopular spending cuts Thursday as angry demonstrators urged fresh street protests.
The government says the tough cuts in the 2013 budget are needed to fix the public finances of the eurozone's fourth-biggest economy, stricken by the collapse of a construction boom in 2008.
As the lower house Congress dominated by the conservative governing Popular Party voted through the budget, demonstrators called for a candle-lit mock-funeral march to Congress in protest.
Crowds have been staging daily rallies in fury at seeing their pay, jobs and benefits cut and taxes raised in a recession that has driven unemployment over 25 percent and thrown many into poverty.
The "indignant" protest movement described the 2013 plan as "a budget of hunger and misery" and called on protesters to march dressed in black and carrying candles on Thursday evening.
Mass rallies near Congress over recent months have boiled over with police making charges against demonstrators and rubber bullets flying.
Conservative Prime Minister Mariano Rajoy said this week that 2013 would be "a difficult year but it will be the year when our economy stabilises".
His government is forecasting the economy will shrink 0.5 percent in 2013, far more optimistic than the OECD prediction of a 1.4-percent slump, after a 1.5-percent contraction this year.
Rajoy said the government aimed to return the country to growth in 2014 and start creating jobs again.
Economists and NGOs warned however that the austere budget approved in parliament on Thursday would undermine the recovery and worsen life for millions in Spain.
Aid charity Oxfam warned that the cutback could drive the number of people categorised as living in poverty in Spain to 18 million or 40 percent of the population over the next 10 years.
"If the austerity measures and social cuts are not altered, out country could see an increase in the number of people at risk of poverty and social exclusion," it said in a statement.
Among the measures in the budget, unemployment benefit payments are to be cut by more than six percent and the budgets of some government departments by more than 20 percent.
Doctors, nurses, police, firemen, teachers, judges and lawyers and other workers have staged daily demonstrations against the cuts that affect just about every part of the public sector.
Spain's regional governments are being pressed to make massive savings which will further squeeze their budgets for hospitals and schools.
In Madrid, a wide range of people from surgeons to hospital cleaners have been on strike against plans to save money by privatising parts of the regional health system.
In two smaller protests on Thursday organised separately from the march to parliament, health workers rallied against the regional plan and justice workers in yellow T-shirts demonstrated against a reform that will charge citizens to bring civil cases to court.
The government has also fallen short of a key election commitment to raise pensions in line with inflation.
Under pressure from the European Union to reform its economy amid speculation that it might need to be bailed out, Spain has promised to make 150 billion euros of savings by 2014.