Italy's technocratic government approved €4.5 billion ($5.58 billion) in spending cuts for this year aimed at slashing the size of Italy's bloated public sector and delaying a new tax increase until after the first half of 2013.

The move, which came late Thursday, increases to €26 billion the amount of cuts through 2014 and allows the government of Prime Minister Mario Monti to delay a planned 2 percentage point rise in the country's value added tax until next July, the Financial Times reported Friday.

The cuts will result in less money being spent on health care, wtih savings to be used to rebuild areas of Italy hit by earthquakes and to assist some 55,000 people left without benefits or pensions since the retirement was raised in December of last year.