Spain’s Prime Minister Mariano Rajoy has begun addressing parliament, setting out a new raft of austerity measures aimed at balancing the budget.
His speech comes as hundreds of Spanish miners arrived in Madrid to protest against government cuts to subsidies.
Mariano Rajoy is expected to unveil a rise in VAT as well as cuts to social security and unemployment benefits.
The measures are in return for a eurozone bank bailout and an extension to Spain’s deficit reduction targets.
Eurozone finance ministers have agreed to provide 30 billion Euros 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.
Mariano Rajoy told parliament that the measures he was announcing had to be adopted without delay.
“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.
The door had been opened to a new EU model, he said, and the summit agreements had committed everyone equally.
Analysts say European leaders want to see a credible Spanish plan for viability and deficit reduction.
Mariano Rajoy warned on Saturday that further austerity was on its way, in a country with unemployment running at more than 24% and rising street protests over drastic spending cuts.
On Monday, budget minister Cristobal Montoro warned of an impending VAT rise, telling a business forum: “If VAT was paid by more of those who are supposed to pay, it would not have to be raised by so much.”
Most of the miners arriving in Madrid late on Tuesday had walked hundreds of miles since 22 June from northern Spain where protests outside coal mines have resulted in clashes with police.
They were greeted by thousands of supporters as they marched on Gran Via in the centre of the Spanish capital.
A second mass rally of miners is due to take place on Wednesday and unions hope it will draw at least 25,000 people.
The miners are angry at plans to slash coal industry subsidies from 301 million Euros last year to 111 million 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 30 billion-euro bank bailout will be the first installment of a package worth up to 100 billion Euros agreed in June.
Eurozone ministers must get approval from their own parliaments and hope to make the payment by the end of July.