José Luis Rodríguez Zapatero, Spain's acting prime minister, yesterday promised emergency measures to reactivate a faltering economy, triggered by the sudden collapse of construction activity after a 10-year property boom.

Outlining his government's priorities for the next four years, Mr Zapatero told parliament he would speed up government infrastructure projects such as high-speed train links, promote more state-subsidised housing and extend government guarantees for some mortgage securitisations. Property developers with unsold stock would be able to place their empty homes with a state rental agency, and there would be retraining schemes for tens of thousands of unemployed construction workers.

In addition, Mr Zapatero said, there would be a €400 ($630, £320) tax rebate for all contributors this year "to help families and boost the economy".

The Socialist premier acknowledged that turmoil in the world's financial markets was affecting Spain. "We have to face with realism a period of economic slowdown," he said.

Nevertheless, there was disappointment that Mr Zapatero failed to announce any new measures - other than those already included in the Socialist party's manifesto - to deal with a rapid deterioration in the economy since a general election last month.

Spain is suffering a double blow from the effects of the international credit squeeze and the bursting of the local property bubble.

Some economists estimate the country is now growing at only half the rate it was last year, when the economy expanded by 3.8 per cent. If the market for Spanish mortgage-backed securities remains closed, growth could fall to just 1 per cent next year, according to some forecasts. At this point, economists say, unemployment would rise sharply.

Spanish banks are reining in credit - particularly to builders and property developers - because they can no longer fund themselves in the international capital markets, and this has accentuated the crisis in the construction sector, once the motor for growth.

Since last summer, building permits are down 40 per cent, the number of property transactions has fallen by 15 per cent and the construction sector has shed 100,000 jobs. Cement consumption is also down by more than 10 per cent.

Now there are signs that the slowdown in construction is affecting other sectors, such as manufacturing and services.

Although Mr Zapatero has promised to speed up infrastructure projects, economists say government spending will not be able to replace private-sector investment in housing, which totalled 9 per cent of gross domestic product at the height of the construction boom.

Other measures Mr Zapatero announced in his investiture speech included sweeping reforms to the justice system, which is slow and inefficient, and the civil service. Mr Zapatero also promised business people a 30 per cent reduction in red tape.

He vowed he would not resume negotiations with Eta, the violent Basque separatist group, and said he would seek a multiparty agreement on how to fight terrorism.

Mr Zapatero is expected to be sworn in as prime minister on Friday.