By Giuseppe Fonte
ROME (Reuters) - The Italian parliament on Wednesday gave its final approval to the government's 2017 budget, which has irked the European Union, paving the way for Prime Minister Matteo Renzi to hand in his resignation.
Renzi said he would quit following his crushing defeat in Sunday's referendum when Italians rejected his proposed reforms to the constitution, but the head of state Sergio Mattarella told him to delay his resignation until the budget was passed.
Sweeping away all amendments to speed up its parliamentary passage, the upper house Senate approved the budget in a vote of confidence, with 173 votes in favor and 108 against.
Minutes later, Renzi announced he would hand in his resignation to Mattarella at 7 p.m. (1800 GMT).
"Budget approved. Formal resignation at 7 p.m. Thanks to everyone and long live Italy," Renzi said on Twitter.
When the premier presented the budget in October he hiked deficit and debt targets previously agreed with Brussels and filled the package with potentially vote-winning measures ahead of the Dec. 4 referendum.
Next year's budget deficit goal is set at 2.3 percent of gross domestic product (GDP), up from 1.8 percent agreed previously with the European Commission.
It abolishes an unpopular state tax collection agency, raises pensions and offers an amnesty for tax dodgers who declare cash previously hidden from the authorities. It also scraps interest and penalties on unpaid fines.
The European Commission said the budget broke EU fiscal rules but delayed any demand for corrective action until after the referendum in order not to hurt Renzi's prospects in the ballot.
EU rules require countries to cut their "structural" budget deficits - adjusted for swings in the business cycle - by at least 0.5 percent of GDP every year until they reach balance or surplus. Italy's budget raises the structural deficit by 0.6 points.
On Monday, the day after the referendum, the Eurogroup of euro zone finance ministers said Italy would need
"significant additional measures" to rein in its deficit next year, leaving a tough prospect for Renzi's successor.
(Writing by Gavin Jones; Editing by Crispian Balmer)