Italy’s squabbling centre-right government has cobbled together a compromise austerity package that relies heavily on a renewed crackdown on tax evasion to reach the goal demanded by the European Central Bank of a balanced budget by 2013.

After three weeks of disputes and revisions, finance minister Giulio Tremonti reached a political deal with coalition leaders and a text was submitted to the senate budget commission last night.

The spectacle of Italy’s ruling politicians led by Silvio Berlusconi quarrelling over where the cuts should fall had already undermined the country’s credibility among foreign investors, well aware that the euro zone’s third biggest economy, with € 1,900 billion of debt, is too big to rescue with a Greek-style bailout. The budget package hammered out represented a three-way compromise. – (Copyright The Financial Times Limited 2011)