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MADRID, Dec 2 AFP

December 03 2012, 05:18AM

Spanish Prime Minister Mariano Rajoy has admitted it will be difficult for the government to meet its deficit reduction targets despite a raft of austerity measures, as thousands of disabled people staged a noisy protest over cuts to their benefits.

"It is very complicated to reduce the deficit by 2.6 points in a context of recession, with as many problems with revenue and such high financing costs," Rajoy said in an interview published in La Razon newspaper on Sunday.

"Spain was asked to make a very difficult effort, to go from 8.9 per cent to 6.3 per cent in only one year," said Rajoy, who has until now pledged to respect the public deficit target called for by the European Union.

"Our goal is to do things well and we will see what will happen at the end of the year," he said.

Spain, the fourth-largest economy in the eurozone, is engaged in a deep austerity program and is seeking to recover 150 billion euros ($A188 billion) between 2012 and 2014, through both tax increases and budget cuts.

The task is all the harder as Spain slid back into recession at the end of 2011, less than two months after re-emerging from the previous one.

In the latest anti-austerity demonstration in Spain, thousands of handicapped people and their families joined a protest in Madrid against budget cuts in the health sector affecting their benefits.

Blowing whistles, beating drums and waving small white flags symbolising an SOS call, they shouted slogans such as "You'll do us in with so many cuts."

The demonstrators, some of them wheelchair-bound, others blind and accompanied by their guide dogs, included Paralympic athletes.

More than four million of Spain's 47 million people are handicapped, according to disability campaign group CERMI.

"They've taken away the right of people who cannot fend for themselves to receive aid and be independent, like everyone else, which is a vital right for us," said one demonstrator, Lola Valverde, 65.

Valverde, who is confined to a wheelchair, said that after having her benefits cut in half this summer, she could now only afford a home help once a week instead of daily, as she had in the past.

Since sweeping to power in the November 2011 election, Rajoy has introduced a series of tough spending cuts and tax hikes to slash the deficit and stabilise Spain's public finances.

In the health sector alone, his government is trying to make cuts of seven billion euros a year, a target that will hit the budgets of regional governments.

Even though market pressure has eased since a peak in the summer, Spain still faces punishing borrowing costs, with interest rates exceeding five percent.

Under its draconian austerity drive, the government broke a key election commitment on Friday when it said it would not raise pensions in line with inflation in 2013.

Rajoy said Sunday that the decision was "imposed by reality", adding: "It's probably one of the hardest decisions I've had to make."

The disabled people's protest came a day after around 1,000 people who say banks cheated them of their savings took to the streets demanding that the bailed-out lenders give them their money back.

"Thieves! Where is our money?" they bellowed outside the central bank in Madrid before marching on the offices of Bankia, the ruined finance giant.

Spanish banks were brought low by the collapse of a construction boom in 2008 that threw millions into unemployment and poverty. Spain is deep in recession, with one in four workers unemployed.

By Elodie Cuzin