Spain will make budget cuts worth more than €27 billion ($36 billion) in 2012, including a freeze on public workers' salaries, to rein in its public deficit, said the government on Friday.

Government ministries will have an average reduction in their budgets of “around 17 per cent” this year, Deputy Prime Minister Soraya Saenz de Santamaria said after a weekly Cabinet meeting that approved the 2012 budget. “We are in an extreme situation. Our top priority is to clean up public accounts,” she said. “This is a moment that demands serious efforts to reduce spending but also structural reforms to cause the economy to grow and create jobs.”

Spain is racing to reduce its public deficit to reassure markets that it will not follow Greece, Ireland and Portugal in requesting an international bailout.

The government unveiled its austerity budget for 2012 a day after a general strike against spending cuts and labour market reforms that make it easier to cut jobs, when violence flared at protests in some cities.

Hundreds of thousands of protesters swamped Spain's streets on Thursday to back the strike, marred by clashes in Barcelona where youths set fire to bins and a Starbucks coffee shop.

As the government unveiled its budget, Finance Ministers from the eurozone were meeting in Copenhagen to decide on the size of a financial firewall for the eurozone. This firewall is intended to ensure adequate funds would be available to support weak eurozone countries suffering new debt strains, and thereby calm tension on financial markets.

Spain, having overshot its public deficit target last year, is once again a focus of concern among economists and investors. Prime Minister Mariano Rajoy has said he is determined to keep his promises to eurozone partners to slash the deficit, even at a time of soaring unemployment and recession.

The Popular Party government must bring down the public deficit to the equivalent of 5.3 per cent of economic output this year from 8.51 per cent last year.

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