Italian cabinet approves tough austerity plan

Italy's cabinet approved an austerity package aimed at shielding the country from the Greek debt crisis and eliminating the budget deficit in 2014.

The package, worth 47 billion euros ($67 billion), must now be approved by parliament within 60 days.

It has heightened tensions within Prime Minister Silvio Berlusconi's centre-right coalition and his restive Northern League ally has warned that the government is at risk until the package is passed.

"The composition of the budget is very well balanced between lower spending and higher revenues," Economy Minister Giulio Tremonti told a joint news conference with Berlusconi.

"With today's measures we completed our path towards a balanced budget," he said, describing this as a "political, civic and moral objective".

Italy, the euro zone's third largest economy, has been spared the worst of the market volatility since Greece's debt crisis exploded, thanks to a prudent fiscal policy, low private debt and a relatively solid banking system.

However, it remains vulnerable due to its massive public debt of around 120 percent of gross domestic product (GDP) and its chronically weak economic growth -- the most sluggish in the euro zone over the last decade.

No details of the final version of the budget were immediately available, and Tremonti and Berlusconi refused to take any questions on the package at the news conference.

According to draft versions, the bulk of the 47 billion euros will come from cuts in the budget of government ministries and local authorities plus a reduction in tax breaks for companies and families.

The budget deficit is targeted at 3.9 percent of GDP this year, down from 4.6 percent in 2010, and to fall progressively to 0.2 percent in 2014.