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Last Updated: Thursday, 29 September 2005, 14:13 GMT 15:13 UK
Crunch talks over Italian budget
Italian workers protesting job cuts
Unions have said they will not tolerate huge spending cuts
Crunch budget talks are continuing in Italy with ministers trying to agree upon controversial plans to tackle the country's public finances.

Italy's cabinet is striving to reach agreement on spending cuts required to reduce the country's budget deficit.

With elections due next year, Prime Minister Silvio Berlusconi is facing opposition to his proposals from some members of his ruling coalition.

Ministers must approve the budget before Friday's deadline.

'No giveaway'

Italy is under pressure to curb its budget deficit which has exceeded EU limits for several years.

Prime Minister Silvio Berlusconi has pledged not to deliver a "giveaway" budget.

But some members of his centre-right coalition are concerned that proposals to cuts 11.5bn euros from the deficit (7.8bn) could threaten its re-election.

There is no agreement yet on everything
Gianni Alemanno, Agriculture minister

Finance minister Domenico Siniscalco quit last week amid claims that he was exasperated about divisions over the budget.

According to Italian media reports, ministers failed to reach final agreement over spending proposals during all-night talks, and would continue discussions on Thursday afternoon.

Under Italian law, the annual budget must be formally delivered by 30 September for parliamentary approval.

"There is no agreement yet on everything," the ANSA news agency quoted Agriculture Minister Gianni Alemanno as saying.

Budget pressure

Brussels has put Italy on notice to reduce its budget deficit, which is forecast to hit 4.3% this year.

EU rules governing the single currency require countries to keep their budget deficit below 3% of gross domestic product.

Next year's budget is designed to bring the deficit down to 3.8% but some economists have claimed that a raft of voter-friendly spending proposals could see it swell above 5%.

In contrast, unions have warned that they will oppose any cuts in spending on health and welfare services and will consider strike action.

"If that's what the picture will be, then we won't stand still," Gugliemo Epifani, leader of the CGIL labour confederation, told L'Unita newspaper.

Political row

The budget discussions have been overshadowed by a political row over the future of central bank governor Antonio Fazio.

Mr Berlusconi has called for Mr Fazio's resignation after he was accused of mishandling a controversial bank takeover.

According to media reports, ministers asked Mr Fazio to attend Thursday's pre-budget meeting but he declined.

In a statement, the Bank of Italy said Mr Fazio was unable to attend as he was presiding over its supreme council's monthly meeting.

A member of the bank's governing body said earlier on Thursday that Mr Fazio's future would not be discussed at the meeting.

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