Italy backs urgent measures to avoid bankruptcy

ROME (AFP) - Italy's cabinet on Sunday adopted a package of tax hikes, budget cuts and pension reforms worth 20 billion euros (S$34.4 billion) in a rush to avoid a bankruptcy that threatens to bring down the euro zone.

'This is a decree to save Italy,' Prime Minister Mario Monti said at a press conference after the cabinet meeting, adding: 'This is a moment in which Italy risks being responsible for helping to drag down the economy of Europe.'

Italy will 'put its deficit and debt under strong control' so that the country is 'not seen as a suspicious flash point by Europe,' he said. He also warned that Italians had to make 'sacrifices' and said he was renouncing his own salary as prime minister in a gesture of solidarity.

The three-year package includes a controversial pension reform that will increase the minimum pension age for women to 62 starting next year and fall into line with men by 2018, by which time both will retire at 66.