The economic reform plan, discussed at a meeting in Cyprus of finance ministers from the 17 countries that use the euro, will be unveiled by Sept. 27. It is expected to be the launch-pad to Spain's tapping of a new European Central Bank bond-buying plan.
Meanwhile, Greece's creditors indicated that it may get more time, but not money, to get public finances into shape.
The two countries topped the agenda of the first day of an informal meeting of European finance ministers in the Cypriot capital Nicosia, which is being held following a run of positive news in Europe's three-year debt crisis.
The ministers, as well as ECB president Mario Draghi and Christine Lagarde, the managing director of the International Monetary Fund, cautiously acknowledged that conditions have recently improved. The ECB bond-buying plan, the creation of a new government in Greece following two elections and a German court ruling in favour of Europe's new bailout fund have all calmed markets and politicians nervous at the eurozone's debt problems.
However they acknowledged that hurdles still need to be cleared if the euro currency is going to emerge intact from the crisis.
The two biggest hazards at the moment remain Greece and much-bigger Spain. While Greece is fighting for its survival in the eurozone, Spain is considering whether it will tap the new ECB facility.
The ECB bond plan is designed to help lower the borrowing costs of struggling countries such as Spain by buying up unlimited amounts of short-term debt on the open market. For the ECB to start buying, a country must first approach the eurozone's bailout fund for help and commit to deficit targets as well as more economic reform.
Spain's finance minister Luis de Guindos gave a broad hint at the meeting that the Spanish government was readying a request to tap the ECB facility — by announcing a new range of reforms that will be strict enough to satisfy the conditions of the ECB bond-buying plan.
"Spain will adopt a plan to boost growth and competitiveness in its economy," De Guindos said. "The idea is that the government will on September 27 announce specific plans to boost the economy and its competitiveness."
Olli Rehn, the European commissioner for monetary affairs, said the Spanish plan would be "based on recommendations of the European Union, with very clear commitments and precise timetables."
Chris Beauchamp, market analyst at IG Index, said Friday's developments have "raised hopes that Spain might ask for assistance soon."
Analysts said Spain is attempting to pre-empt the conditions of the bailout by announcing plans to embark on further reforms before a request is made. For many investors, a request would help relieve uncertainty over the financial future of the eurozone's fourth-largest economy. The optimism over the plans contributed to the outperformance of the IBEX stock index in Madrid — it closed 2.75 per cent higher Friday.
The ECB proposals have helped calm the mood in markets, reducing the immediate pressure on indebted countries such as Spain and Italy and sending the euro above $1.30 for the first time in four months.
Greece also appeared to be making progress in its efforts to get more time to get a grip on its public finances, in another sign of increasing flexibility and optimism across the eurozone.
Greece is currently being assessed by international debt inspectors, whose verdict could theoretically spell the end of its involvement in the eurozone. If the inspectors decide it hasn't done enough to meet the strict conditions of its bailout, vital funds would be cut off and it could be forced to default on its mountain of debt, potentially triggering another bout of turmoil in the markets and its exit from the euro.
The new Greek coalition government is seeking a two-year extension to meeting a budget reduction program to 2016, as the country's recession is proving worse than anticipated at the time the program was negotiated. By the end of this year, the Greek economy is expected to have contracted by a cumulative 20 per cent since 2008.
There were signs Friday as finance ministers meeting in Cyprus for an informal meeting that Greece's his pleas may be getting a hearing.
"It is on the table," Greek finance minister Yannis Stournaras. "There is significant acceptance that there is significant progress."
However, any chance that Greece will get a third financial bailout look slim.
"If the deficit turns out to be somewhat worse than expected because of a temporary downturn in the economy, there could be some time but not money, not extra money," Dutch finance minister Jan Kees de Jager said.
And the IMF's Lagarde conceded that the conditions that Greece faces are huge, not least with regard to getting its debt burden down to 120 per cent of GDP by 2020.
"Greece has already produced a huge effort but will have to continue to do so," she said. "The target when it comes to achieving debt sustainability is very high so there are various ways to adjust. Time is one that needs to be considered as an option."
However, the crisis-hit country was told that it won't find out whether it's done enough to get its next batch of bailout cash for at least a month.
The head of the eurogroup, Jean-Claude Juncker, said the report from the "troika" of the EU, the ECB and the IMF is unlikely to be ready before the beginning of October, pushing on a decision on Greece's bailout loans into the second half of October.
Menelaos Hadjicostis in Cyprus and Harold Heckle in Madrid contributed to this story.Suggest a correction