ITALY’S SENATE HAS passed an austerity budget which will now be voted on in the country’s lower house tomorrow in a bid to stave off market worries over its ability to cope with its spiralling debt.

The country’s senators voted 161 to 135 in favour of the three-year package which is intended to eliminate the country’s budget deficit by 2014, reports the FT, which adds that the governing coalition of Silvio Berlusconi used a vote of confidence to ensure swift passage of the measure.

The package totals around €45 billion and is a mix of revenue raising measures such as higher hospital fees and a tax on the holding of state bonds as well as cuts in spending by central and local governments that will come into force from 2013 and 2014.

There is also a freeze on public sector wages and hiring from 2012.

The measures passed were agreed by the government at cabinet level at the beginning of the month after Italy’s public debt rose to around 120 per cent of GDP, one of the highest in Europe.

Ratings agencies had also expressed concern about Italy’s sluggish growth.

But despite this it retains a relatively high credit rating from Fitch at AA- in comparison to Greece which was downgraded by the same agency to CCC earlier today, one level above actual default.

There have been fears in recent days in relation to Italy’s economic woes with some analysts worrying that both it and Spain would be unable to borrow from the normal private debt markets forcing the country to seek an international bailout similar to that already taken by Greece, Ireland and Portugal in the last year.