The Italian government has approved austerity measures worth €24 billion for 2011-2012 in a bid to stabilise public finances.

"The measures are centred on cuts to public spending," the government said in a statement after a Cabinet meeting, adding that they also aimed at increasing revenues mainly by cracking down on tax evasion.

The measures, worth nearly $30 billion, are aimed at helping cut the public deficit from 5.3 per cent of gross domestic product in 2009 to 2.7 per cent in 2012, bringing Italy into line with an EU limit of three per cent. Italian Prime Minister Silvio Berlusconi's close aide Gianni Letta had earlier warned of stern measures, stressing the need to make "very heavy, very hard sacrifices... to save our country from going the way of Greece". Civil servants will pay a high price in the austerity drive with their salaries frozen for three years while ministers and other highly paid government officials face wage cuts.

Average Italians were spared tax increases but the government is to hike tax on stock options and private sector executives' bonuses.

The battle against tax evasion is to be stepped up by involving local authorities to improve efficiency and there will be measures affecting the retirement age for some. The plan was immediately denounced by Pier Luigi Bersani, the head of the opposition Democratic Party, as a package of "indiscriminate" cuts that "do not confront anything structural".

The package follows austerity measures in Spain, Greece, Portugal and Britain aimed at stemming a loss of market confidence in indebted European economies whose deficits soared during the global slump.

While Italy managed to keep its public deficit from spiralling sharply higher during the economic crisis, the country is saddled with one of the highest national debts in the world, much to the concern of financial markets.