Madrid, Dec 1 (EFE) Spanish Prime Minister Jose Luis Rodriguez Zapatero said his government expected the economy to begin creating new jobs in late 2010 or early 2011.

Spain is in 'the last part of negative growth', with quarter-on-quarter positive growth likely to be seen starting at the end of this year or the beginning of 2010, Zapatero said in an interview with television network La Sexta.

The 'serious' job destruction has slowed in a 'very important' way, the prime minister said, adding that Spain was likely to begin creating jobs again at the end of next year.

Confidence, especially that of consumers, must recover to achieve job creation, Zapatero said.

Spain has the highest unemployment in the European Union, according to the most recent figures from Eurostat, the EU's statistics agency, which said the Spanish jobless rate was 18.1 percent in June.

The Iberian nation is mired in its first recession since 1993, with the construction and service sectors having been especially battered by the global financial crisis.

Spain's economy needs change and labour reforms that strengthen businesses, but 'without weakening workers', with the goal of creating a new economic model, Zapatero said.

'What we are dealing with is that our productive structure must be expanded, it has to gain innovative sectors, competitive (ones) and not return to having a sector as broad as construction,' the Socialist premier said.

A short-term job creation fund of 20 billion euros ($30 billion) has been created to support business projects in competitive sectors, as well as a local fund of 5 billion euros ($7.5 billion) for municipal governments to renovate infrastructure and improve energy efficiency, Zapatero said.

'These two large funds are going to create jobs. They are going to create jobs and are going to create stable employment,' Zapatero said.

Last week, Economy and Finance Minister Elena Salgado announced a package of proposed measures to put Spain on a course to sustainable economic growth.

She said one of the principal aims of the initiative was creating a 'stable and predictable' regulatory framework that was not unduly burdensome.

The government likewise hopes to impose discipline on public spending by requiring municipalities to produce quarterly budget and expenditure reports, and by tasking the General State Administration with developing an austerity plan.

To boost Spanish competitiveness, Zapatero wants to shorten the time it takes to create and register a new business, his economy chief said.

She said the package would include an increase in existing tax deductions for research and development, and for green investment.