After an eight-hour cabinet meeting that ended early on Wednesday, the government said it would also halve a planned increase in sales tax rates to a single percentage point.

Italy will reduce by a percentage point the two lowest income-tax rates. The rate will drop to 22 percent from 23 percent for earners of less than 15,000 euros per year, and to 26 percent from 27 percent for earners of between 15,001 and 28,000 euros.

The top three rates will remain unchanged.

 Italy will balance its budget in structural terms next year, as it has pledged its EU partners it would do, according to a statement from the cabinet meeting.