can anyone recommend a budget hotel in barcelona or madrid?

preferably nice, and central!

Cat's Hostel in Madrid was nice. It's a hostel and has that atmosphere, but does have some private rooms with bath if you're looking for that (they fill up quickly, though). Beautiful indoor courtyard. Basement bar is pretty popular, too.

You can find cheaper hotels here from around US$10.

Madrid Hotels http://hotels.americacheaphotels.com/City.aspx?fileName=Madrid&pageIndex=0&sort=MinRate-asc&tabId=Details

Barcelona Hotels http://hotels.americacheaphotels.com/City.aspx?fileName=Barcelona&pageIndex=0&sort=MinR ate-asc&tabId=Details

you can find hostels on hostelworld.com
btw i have been to Cat's hostel in Madrid and they put us in an awful room in the attic, it was mixed and it has an attached bathroom with a curtain in place of a door. Thank god we had boys in our room for only one night and the rest of the time is was girls. I would suggest you got to that website and read the reviews.