The Spanish president, José Luis Rodríguez Zapatero, announced three billion euros worth of new financial guarantees from the Official Credit Institute (ICO), aimed at making sure that companies who have provided public works or services are paid even though the corresponding town councils are insolvent.

He made the announcement to an audience of some 1600 people in Valladolid today, where he was chairing a PSOE meeting to celebrate 30 years of democratic municipal elections.

During his speech, Zapatero underlined the importance of the town councils saying that 'at every significant moment in the history of Spain's democracy, town councils have had a 'decisive' role to play' and he said he hoped that in another 30 years time people would remember that it was the town councils who 'got the country back on its feet again'.

Zapatero confirmed that the government and the PSOE had 'chosen town councils as our great allies' to create employment and boost the country's economic revival.

Not wanting to comment on speculation that there would be more money in the pot for town councils if this initial aid package proved successful, Zapatero limited his words to the current budget, saying that it was 'at its peak' with the 'rhythm of public works beginning to pick up again' and town councils testing the water to see how quickly the government funding reaches them.

The president of the government told his audience that his 'road map' for getting the country out of the current financial crisis includes 'mobilising public resources to alleviate the effects of employment loss, improve social protection and support the key sectors that would be decisive in the future'.

Zapatero also criticised opposition leader, Rajoy's 'recipes' to combat the crisis, saying that the PP was 'practically the only party in the whole of Europe' that did not share the conviction that 'massive public investment' was needed to prop up a private sector that is 'fragile and paralysed' by the recession.

The president gave assurances that his government had no intention of reducing public spending and would make no cuts in social policy or social rights.