Jose Luis Rodriguez Zapatero, Spanish Prime Minister, has unveiled an €11billion two-year package to boost the country’s flagging economy and cut unemployment.

The Spanish premier said the plan would boost public works programmes and offer some state help for the car industry which has been badly hit by the global financial crisis.

“We hope this will generate 300,000 jobs within a year,” he told parliament. “These are urgent measures to generate jobs.”

Mr Zapatero said the package would help innovation, productivity, infrastructure and education in 2009 and 2010.

The majority of the cash – €8 billion - was destined for local public works.

Councils should use the cash for construction projects, infrastructure works, repairing buildings and social programmes.

Mr Zapatero also handed €800 to Spain’s ailing car industry which accounts for 20 per cent of exports.

Car industry bosses, including Jean Pierre Laurent, chief executive of Renault Espana, had criticised Mr Zapatero for failing to do enough for car firms which are laying off thousands of workers s demand plummets.

“This is a sector with a future and we are backing it,” Mr Zapatero said.

The regional government of Aragon in eastern Spain announced a €200 million loan to General Motors Europe so the US car giant can start production of its new Opel Meriva at its factory in Zaragoza.

General Motors said it needed €595 million to keep its European factories running.

Spain has already put in place stimulus measures totalling about €40 billion as the economy contracted in the third quarter by 0.2 per cent, the first time this has happened in 15 years.

But the country’s scope for more fiscal stimulus is “reduced,” said Pedro Solbes, Spain’s Economy Minister.

“I’ve always said that the margin for fiscal measures is reduced and I’m still saying that,” Mr Solbes said.

He welcomed the European Commission’s proposed 200 billion euro stimulus plan for the EU economy unveiled on Tuesday.

“What’s new is the commission’s communiqué from yesterday calling on European countries to make a certain effort. We wanted to show solidarity with that effort,” he said.

The package, to which individual countries will contribute €170 billion, equals about 1.5 per cent of the 27-nation EU’s economic output.

Mr Solbes said the EU new stimulus plan will not reduce the Spanish budget deficit, which is likely to be above the EU limit of 3 per cent of GDP for the time since the adoption of the euro.

Explore Economics

• Pre-Budget Report 2008

• Budget 2009

• World Economic Forum

• The Times MPC

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive