Italy’s centre-right cabinet signed off on Thursday on a planned constitutional amendment that would bind governments to running balanced budgets from 2014 onwards unless an exception is sanctioned by a vote in parliament.
The amendment, which needs a two-thirds majority to pass in parliament, is part of a package of austerity measures aimed at calming market fears over the stability of Italian public finances and echoes similar plans by other European governments.
It comes a day after the Senate voted to approve a €54-billion ($75.96-billion U.S.) package of tax cuts and spending cuts aimed at balancing the budget by 2013, which now goes to the lower house for final approval in the next few days.
In a statement issued after the cabinet meeting, Economy Minister Giulio Tremonti said the amendment would be accompanied by “other important reform texts.”
Under the amendment, an article would be inserted into the constitution reading: “The state budget respects the balance of revenue and expenditure.”
The amendment would prevent governments from running a deficit “unless in adverse phases of the economic cycle within the limits it decides or due to a state of necessity which cannot be supported with ordinary budget decisions.”
A state of necessity would only be declared under exceptional circumstances after a vote requiring an absolute majority in both houses of parliament, the text said.
“In consequence, the ‘balanced budget’ will not only be an accounting criterion, it will be a principle of high political and civic intensity,” Mr. Tremonti said.
Italy’s stepped up efforts to tighten its public finances following two months of market turmoil which have seen Italian government bonds hammered over doubts about the sustainability of its €1.9-trillion debt pile.
Italy’s borrowing costs shot up to levels that it could not afford to keep paying and crisis was only averted by exceptional intervention by the European Central Bank, which has been buying Italian bonds to keep yields down to manageable levels.