Mario Monti made his announcement during a speech to Italy's financial community gathered in Milan Monday, saying there was "no need for further austerity cuts" in spite of the current downturn in the Italian economy.

"If the recession lasts, if the real economy does not improve; even then there will be no need for a new plan since safety margins have been included [in the latest austerity budget]," he said.

Monti's technocrat government - appointed in November after the resignation of Silvio Berlusconi - aims to balance the budget by 2013.

His plan, dubbed "Save Italy," was approved by parliament in December and envisages cuts of 21 billion euros ($27.7 billion) in 2012. As a result, Italy has slid back into recession, contracting 0.7 percent at the end of last year.

Monti said that Italy's economic weakness was not a reason for more cuts as his budget policy was "prudent," having incorporated "very modest growth figures" and "very high borrowing costs" for Italy in financial markets.

More tax revenue

In addition, Mario Monti said that "extra revenue" would be flowing into state coffers from a crackdown on tax evasion which had "not been included in the budget."

Earlier this month, the government announced that it would pass a law ending the Catholic Church's exemption from local property taxes. This measure alone is estimated to bring up to one billion euros into the budget.

"Corruption devours 60 to 70 billion euros a year and tax evasion 120 to 150 billion euros," Marco Travaglio, a columnist for investigative daily, Il Fatto Quotidiano, told AFP news agency.

However, Europe's third biggest economy is saddled with 1.9 trillion euros ($2.5 trillion) of sovereign debt - a burden that could still prove to weigh heavily on Monti's plan to balance the budget without further cuts. 

Author: Uwe Hessler (AFP,dpa)
Editor: Michael Lawton