The Italian government is vowing that a new austerity package will slash the country’s huge bureaucratic and political costs, with thousands of jobs and elected posts being gradually eliminated and a myriad of the country’s tiny towns losing their administrations.

Premier Silvio Berlusconi acknowledged that the cuts were in some cases “excessive”, but said they had been approved because of widespread discontent among citizens over the perks enjoyed by the ruling class at a time of belt-tightening.

The government approved the €45.5 billion emergency package on Friday, seeking to balance the budget by 2013 in response to demands from the European Central Bank.

Cabinet minister Roberto Calderoli vowed yesterday to cut the number of national legislators and eliminate local governments for some small towns and villages.

On Friday, the Cabinet approved the package of cuts and new taxes despite fierce resistance from local government officials, who denounced the measures as socially unjust and damaging to economic growth.

“It wasn’t easy. We’re personally pained to have taken these measures, but we are satisfied,” Premier Silvio Berlusconi told a news conference after feverish talks with the Opposition, regional governors and big city mayors.

The Cabinet approved €20 billion worth of cuts for 2012 and €25.5 billion for 2013.

The measures include an extraordinary “solidarity” tax for high-earners. Anyone with an income of over €90,000 a year will be assessed an additional five per cent tax in each of the next two years. The rate will be 10 per cent for incomes over €150,000.

“Our hearts are bleeding. This government had bragged that it never put its hands in the pockets of Italians, but the world situation changed,” Berlusconi said, while insisting the emergency measures were “fair”.

The solidarity tax was reminiscent of another by former Premier Giulio Amato, who in July 1992 siphoned money out of every Italian bank account at a rate of six lire per 1,000 lire as the old Italian currency faced collapse. Just months later, Italy abandoned the European currency system and allowed the lira’s value to be dictated by market forces during a period of intense currency speculation.

Berlusconi’s “solidarity” tax could encourage greater tax evasion, as those who do not draw a declared salary from an employer will be tempted to hide income through cash payments.

Berlusconi held urgent meetings with key parties to pass the cuts before a long holiday weekend, when most of the country shuts down.

But the hasty news conference by regional, provincial and city authorities held after the meeting with Berlusconi and his finance minister, Giulio Tremonti, did not bode well for the broad acceptance of new sacrifices.

Tremonti’s presentation to legislators on Thursday failed to convince some of his own allies, a sign of possible rifts within the coalition. The Opposition accused Tremonti of being too vague, and insists Berlusconi must resign.

Italian borrowing costs remained way below the levels they struck last week before the European Central Bank intervened in the markets to get them down. The yield on the 10-year bond is below five per cent compared with over six per cent last week. The fall now makes it easy for Italy to keep up on its debt payments.

The drastically pared down budget was mainly achieved through cuts, with the notable exception of the “solidarity” levy.

Although few details were given, the measures include abolishing public administrations of towns with fewer than 1,000 residents, cuts to the salaries of ministry personnel and perks totalling €6 billion ($8.55 billion), and gradually raising the retirement age for women in private sector jobs. Details were not immediately announced.

Tremonti assured his countrymen that there would be no cuts for schools – whose services took a hit in previous cuts – or the national health system, which was hit by austerity measures approved by parliament in July.

Last on the list of the Cabinet’s measures was an order that all Members of Parliament, public administrators and state workers fly economy class when travelling on official business.

Blogs had buzzed on Friday with angry postings by citizens stunned to learn in news reports that senators virtually had a free lunch, thanks to bargain-basement prices on menus in their dining room for everything from steak to dessert.