Unions mounted a general strike in Italy and organized mass protests in Spain Tuesday as they battled government efforts to tackle the debt crisis in two of the eurozone's most beleaguered economies.
Despite the strike, Italian Prime Minister Silvio Berlusconi's government backtracked under market pressure and restored measures it had cut from its latest 45.5-billion-euro ($65.6-billion) austerity package.
The Italian cabinet late Tuesday also authorized calling a vote of confidence in parliament over its austerity package to speed its adoption, citing "the seriousness of the international financial crisis". That would allow the Italian Senate to vote on the measures Wednesday.
It announced the plans to impose a wealth tax, raise the VAT sales tax and introduce new pension reforms amidst a one-day general strike against the austerity package.
Parts of Italy's public transport network ground to a halt and major attractions such as the Colosseum in Rome were closed by the strike as tens of thousands of workers took to the streets across the country.
"This is a plan the country doesn't deserve," said Susanna Camusso, head of the largest CGIL union, as she led the main march in Rome.
And in Spain, whose jobless rate is the highest in the industrialized world at nearly 21 percent, thousands of protesters from major unions and leftist groups marched in Madrid and Barcelona against a constitutional amendment to ensure that budgets are balanced.
"It sets a cap on the deficit you can have and that always has an impact on social questions — education, health," said 57-year-old Labor Union (CCOO) staff member Ana Maria Garcia in the Spanish capital.
The protests came a day after Europe's stock markets saw sharp falls in share prices, including by more than three percent in Italy and Spain, amid growing fears of recession. There was a slight rally on Tuesday morning, but most markets ended the day down.
Italy announced the austerity package last month, but its credibility among investors had been undermined by several changes the government made in the following weeks.
After Berlusconi met with coalition leaders they announced the package will again include a wealth tax, raise the VAT sales tax and make pension reforms.
The government also said it would also adopt balanced budget rules on Thursday as part of efforts by the embattled eurozone member to regain the confidence of markets.
A wealth tax of 3.0 percent on revenues above 500,000 euros was put back into the package on Tuesday, after a tax of 5.0 percent had been cut last week under pressure by Berlusconi.
The VAT sales tax will go up one point to 21 percent, according to statement issued after the ruling coalition meeting.
The retirement age for women in the private sector, now at 60, is to rise to 65 years as it is for men beginning in 2014, instead of 2016 as had been planned previously.
The measures should help Italy bring its budget back into balance in 2013 instead of 2014.
The European Central Bank had to step in last month and buy tens of billions of eurozone bonds after investors fled Italian and Spanish debt and sent their borrowing costs to unsustainable levels.
Apart from the protest in Rome, more than 10,000 were taking part in an anti-austerity demonstration in Florence, and marches were under way in Genoa and other towns and cities across Italy.
"We are on the edge of the abyss, we need responsible government," said Camusso as a colorful, banner-wielding column of tens of thousands of workers weaved its way through Rome.
The eight-hour strike caused major disruption to public transport, with airlines, trains, buses, and ferries announcing cancellations and delays.
The strike was also affecting hospitals and postal services. Schools were unaffected with classes yet to begin for the year.
In a speech on Tuesday, the head of the World Bank kept up the pressure on eurozone governments to get their economies back on track, saying the ECB's bond buy-up would only provide a certain amount of breathing space.
"We're reaching a key decision point for European leaders," Robert Zoellick said.
Italy's struggles to meet its deficit-cutting targets was cited by Spain for battering market confidence.
"We are very worried because some countries are having a very bad time and are not meeting their targets — Greece, Italy and its adjustment plan which it then went back on within days," chief government spokesman Jose Blanco told the Telecinco network.
"That affects the decision of the markets that have to buy our debt and that is what puts us in a period of a certain instability."