Italy’s budget deficit fell to a three-year low of 2.7 percent of GDP in the third quarter of 2011, the national statistics agency Istat reported on Wednesday.
The deficit was 3.5 percent in the same period the year before.
Italy’s budget deficit in the first nine months of 2011 also fell, to 4.3 percent of GDP compared with 4.6 percent in the same period last year.
The news of the fall in debt is timely for Rome, as Italy's Prime Minister Mario Monti met with Germany's Chancellor Angela Merkel in Berlin on Wednesday for talks on the European sovereign debt crisis.
Italy is currently one of the highest profile victims of the debt crisis. Economists worry that the eurozone’s third largest economy might be unable to refinance its huge public debt, which currently stands at 1.9 trillion euros ($2.6 trillion).
With yields on Italian government ten-year securities surging past the critical level of seven percent, economists believe Italy is likely to have to ask the European Central Bank and the International Monetary Fund for bailouts to stave off default on its obligations.
Last December Prime Minister Monti pushed through a 30 billion euro ($38 billion) austerity plan in a bid to cut the country’s massive public debt and get the ailing Italian economy back on track.
Monti said Italy was in a deep crisis and should take all efforts to save it to avoid the scenario unfolding in Greece, which is teetering on the brink of default.
Italy's austerity plan aims to eliminate the country's budget deficit by 2013.
