Italy austerity package passed

The lower house voted 314 in favour and 280 against the motion, which hours ealier had passed in a confidence vote.

The mix of spending cuts and tax measures, aimed at protecting Italy from a full scale financial crisis and ensuring the government reaches its target of balancing the budget by 2014, was approved by the Senate on Thursday.

It has passed through parliament with unusual speed after the opposition said it would not hold up the package with delaying tactics because of the risk that the tensions seen on financial markets in recent days could spiral out of control.

While Italy has avoided the worst of the financial crisis thanks to strong controls on public spending, a conservative banking system and a high level of private savings, it has become embroiled in the wider euro zone crisis sparked by difficulties in Ireland, Portugal and Greece.

The rapid political action helped calm the sell-off of Italian assets at the start of the week.

But in a sign of continuing market nerves, yields on Italian 10-year government bonds climbed to about 5.7 per cent and spreads over benchmark German bonds rose above 300 points on Friday.

After several days in which he has not been seen in public, Berlusconi came to parliament for the vote where he met Economy Minister Giulio Tremonti and Umberto Bossi, head of his Northern League coalition allies.

Speaking to supporters in the chamber, he rubbed the back of his neck and grimaced several times as if describing an episode of physical discomfort. One deputy quoted Berlusconi as saying he had slipped in his bath and hit his head.