(Edits, updates prices to close)

By Inmaculada Sanz and Tracy Rucinski

MADRID, Sept 29 (Reuters) - Spain's first general strike ineight years, called to oppose official spending cuts, disruptedtransport and factories on Wednesday, a day before thegovernment is due to take its tough budget to lawmakers.

The strike won more support from workers than a weak publicsector walk-out in June, yet impact was limited as Spaniardsresign themselves to austerity to trim a massive deficit eventhough unemployment is stubbornly high at 20 percent.

"The country is in a mess, and everyone's personal financestoo, so I think a strike just makes things worse," said35-year-old shop assistant Arancha Fernandez de Cordoba, whowent to work despite the strike.

Wednesday's work stoppage -- called by Spain's two bigunions the UGT and CCOO -- coincided with labour action inBrussels, Athens and other European cities as austerity measuresbite across the continent.

Socialist Prime Minister Jose Luis Rodriguez Zapatero, dueto start seeking parliament's approval for his 2011 budget planon Thursday, has vowed not to go back on austerity and labourreforms that make it easier for companies to hire and fire.

Trade unions said 10 million people, or more than half theworkforce, walked off their jobs, but the government said lessthan 10 percent of public administration workers and 20 percentof Madrid transportation workers were on strike.

Thousands of workers marched and waved flags in mostlypeaceful protests around the country. Police detained a fewpicketers in Madrid for blocking roads, protesters set a patrolcar on fire in Barcelona and miners burned tires in Asturias.

"We'll continue to strike if that's what's needed to bringdown the labour reform, which threatens to make jobs even morevulnerable," said graphic designer Alfredo Perez, one of thepickets.

Demand for power was 15 percent lower than usual as assemblylines halted at factories, and tourists trapped by cancelledflights napped on inflatable air mattresses in Mallorca.

Financial markets shrugged off the strike, which analystssaid was unlikely to make the government reverse its plans tomeet European Union deficit reduction targets.

"The Spanish protest doesn't seem to be large enough toreally change anyone's view, either in the market or amongst theSpanish people," said David Lea, Western Europe analyst atControlRisks.

MANY INSIST ON WORKING

Zapatero cut civil servants' wages by 5 percent as part ofan austerity package after investors drove up Spanish borrowingcosts earlier this year over fears the country could be headingfor a debt crisis that would trigger a Greek-style bailout.

Unions were also protesting Zapatero's pledge to reformpensions and extend retirement age to 67 from 65.

But Spain's trade unions are much weaker than they were 20years ago, representing about 16 percent of workers, a low levelcompared with much of Europe. Non-union workers criticised thestrike.

"The strike is a big act, it's just a way for the unionrepresentatives to justify their salaries," said beauty parlourworker Teresa, 38, as she peeled strike posters off the door ofher salon.

Many businesses remained open even though buses, subways andtrains were running at a fraction of their usual service.

The yield premium that investors demand to hold Spanish10-year bonds rather than benchmark German bunds -- a keymeasure of risk perception -- rose to around 197 basis points,its widest level since July, largely due to worries overpossible rating downgrades in peripheral euro zone states suchas Ireland and Portugal.

The benchmark Ibex index of Spanish stocks closed down 0.98percent at 103.9 points. (Additional reporting by Tomas Gonzalez, Jose Rodriguez,Feliciano Tisera, Elisabeth O'Leary and Peter Apps; writing byMartin Roberts; editing by Fiona Ortiz/Paul Taylor/RuthPitchford)