Spain's prime minister has set out a plan to reduce the country's soaring budget deficit, currently standing at 11% of GDP.
Jose Luis Rodriguez Zapatero announced a 5% cut to public sector salaries, as well as reductions to pensions and regional government funding.
He said the plan would save about 15bn euros over two years.
The European Union has been anxious to see more fragile European economies including Spain, Portugal and Greece impose tougher austerity measures, the BBC reports
On Sunday it approved a 750 billion-euro rescue package to prop up European economies struggling with large debts.
US stocks rose after Spain outlined the measures, easing fears the Greek debt crisis could spread in Europe.
The Dow Jones industrial average rose 148.65 points (1.38%) to 10,896.91.
The Standard & Poor's 500 Index closed up 15.88 points (1.37%) to 1,171.67, while the Nasdaq Composite Index gained 49.71 points (2.09%) to 2,425.02.