A series of crucial political agreements at year's end between the Spanish government and the autonomous Basque executive have raised official hopes for pacification of what became during the past year Western Europe's most violent area.

Today both sides were hailing what they called a breakthrough in negotiations for turning over substantive home-rule powers to the autonomous government. One objective is to isolate the separatist ETA organization responsible for the vast majority of the 110 political killings in the northern Basque country this year.

At a meeting yesterday, the Cabinet met a key demand of moderate Basque nationalist opinion when it restored an ancient right of the area to levy its own taxes. In recent days, Madrid also approved an autonomous Basque police force and turned over wide-ranging local education powers to the Basque government.

Months of stalling by Madrid over the issues had led to strained relations between the regionally ruling Basque Nationalist Party and the central government that were exploited by separatist extremists.

In a year-end message today, the prime minister of the Basque government, Carlos Garaicoetxea, termed the successful negotiations "enormously positive." Garaicoetxea formed the first Basque autonomous government since before the 1936-39 Spanish civil war when his Basque Nationalist Party won local parliamentary elections last March. Since then, his executive has been locked in complex and often vitriolic talks with the central goverment in a bid to wrest real self-rule powers.

Spanish Treasury Minister Jaime Garcia Anoveros, who steered through the fiscal issue, told a press conference after the Cabinet meeting: "The civil war has been definitively overcome" as a result of the agreement. Basques achieved autonomy during the brief rule of the republic before its defeat in the war.

The Basque government is now empowered to collect both income and company tax in the autonomous area. It is to return roughly a third of the levy, or about $500 million, to Madrid in a yearly lump sum while keeping the balance for its own internal budget.

The agreement restores the basis of the fiscal privileges known as the "economic concerts," that had been enjoyed by the Basques since feudal times until they were abolished in the last century.

The loss of the historic "economic concerts" together with suppression of the Basque police force and curtailment of ethnic schooling, tended to align the mainstream moderate Basque opinion with the ETA Marxist separatists and frequently led Madrid politicians to accuse the Basque Nationalist Party of being at best ambiguous toward the terrorists.

Spanish government and Basque executive sources indicated today that the last-minute package of agreements was a bid for a political solution to Basque violence. The ETA has yearly stepped up its activities since the death of dictator Francisco Franco five years ago and is seen as the main destabilizing factor in Spain's democracy.

The sources said the pacification move's chief goal is to isolate the gunmen by trusting Basque moderates with real powers that can be seen to be effective and thus placate majority opinion. Political sources in Madrid said that Premier Adolfo Suarez had urged speedup of negotiations on his return from his first official visit to the Basque country in early December. Suarez, who for security reasons had avoided the area until then, returned to Madrid struck both by the violence of the region and by the frosty reception he received from Basque government leaders, who accused him of stalling on devolution of power.

Both Madrid and Basque politicians said there could be no easy and quick end to ETA terror actions but that a start had been made. Madrid has consistently ruled out negotiations with the terrorists but on the Basque government side, discreet talks over a cease-fire are widely expected to be on the agenda in the coming weeks.