The new government in Spain has outlined 8.9 billion euros ($US11.5 billion) in new spending cuts and tax rises.
The announcement is the first in a wave of austerity measures, with a total of 16.5 billion euros to be cut in 2012.
The government also said Spain's 2011 deficit will be about 8% of its output - higher than the 6% seen by the previous government.
The Popular Party last month ousted the Socialists from power at elections amid deep economic gloom.
Prime Minister Mariano Rajoy has vowed to meet Spain's target of reducing the public deficit to 4.4% of gross domestic product in 2012, no matter what.
On Friday, Deputy Prime Minister Soraya Saenz de Santamaria maintained a freeze on public sector wages for another year and ruled out practically all government hiring.
''This is the beginning of the beginning,'' she said.
''We are facing an extraordinary, unexpected situation, which will force us to take extraordinary and unexpected measures.''
Taxes on the wealthy will also be raised for at least two years, raising 6 billion euros, she said.
Borrowing costs have jumped in the last year as investors feared that Spain might join Greece, the Irish Republic and Portugal in needing a bailout.
The economy has shrunk sharply since a housing bubble burst in 2008. Spain has an unemployment rate of 21%, the highest in Europe.