Italy's government signed off Thursday on a proposed constitutional amendment calling for a balanced budget, a day after the Senate approved an austerity plan aimed at calming financial markets and meeting European Central Bank demands.
The Cabinet also finalized a proposal to slash the duplicating government functions of provinces and larger regions in a bid to cut public spending. Because both are constitutional amendments, both must be approved by a two-thirds majority in each house of Parliament.
The Cabinet signed off on the measures a day after the Senate approved a core austerity package aimed at reducing the deficit by more than euro54 billion ($70 billion) over three years through budget cuts, tax hikes and changes to Italy's costly pension system.
The European Central Bank had demanded stiff austerity measures to calm the markets that have been roiled for weeks over doubts that Italy was serious about cutting its massive debt. Italy's deficit to GDP ratio now stands at 120 percent, one of Europe's highest.
The ECB has spent billions over the last month buying up Italian government bonds to get Italy's borrowing costs lower and help them avoid becoming the next eurozone nation to need an international bailout.
The austerity measure now heads to the lower Chamber of Deputies, where lawmakers of Berlusconi's party said they were considering putting it to a confidence vote sometime next week.
Among other things, the measure approved Wednesday hikes the sales taxes on goods and many services from 20 percent to 21 percent and includes an additional income tax of 3 percent on incomes exceeding euro300,000 (nearly $450,000).
Separately, Economy Minister Giulio Tremonti called Thursday for a "constructive and quick" parliamentary discussion over the proposed balanced budget amendment and predicted it would ultimately pass.
The text says Italy would "pursue" a balanced budget and contained public debt, though it allows for "exceptional events" when ordinary budget balancing measures don't work.