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Italian Senate Votes In Favour Of Austerity Budget

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The budget will be voted on by Italy's lower house on Friday. | AP

The Italian Senate has passed a stringent package of austerity measures in a budget intended to save 48bn euros over three years.

The budget was passed by 161 votes to 135 and will now move to the lower house, which votes on Friday.

The Italian economy is under intense scrutiny by the markets due to the enormous scale of its national debt. Italy's current budget deficit equates to 3.9 per cent of its GDP. The budget was brought to parliament ahead of schedule due in part to a report from the International Monetary Fund, who asked the country to implement "decisive" spending cuts.

Italian Finance Minister Giulio Tremonti said that he is hopeful the budget will reduce Italy's deficit to zero by 2014. He said in parliament that unless the budget was passed ''the monster debt from our past will swallow up our future''.

Italy raised around 2.9bn through a sale of government bonds on Thursday, but had to offer a record rate of return amounting to 5.9 per cent.

Reaction to the move has been mixed:

-- Stefano Fassina, economic spokesman for the Democratic Party, who are Italy's main opposition, said that the budget was "disastrous" and claimed that its cuts would hurt lower and middle-income households. (Wall Street Journal)

-- Ratings agency Fitch said the Italian government would probably succeed in its attempt to cut the deficit. "In the absence of negative shocks, adherence to the fiscal targets set out by the government would be consistent with stabilising Italy's sovereign credit profile", Fitch said. (

-- Other analysts said that Italy still had more work to do. "This is not a result that sweeps away contagion fears, ratings fears," Luca Jellinek, head of European interest-rate strategy at Credit Agricole CIB. (Reuters)

-- Alex Rossi at Sky News says that the Italian government "is arguably paying the price for a political elite which has failed to deal properly with the sovereign debt crisis in Greece. (Sky)

-- Not On The Wires have covered the story from a different angle, reporting from inside the anti-cuts movement in Italy. "People are tired of being on the periphery of their own lives," they quote one of the organisers of the 'Italian Revolution Bologna' as saying. "Citizens want to feel that they are protagonists on the political stage." (Not On The Wires)

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