The Italian government agreed on a series of measures to slash public spending by 26 billion euros ($32 billion) over three years, including major payroll cuts.
"The economies in this measure will be 4.5 billion in 2012, 10.5 billion in 2013 and 11 billion in 2014," said Prime Minister Mario Monti.
Much of the savings will be found in the health and public administration budgets, said Monti.
Deputy Economy Minister Vittorio Grilli said the planned measures would lead to a 20 percent reduction in the number of public sector managers and a 10 percent cut in the ranks of orinary public sector workers.
In April, the government had decided in principle to cut 4.2 billion euros off this year's spending account, but now Rome sees the need for deeper cuts.
Monti said the cuts were needed to avoid a two percentage point hike in sales tax which would otherwise be necessary.