AFP reported that Spain's government has agreed steps to boost state coffers by EUR 4.9 billion and aid the property sector in 2011, aiming to calm fears of a sovereign debt crisis.

A cabinet meeting called by Prime Minister Mr Jose Luis Rodriguez Zapatero agreed three key measures:

1. Big companies will have to pay some tax installments earlier, bringing in an extra EUR 2.5 billion for the state this year

2. Health authorities will be obliged to buy generic drugs instead of more expensive branded treatments, saving another EUR 2.4 billion in 2011

3. Finally, the value added tax on purchases of new homes will be slashed from 8% to 4% until the end of 2011 so as to inject life into a sector flailing since the 2008 property bubble collapse

Finance Minister Ms Elena Salgado said the measures would take effect immediately by decree.

She said that a second cabinet meeting on August 26th 2011 will take aim at boosting employment in a country suffering an overall jobless rate of 20.89% and more than 45% for the under 25s. She added that "We are going to carry on taking measures to stimulate and favor growth, which will strengthen those we already have in place, in the labour market."

Spain first announced it would take extra fiscal steps this month when the cost of government borrowing on the markets hit euro era highs, sparking concern about Madrid's ability to pay its debts.

The European Central Bank halted the rout when it intervened in the market, buying hard-hit Spanish and Italian government bonds after the two countries promised the extra belt tightening measures. But fears of a spreading euro zone debt crisis continue to haunt the financial markets.

France's Mr Nicolas Sarkozy and Germany's Ms Angela Merkel vowed in a summit earlier this week to give the euro zone bloc a true economic government but provided no specifics and failed to halt the slide on the markets.

(Sourced from AFP)