Italy's lower house of parliament today approved a package of budget measures including a sales tax hike and a cut in some payroll taxes, aimed at helping the government reach its deficit-cutting targets.

Approval was expected after prime minister Mario Monti's government won three confidence votes today that it had called to speed up passage of the budget.

The measures will now move to the Senate for approval, which is expected before Christmas.

The Chamber of Deputies approved the plans by 372 votes against 73.

The budget, enshrined in a so-called Stability Law, is central to Mr Monti's efforts to lower Italy's public deficit to 1.8 perc ent of output next year from a targeted 2.6 per cent in 2012.

Mr Monti agreed at the end of October to overhaul the first draft of the budget legislation by replacing a planned income tax cut with a reduction in payroll taxes paid by employers.

The package still includes a one percentage point rise in the highest VAT rate, which will go into effect next July, bringing it to 22 per cent. The lower 10 per cent rate will not be increased as previously planned.

The Stability Law is expected to be one of the final pieces of major legislation approved under Mr Monti before Italy gears up for a national election.

Reuters