Italian Prime Minister Silvio Berlusconi announced a painful mix of tax hikes and spending cuts Friday to meet European Central Bank demands for action on shoring up Italy's strained public finances.

After days of criticism for a lack of clarity over how they intended to meet an ECB-imposed target of balancing the budget by 2013, Berlusconi and Economy Minister Giulio Tremonti delivered a harsh dose of austerity for Italy's fragile economy.

"We are personally very pained to have to adopt these measures," Berlusconi told reporters after the Cabinet approved the plan.

The package, adopted by emergency decree, imposes austerity measures worth 20 billion euros in 2012 and a further 25.5 billion euros the following year through a mixture of public spending cuts and higher taxes, Berlusconi said.

It must now be approved by Parliament within 60 days.

The extent of the cuts underlines how far the government has been pushed since markets turned on Italy last month, dragging it close to a Greek-style emergency that would overwhelm the eurozone's bailout mechanisms.

The budget deficit will fall to 1.4 percent of gross domestic product in 2012 from 3.8 percent this year, and be eliminated in 2013, Tremonti said, adding that these targets were "prudent."

The package imposes a five percent extra tax on income above 90,000 euros and 10 percent more tax on income above 150,000 euros, as well as increasing the tax rate on financial income to 20 percent from a current level of 12.5 percent.

It also brings forward measures to raise the retirement age for women in the private sector, originally planned to begin in 2020 but  now moved to 2016.

Additional measures include a rule ensuring that non-religious public holidays, such as the June 2 anniversary of the founding of the Italian Republic, are celebrated on a Sunday to increase the number of working days in a year.

(Additional reporting by Roberto Landucci, Francesca Piscioneri, Giselda Vagnoni and Antonella Cinelli)

(Writing by James Mackenzie; editing by David Stamp)