Italy reached an accord with the three large federal unions on first pillar pension reform last month, and now expects to meet the Maastricht criteria.

Four and a half trillion lire ($2.7bn) will be saved in amendments to the 1998 budget, although this is less than the nine trillion originally suggested, while the government has also agreed to reduce the working week to 35 hours, to keep the Communists, on whose votes its relies, on side.

The IMF, the German government and Confindustria, the Italian employers federation, among others, have criticised aspects of the deal. while EU Commissioner Mario Monti said on Italian television last month that Italy's system of early retirement needs further reform.

Immediate cuts will come from tightening the age of retirement and blocking early retirement in certain employment sectors while one trillion will come from increasing contributions from retailers and artisans.

The deal also sees a broad extension of the retirement age for several categories from 53 to 58 although this comes into effect for those retiring in 2008 and importantly does not cover blue collar workers.

The deal has sparked a series of strikes by Bank of Italy staff, angered at government plans to bring them in line with other state employees and prevent them from being able to retire at 52 with 31 years of contributions by extending this to retirement at 53 with 35 years.

The Bank of Italy unions had, at time of going to press, called a series of 11 strikes in response to the ending of their privileged position while other sectors were considering their positions.

The European Commission will express its views on Italy's budget and pension reform at a meeting of EU finance ministers (ECOFIN) in January.

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