The Italian government approved $8.6 billion (¤6.5 billion) in tax cuts for 2005 Saturday, state radio reported, ending partisan debate that at one point had prompted Premier Silvio Berlusconi to threaten to resign. Opposition parties criticized the cuts approved by Berlusconi's Cabinet in the early hours Saturday, arguing they will unfairly favor the rich and will be canceled out by tax hikes in other areas. Berlusconi, who had pledged to cut income taxes before the next election, had reportedly resolved rifts over the plan earlier in the week. But he threatened to step down amid continuing disagreements over the package. Many of Berlusconi's political allies had argued that the cuts should be postponed until 2006, saying that Italy's huge debt would not allow for them sooner. Sources of funding for the tax cuts include a public sector hiring freeze and an increase in cigarette taxes, the financial daily Il Sole-24 Ore reported. Italy is trying to contain its budget deficit and keep it within the limit of 3 percent of gross domestic product set by the European Union. Though sharply critical of what he has called "rigid" EU rules, Berlusconi has said he will stick by them.
