Italian lawmakers gave final approval Tuesday to 26 billion euros ($32.3 billion) in spending cutbacks over three years that will see a 10-percent cut in the ranks of public sector workers.
Italian lawmakers voted by 371 to 86 with 22 absentions to approve the cutbacks, which the government of Prime Minister Mario Monti set out on July 5. The approval had been widely expected.
Much of the savings will be found in the health and public administration budgets, with regional hospitals set to lose 7,000 beds in the coming months.
There will be a reduction of 20 percent in the number of public sector managers and a 10-percent cut in the ranks of ordinary public sector workers in order to generate the savings of 4.5 billion euros this year, 10.5 billion in 2013 and 11 billion 2014.
Federal transfers to regions will also be cut, as will spending in ministries, including cutbacks on cars and limiting reimbursements on meals.
The cutbacks will allow Italy to avoid another hike in the VAT sales tax, from 21 to 23 percent, in October that many economists saw as counterproductive as it would further dampen domestic demand while the economy is contracting.
Preliminary data released Tuesday showed Italy's economy shrank by 0.7 percent in the second quarter, its fourth consecutive quarter of contraction.