THE European Union yesterday bolstered Italy's hopes of a timely entry into a single currency by approving, its controversial euro tax, a one off measure aimed at bringing its public finances under control in 1997.

Eurostat, the EU's statistical office, said the "the Italian tax on wage funds is a new tax and should be recorded as a receipt reducing the deficit". Italy, like other EU states, is trying to bring its deficit, debt and other budget targets into line with criteria set in the Maastricht Treaty for qualifying for the EU's single currency.

In Rome, the Italian Treasury welcomed the decision, but the German finance ministry, where there is concern about Italy's fitness to be a founding member of the new euro - currency, declined to comment.

Eurostat estimated that the part of the so called euro tax it was reviewing would represent 0.19 per cent of GDP.