15 Jul 2011

Austerity budget passed by Italian Senate

9:19 am on 15 July 2011

The Italian Senate has passed a tough austerity budget, in an effort to prevent the European debt crisis from engulfing the country.

Cuts of 48 billion euros ($US67 billion) over three years were passed by 161 votes to 135 in the Senate on Thursday.

To get final approval, the budget must be adopted by the lower house on Friday. Correspondents say that is likely.

The BBC reports Italy has one of the largest debt mountains in the eurozone and wants to avoid any need for a bail-out.

Prime Minister Silvio Berlusconi has said Italy is on the front line of the eurozone's economic difficulties.

Italy raised 2.97 billion euros ($US4.2 billion) through a sale of 15-year government bonds on Thursday, but had to offer a 5.9% rate of return.

Finance Minister Giulio Tremonti hopes the package will cut the deficit to zero by 2014 from this year's 3.9% of gross domestic product.