Italy crisis: Mario Monti announces austerity plan

Italy's new government has adopted a package of emergency austerity measures aimed at fending off bankruptcy and saving the euro from collapse.

Taxes on the assets of the wealthy will go up, as will pension ages. There will be a major drive to tackle tax evasion.

Prime Minister Mario Monti said the measures were necessary to "save Italy", and announced he would give up his own salary as part of the effort.

The plans must still be approved by the Italian parliament.

Mr Monti will outline the measures in full to lawmakers on Monday, but a few elements have already been announced.

Pension ages will rise to 62 for women and 66 for men, and most payments will be unlinked from inflation. The pension age for women will rise to 66 from 2018.

The minister in charge of pension reform broke down and cried as she tried to spell out the detail of the changes, says the BBC's Alan Johnston in Rome.

In all, the austerity package is estimated to represent 20bn euros (£17bn; $26.8bn) of savings from now until 2014.

The measures were agreed at a cabinet meeting held 24 hours ahead of schedule because of the growing pressure on Italy's finances.

Italy has recently been compelled to pay the kind of very high rates of interest that eventually forced Greece to call for an international bailout.

On Monday, German Chancellor Angela is due to meet French President Nicolas Sarkozy in Paris to outline joint proposals on closer ties between eurozone economies which they announced last week.

Eurozone leaders have warned the bloc is entering a decisive phase in its bid to resolve the debt crisis. They are due to meet on Thursday and Friday in Brussels to try to agree a broader rescue plan.

Mr Monti, a former EU commissioner, said there would be no room for error at the summit and that financial markets would punish inaction.

"The choice is between adopting tough austerity measures and starting the euro rescue, or Italy not being able to stand on its feet, and we risk the collapse of the euro," said Emma Marcegaglia, head of Italian employers' lobby Confindustria.