Ten Italian cities including Naples and Palermo are facing bankruptcy as they are unable to fulfil their budget commitments, Italian newspaper La Stampa reported on Tuesday, quoting National Association of Italian Municipalities President Graziano Del Rio.

Del Rio told the paper many schools in Naples, Palermo in Sicily, Reggio di Calabria, Alessandria in Piedmont and in some towns might not start school lessons in the fall due to city budget deficits caused by the huge cuts being implemented by the Italian government, the paper says.

The government has been trying to reduce the state debt of about two trillion euros by cutting the budgets of 64 out of 107 Italian provinces. This year the municipalities' finances will be cut by 500 million euros, and by one billion euros in 2013

The Italian government approved a program in early July to cut budget spending by 26 billion euros in 2012-2014. About 10 percent of state employees and 20 percent of state agencies' heads could be dismissed in the next three years.

Italy’s state debt soared to 120.1 percent of gross domestic product level in 2011 and may hit 123.4 percent of GDP this year.

Moody's Investors Service downgraded Italy's government bond rating to Baa2 from A3 with a negative outlook this month, saying it expected the eurozone’s third largest economy to experience greater economic difficulties in the near future.