© ReutersProtesters shout slogans during a general strike in Madrid, Spain in March 2012
Under the laws, a minimum jail term of two years could be imposed on those found guilty of instigating and carrying out violent acts of protest under a new package of measures unveiled on Wednesday.
But it has raised fears that the new measures could be used to stem the wave of protests that began last summer with the birth of what has been dubbed the "indignado movement", when tens ouf thousands of peaceful protesters camped out in squares across Spain.
Protest groups were quick to draw comparisons to the fascist dictatorship of Gen Grancisco Franco.
The measures come amid growing incidents of street violence in cities across Spain, most notably Barcelona where "anti-capitalist" groups were blamed for stirring tensions during last month's general strike.
The strike on March 29 was marred by clashes between police and individuals who torched bins, threw missiles at businesses including banks and vandalised the Barcelona Stock Exchange in the Catalan capital.
A Starbucks café was also torched during the protests when police fired rubber bullets and used tear gas as the protests spiralled out of control.
Mr Diaz said "serious disturbances of public order and intent to organise violent demonstrations through means such as social networking" would carry the same penalty as involvement in a criminal organisation under the new reform.
But he also said that the measures would extend authorities powers to deal with passive resistance as contempt of court.
The measures will make it "an offence to breach authority using mass active or passive resistance against security forces and to include as a crime of assault any threatening or intimidating behaviour," he said in Congress.
In addition attempts to disrupt public services such as transportation would also be made a crime. During the recent general strike picketers blockaded bus and train stations in an attempt to bring transportation to a halt.
"New measures are needed to combat the spiral of violence practised by 'anti-system' groups using urban guerrilla warfare," the Interior Ministry clarified in a later statement.
The measures brought swift criticism from protest groups and became a trending topic on Twitter. The terms "#soycriminial" (I'm a criminal) and "Holadictatura" immediately became popular trending topics.
Comparisons were drawn with Cuba, where peaceful protesters are routinely rounded up by the communist regime, and with Spain's dark days of the Franco dictatorship which ended with his death in 1975.
"We fought for freedom and civil rights during the dictatorship of Franco only to lose them now," one Twitter user, @Iaioflautas wrote.
Another, @Mordorpress said that the government of Mariano Rajoy was a step back to dictatorship. "Goodbye democracy, you only lasted 30 years," he wrote.
Protests against the reforms of the penal code have already been called for Saturday.
The new measures were announced just days after Felip Puig, the Minister of the Interior of Catalonia's regional government, called for measures to limit "social assemblies". They will be debated in parliament and voted on during the current parliamentary session.
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