Minister breaks down announcing new Italian austerity

Full details will be made known on Monday as the plan must still be approved by the full sitting of the Italian parliament.

The package amounts to €20 billion in savings to 2014.

The cornerstone of the cost-cutting measures will be a hike in the retirement age to 62 for women and 66 for men, with women also eventually matching the 66-year rule in six years’ time.

The cabinet member responsible for the pension changes, social affairs minister Elas Fornero, was so overwhelmed by her own announcement that she broke down and could not continue.

“The pension system is a long mechanism between the generations so we need it, and it costs us even psychologically, so we have to ask a…,” said Fornero, wiping away tears.

The government also agreed to measures aimed at clamping down on tax evasion and an increase to taxes on the assets of the rich, although a one-off wealth-tax has been shelved, according to reports.

Monti for his part has offered to forego his own salary as prime minister.

“While taking these steps, at the same time we’ve thought about the need to create the conditions for growth in Italy. So we must strongly control the deficit and debt. We must not be seen as a source of infection in Europe, but once again as a source of strength,” he said in announcing the measures.

Separately on Monday, German Chancellor Angela Merkel and French President Nicolas Sarkozy are to meet in Paris in the hope of agreeing to common proposals for changes to the EU treaties that will deliver what the German leader called last week “fiscal union” in the eurozone.

However, there remain strong differences between the two sides about the future role of national governments. France is in favour of treaty changes, but is loth to permit such infringement of its national sovereignty.

The outline of the Franco-German pact comes ahead of a two-day crunch summit of European leaders at the end of the week.

EU economy chief Olli Rehn has said that the bloc has just days to save the eurozone.

The aim is to embrace stringent new fiscal rules in which budget-making will in effect be taken out of the hands of national parliaments and handed over to the European Commission and the Council of Ministers, with supervision by Brussels backed up by the threat of sanction imposed by European Court of Justice judges.

Such measures it is thought would be a sufficient quid pro quo for the European Central Bank, which would then ramp up its bond purchases of troubled governments.

The new ECB chief, Mario Draghi, last week in an address to a nearly empty European Parliament, hinted that the Frankfurt institution was ready to move with such purchases, but only after a “fiscal compact” had been achieved.

Over the weekend however, the deputy Dutch foreign minister, Ben Knapen, warned against any expectation of a complete resolution to the crisis at the upcoming summit.

"I do not suggest that there is a peak and then a deus ex machina solution. This is a marathon," he told Sunday television programme Buitenhof.