Reducing Spain's budget deficit, which has soared past EU limits due to the deep recession, is the government's top priority, Finance Minister Luis de Guindos said on Monday.

Deficit reduction "is the number one priority from the point of view of economic policy," he said.

Almost 4,000 people who fled a deadly forest fire in mountains near the glitzy Spanish resort of Marbella returned home on Saturday after the blaze was brought under control, local officials said.

An elderly British man perished in the fire and five people were injured when fast-moving flames and choking smoke engulfed mountains near the Costa del Sol in southern Spain.

Spain's cabinet approved a major financial reform package on Friday including the creation of a "bad bank" to buy troubled property assets and bad loans from lenders.

Spain had agreed to push through the changes as a condition for receiving a banking sector rescue loan of up to 100 billion euros ($125 billion) from its Eurozone partners.

Towering flames raced through forests near the glitzy Spanish resort of Marbella on Friday, killing at least one person, injuring five and sending thousands fleeing.

More than 250 firefighters on the ground, backed by eight planes and nine helicopters, battled the blaze after hot, dry winds blew it through the tinder-dry mountain forest in southern Spain, officials said.

Inflation in Spain picked up to an annualized 2.7 percent in August, from 2.2 percent in July, the second consecutive month that the rate has risen, provisional statistics published on Thursday showed.

The national Institute of Statistics (INE) did not provide details, stating only that the result was due principally to a rise in fuel prices.

Dutch police said Wednesday that an alert over a feared hijacking of a flight from Spain to Amsterdam which caused fighter jets to scramble was triggered by a "miscommunication."

"The report over the hijacking seemed to have been a miscommunication," the police said in a tweet on their official Twitter account, explaining that "No radio contact was possible" with the plane.

Preventing the European Central Bank from buying bonds issued by countries like Italy and Spain could drive up inflation in Germany, 0 warned Wednesday in an interview.

Monti's comments published in the Italian daily Il Sole 24 Ore a few hours before he was due in Berlin argued for resuming a revamped ECB bond-purchasing program that has been opposed by the influential German central bank.

Tens of thousands of revelers hurled 120 tons of squashed tomatoes at each other Wednesday, drenching the streets in red in a gigantic Spanish food fight known as the Tomatina.

A sea of more than 40,000 alcohol-soaked men and women packed into the Plaza Mayor square of Bunol, eastern Spain, many with their shirts off and wearing swimming goggles to keep out the stinging juice.

Hundreds of firefighters battled several wildfires that raged west of Madrid Tuesday and forced the evacuation overnight of 2,000 people from their homes, an emergency services spokesman said.

The fires, which broke out on Monday and have so far ravaged over 2,000 hectares (5,000 acres) according to Spanish media reports, appear to have been deliberately set, he added.

Spain's government denied Friday that it had entered negotiations for a sovereign rescue, which would make it the largest victim so far of the Eurozone crisis.

Deputy Prime Minister Soraya Saenz de Santamaria repeated to journalists a denial issued earlier in the day in Brussels by a spokesman for European Commissioner for the euro Olli Rehn.