A cabinet meeting on the package of tax increases and spending cuts originally scheduled for Monday was brought forward to 1500 GMT (3 p.m. British time) on Sunday after meetings with party leaders and unions, the prime minister's office said.

Expected reforms include an increase in the retirement age for many workers, liberalisation of professional services, a hike in income tax for higher income brackets and new taxes on private assets and housing.

The measures come before one of the most crucial weeks since the creation of the single currency more than a decade ago, with European leaders due to meet on Thursday and Friday in Brussels to try to agree a broader rescue plan for the bloc.

"The choice is between adopting tough austerity measures and starting the euro rescue, or Italy not being able to stand on its feet, and we risk the collapse of the euro," said Emma Marcegaglia, head of Italian employers' lobby Confindustria.

Italy, with a public debt of around 120 percent of gross domestic product, has been at the centre of Europe's debt crisis since yields on its 10-year bonds shot up to around 7 percent, similar to levels seen when countries such as Greece and Ireland were forced to seek a bailout.

Adoption of the package is seen as vital for re-establishing Italy's shattered credibility with financial markets after a series of unfulfilled promises by the previous centre-right government of former Prime Minister Silvio Berlusconi.

Unions said the cuts will hit poorer workers and pensioners disproportionately hard, but there was little sign of serious political opposition to Monti's plan, which is expected to be approved in parliament before Christmas.

With Italy, the euro zone's third-largest economy, close to a debt emergency that would destroy Europe's financial defences, EU leaders will meet in Brussels this week hoping to agree steps to bind the bloc more closely with tougher fiscal rules.