Italy govt clears 2007 draft budget to cut public deficit to 2.8 pct of GDP.

(From AFX Europe (Focus))

ROME (AFX) - The centre-left government of prime minister Romano Prodi agreed Friday on a draft budget for 2007 aimed at cutting the public deficit to 2.8 pct of GDP.

The draft provides for 33.4 bln eur in austerity measures and additional incomes, compared with the 30.0 bln previously announced.

"With this budget we will again play by European rules," Prodi said, alluding to the EU stability pact which limits public deficits at 3.0 pct of national GDP.

In 2005, the country's public deficit totaled 4.1 pct of GDP and is expected to be over 4.0 pct this year.

The draft must still be approved by both houses of parliament.

Communists and other parties in Prodi's nine-party coalition had said they would not back cuts in funding for education and local government, while parties in the centre worried that the budget would focus on higher taxes instead of spending cuts.