In a bid to foster growth and create jobs, Germany's KfW public-sector bank will loan some €800 million (about $1.0 billion) to Spain's Institute of Official Credit (ICO), which would then lend the money to businesses, the German finance ministry said.

"We want to ease financing for companies with solid business models and good growth prospects," said German Finance Minister Wolfgang Schaeuble.

"They should be able to expand staffing and especially to create jobs and apprenticeships for young people," he said as both countries signed the agreement first announced in April.

Germany has repeatedly mentioned the programme as part of efforts to battle massive youth unemployment, which has left almost six million under 25-year-olds jobless in the European Union.