On budgetary and fiscal policy, Zapatero will follow largely in the footsteps of predecessor Jose Maria Aznar, whose conservative administration was this year targeting a fourth straight year of zero public sector deficits while reducing unemployment from 23 to 11 percent during eight years in power.

However, with the current jobless figure the highest in the eurozone and around a third of workers on short-term contracts, Zapatero was keen to stress he wants to imbue economic policy with a far wider social streak.

Zapatero, who won an unexpected March 14 general election victory over Popular Party candidate Mariano Rajoy, Aznar's designated choice of successor, promised his government would have a "firm commitment" to "budgetary stability as well as "balanced and sustained growth".

He said: "My government will be guided by the principle of budgetary stability. This is a firm committment."

"We are convinced that healthy public accounts are prerequisites for an improvement of public services and citizens' quality of life," Zapatero added as he opened a two-day debate which will culminate Friday in his investiture, assuming he can garner some support from leftist fringe parties.

Zapatero furthermore promised he would not increase the tax burden.

He said he planned to reform Spanish energy policy to make it more environmentally-friendly via the development of "alternative energy" sources to reduce carbon emission while signalling the "progressive" abandoning of nuclear energy, a long-held party policy.

"In terms of energy policy I wish to reiterate our choice concerning the development of alternative energy to allow a reduction of greenhouse effect gas emissions in line with the Kyoto Protocol, as well as the progressive abandoning of nuclear energy," Zapatero said.

However, he gave no details regarding the time scale of such aims even though the Spanish Left has long sought to rein in a nuclear sector which provides some 30 percent of overall energy production.

The previous Socialist government of Felipe Gonzalez (1982-96) imposed a moratorium on five partially built nuclear reactors and legislation in 1997 confirmed the sites would never be put into operation.

However, debate surrounds the degree to which Spain could afford to subsidise moves towards more environmentally-friendly production.

Zapatero dubbed sustained growth "the main challenge for the Spanish economy" as he seeks to boost productivity and savings, underpinning his economic agenda with liberal social policies which include greater job protection for a country where some one in three workers have temporary contracts.

"This means investing in research and development as well as innovation. I commit myself to a 25 percent increase in the portion of the budget earmarked for these sectors," Zapatero said, adding that science had to be a priority.

He insisted that "it is possible to combine growth with social well being."

Housing is another sector which will come under scrutiny, with prices having raced ahead 120 percent on average in the past eight years.

Zapatero has announced a plan to build 180,000 affordable houses annually over and above present construction levels, earmarking them for families priced out of today's rampant market.

"The impossibility of obtaining a property at an affordable price is a key problem for Spanish families: We are going to confront it," Zapatero promised.

The main motor of the Spanish economy alongside private consumption in recent years, the construction sector has enabled Spanish growth to far outstrip that of its eurozone neighbours, reaching an annualised 2.4 percent in 2003.

But the downside of such a development is the risk of the boom proving unsustainable, prompting Bank of Spain chairman Jaime Caruana to warn several weeks ago of the inherent danger of "inflationary pressure" as well of the risk posed by high household debt.

An International Monetary Fund report voiced similar concerns.

WAR.WIRE