What began as an economic storm has blown into a full-scale political crisis. Amid popular discontent and separatist protests, Spain has stumbled towards a crossroads: without decisive action by the government, the post-Franco democratic settlement is at risk.

Yesterday’s announcement of the 2013 budget does not change this. Spain is persisting with the excessive austerity favoured in the eurozone but which is making the crisis worse. In the middle of a swingeing recession, Madrid is taking some €40bn out of the economy to achieve a fall in the public sector deficit from 6.3 per cent this year to 4.5 per cent next year. The slump and obscenely high unemployment are at least in part caused by an overly rigorous view of public finances that are not that bad by eurozone standards.

Social security costs are going up by €6.6bn or 0.6 per cent of gross domestic product. Cristobal Montoro, the budget minister, attempted to put a brave face on this by calling it a “clearly social” budget. In fact the increase reflects the higher cost of the welfare state at a time of economic suffering. Indeed this increase in social spending, caused by the recession, is almost as large as the €9.7bn increase in interest spending due to the debt problem.