THIS WEEK GREECE has witnessed riots and strikes over a €28bn austerity package but yesterday Italy’s government quietly approved €47bn in tax hikes and public spending cuts.

To show the European Union and the financial markets that the Italian Government is keen to tackle its troubled finances, Finance Minister Giulio Tremonti brought a package of austerity measures to the Cabinet yesterday.

Italy’s public debt of about 120 per cent of GDP is among the highest in Europe. As well as the enormous debt pile, ratings agencies have recently pointed to Italy’s sluggish growth as a matter for concern.

Yesterday, the Cabinet approved the plans, which include new taxes, an extension of the public sector hiring freeze and government department spending cuts.

The package has some positive features though, such as tax breaks for young entrepreneurs and stricter rules on tax evasion.

Prime Minister Silvio Berlusconi told reporters that the plans “keep our hands out of the Italian pockets”.

Tremonti told reporters after the Cabinet meeting that the decision to pass the measures was driven by “moral and political” objectives, rather than an economic necessity.

The decree will now go to a vote in Parliament and Berlusconi has asked for cooperation from opposition parties.

The three year plan hopes to bring the budget deficit down to 3.9 per cent by 2014. To compare, Ireland is hoping to reduce its deficit to 3 per cent in 2015 but the International Monetary Fund has already said aim is too optimistic.

- Additional reporting by AP