Anti-austerity protesters and police clashed in Madrid today as thousands of demonstrators filled the city's central Plaza de Espana to protest the government's handling of Spain's financial crisis.

Police fired rubber bullets and used truncheons on several protesters as they tried to tear down crowd control barriers.

Other demonstrators chanted and held placards reading "For Sale: Spain" and "Occupy Congress" in Spanish.

They are calling for the country's parliament to be dissolved and fresh elections to be held, claiming the government's austerity measures show the ruling Popular Party misled voters to get elected last November.

Police barricaded access to the Congress of Deputies, where lawmakers are due to unveil this week a new series of cost-cutting moves.

Those could pave the way for a demand for financial aid from its fellow eurozone countries.

But that appeared to be on hold as government officials held off on requesting a formal bailout while trying to learn how much Spanish debt the European Central Bank is still prepared to buy without a rescue.

Bond yields edge higher

Spanish bond yields edged higher after a news report that suggested Germany's central bank might oppose a new bond-buying plan to help Europe’s troubled economies.

The rate on two-year borrowing rose by as much as 12 basis points to 3.23 per cent and 10-year yields gained up to eight basis points to 5.78 per cent.

German tabloid Bild, without naming its sources, reported the Bundesbank had ordered its lawyers to check whether the European Central Bank's recently announced program is legal under European Union treaties.

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Pedestrians in Athens on Tuesday walk among banners calling for a general strike Wednesday to protest new austerity measures there. (Thanassis Stavrakis/Associated Press)

The ECB’s plan is aimed at buying unlimited amounts of government bonds in order to help lower borrowing costs for struggling countries — a drive that met with skepticism in Germany and is opposed by the country's central bank chief.

And the head of the ECB, Mario Draghi, insisted during a speech in Berlin on Tuesday that the measures can only "build a bridge" to a better future, and it's up to governments to take decisive action.

The Europe debt watch continued elsewhere, as markets tried to figure out whether eurozone countries will grant Greece more time to reach its deficit reduction targets.

Reuters reported that Greek Finance Minister Yannis Stournaras said his country would need as much as €15 billion euros ($19 billion Cdn) if it were granted the two-year extension it has requested to its bailout.

Stournaras said that would not require more money from the European Union, but did not explain why not. Greece has already been pledged a total of €240 billion ($304 billion Cdn).

Austerity package needed for aid

The country needs to finalize a package of austerity measures to qualify for further instalments of that aid, but political leaders are struggling to compromise as popular anger increases.

Meanwhile, the outlook for Europe is darkening, even for Germany, as Europe's economic uncertainty weighs on the continent.

Credit ratings agency Standard & Poor's on Tuesday lowered its growth forecasts for the eurozone.

It expects a 0.8 per cent contraction this year and no growth in 2013. In July, it was estimating a 0.7 per cent contraction and 0.3 per cent growth.

On Monday, a closely watched survey of business optimism in Germany, the Ifo index, dipped to 101.4, its lowest level in 2½ years, from 102.3 in August. The consensus in the markets was for no change.

With files from The Canadian Press and The Associated Press