Italy is the latest country in Europe to deal with austerity. The government has approved measures worth 24 billion euros ($US29 billion) for the years 2011-2012.
The announcement makes Italy the latest eurozone country to announce cuts in an effort to reduce the gap between spending and earnings.
The British and Danish governments also this week announced plans to curb spending. Greece, Spain and Portugal are already doing so.
Italy is to reduce public sector pay and will impose a freeze on new recruitment.
Public sector pensions and local government spending are also expected to be hit. A clampdown on tax avoidance is also planned.
The BBC reports the cuts are equal to 1.6% of gross domestic product.
The government hopes to bring its deficit down to below 3% of GDP by 2012 - from 5.3% now - in order to maintain the confidence of international investors and prevent the spread of a Greek-style debt crisis.