OPPOSITION parties staged protests across Italy yesterday against the government's 1997 austerity budget, a day after the draft law was approved by the lower house of parliament.

The Prime Minister, Mr Romano Prodi, says the deficit cutting package is vital if Italy is to become a founder member of planned European monetary and economic union (EMU).

As a big steep towards reaching that goal, he said yesterday his centre left government would soon ask to put the lira back into the European exchange rate mechanism (ERM), four years after it crashed out of the grid in a currency crisis.

"From today, tomorrow or the day after we will start negotiations for the lira's return to the ERM," a smiling Mr Prodi told reporters minutes after the lower house ratification.