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Rome, the next Detroit?

Rome could be about to follow in the footsteps of bankrupt Detroit, after the country's new government scrapped a measure that would have helped with the Italian capital's budget deficit.

Italy's central government – under new Prime Minister Matteo Renzi – announced on Wednesday it would be dropping a bailout package designed to help plug city's gnawing €816 million ($1.17 billion) budget gap.

(Read more: Italy's new leader Renzi already in the soup)

Artisans and merchants gathered in Rome to demand that Parliament the new government in the midst of being formed make an urgent breakthrough in economic policy after the economic crisis shut down more than 372 000 businesses in 2013.
Kevin Winter | Getty Images
Artisans and merchants gathered in Rome to demand that Parliament the new government in the midst of being formed make an urgent breakthrough in economic policy after the economic crisis shut down more than 372 000 businesses in 2013.

The move could bring Rome one step closer to a Detroit-style default.

Rome's mayor Ignazio Marino responded to the move by saying "In March there won't be money to pay 25,000 city employees, to pay for fuel for the buses, to keep the nurseries open, to collect rubbish or to organise that canonisation of the two popes, an event of a planetary scale" the Italian news agency ANSA reported on Thursday.

(Read more: Fears rise that Italy's 2014 budget could spark further trouble)

He also threatened to bring the city to a halt if the government failed to him answers – warning the ceremony for the canonisation of Popes John Paul II and John XXII on April 27 was at risk.

"I'll halt the city from Sunday … the politicians are lucky because they have chauffeur-driven cars, but the Romans won't be able to move around. People will have to fend for themselves" the local paper Gazetta del Sud reported.

The so-called "Save Rome" decree – which had been passed under the administration of Renzi's predecessor, Enrico Letta – has stirred up controversy in Italian politics.

It was obstructed by opposition parties such as the Northern League and anti-establishment 5-Star Movement (M5S) – and was in danger of not getting cabinet approval by the 28th February deadline, according to reports by the Italian news agency ANSA.

Italy's new government – which was sworn in last Sunday --is currently working on another package of aid to provide basic funding for services, Marino said, according to the Italian news agency ANSA.

(Read more: Doubts over Renzi's 'ambitious' reforms for Italy)

And yet, wrangling over the aid package will divert resources from Renzi's pivotal package of reforms. Commentators have already highlighted concern as to the five-month time frame for his reform agenda.

The new prime minister has said he wants to overhaul the country's electoral system and constitution by the end of February before tackling labour reform in March and public administration and the fiscal system in April and May respectively.

Rome's budgetary concerns are set against a backdrop of economic trouble in Italy. Its economy grew for the first time in just over two years in the last quarter of 2013 according to Rome-based national statistics office Istat. But it still faces a worryingly high unemployment rate which rose to a record high of 12.9 percent in January.

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