Spain's Prime Minister Mariano Rajoy told lawmakers in Madrid that his government plans to implement at least €65bn in budget reforms only days after winning support for a European-led rescue for the country's beleaguered banks and an extension on its deficit reduction timetable.

After promising to "press the accelerator pedal" on spending and tax reforms, Rajoy outlined a serious of major efforts aimed at reducing his nation's budget gap and securing the faith of his European Union partners.

Rajoy said he plans a 3 percent hike to VAT - taking it to 21 percent - while simultaneously cutting some income taxes, eliminating property tax breaks and setting out timetables for state sales of airport, railway and port assets.

Christmas bonuses for senior public servants were also symbolically axed as Rajoy pledged a review of unemployment benefits and vast public spending cuts.

Collectively, Rajoy told Spain's parliament that the cuts and tax increases would total around €65bn over the next 2.5 years.

The budget cuts are being introduced to conform to the Eurozone bailout terms. The EU had decided to provide €30 billion (£24 billion) to ailing Spanish banks by the end of July. The EU had also extended its deadline by a year to 2014 for correcting the excessive deficit.

Besides, the EU had insisted that separate plans should be put in place for the banks in line with the bailout measures.

Earlier, the Spanish prime minister indicated that more such austerity measures were to come amid staggering unemployment rates.

"If VAT was paid by more of those who are supposed to pay, it would not have to be raised by so much," the BBC quoted budget minister Cristobal Montoro as saying.

The tough measures have sparked off massive street protests across the country. Thousands of coal miners are flooding Madrid to protest against the proposed measures. Miners were seen clashing with the police outside coal mines recently.

Angered at the latest cuts in coal subsidies from €301 million (£237 million) to €111 million (£87 million) a year, the miners are concerned that this would result in loss of thousands of jobs. The protesters assert that the cuts have the potential to completely destroy the coal industry.

The demonstrators, who were marching with their helmet lamps on, were chanting slogans such as: "Miners, stick it out, Spain is rising up!"

"We didn't expect such a big welcome, much less. The fact people are coming into the street and mobilising is a good sign," a 50-year-old miner Roberto Quintas was quoted by AFP.

Many of the miners were walking hundreds of miles from the northern part of the country to participate in the demonstration.

Wednesday's demonstration is expected to draw at least 25,000 people to Madrid.