Italy: Silvio Berlusconi pressed to make tax cuts by rightwing partner

Northern League’s Umberto Bossi makes life difficult for Italian PM with demand that could generate new eurozone crisis The threat of a new crisis on the eurozone’s southern flank loomed on Sunday as a crucial ally of Silvio Berlusconi demanded that the government cut taxes, despite the serious implications that this would have on Italy’s public finances. Umberto Bossi, the Northern League leader and arbiter of the prime minister’s fate, brushed aside concerns that Italy could go the way of Greece when he told cheering supporters in Pontida that the tax burden in Italy had gone “beyond all limits”. Bossi, Berlusconi’s partner in Italy’s rightwing coalition government, has been under huge pressure from his party’s rank and file since local elections last month showed a sharp fall in the league’s support. Tax cuts would offer both men the promise of regaining their lost popularity, but could widen the budget deficit of a country that has the eurozone’s biggest public debt. On Friday, the rating agency Moody’s warned it could downgrade Italy’s credit ratings because of concerns that the crisis in Greece could increase eurozone interest rates and derail Italy’s already precarious economic recovery. The finance minister, Giulio Tremonti, has been urging prudence on his cabinet colleagues and was reported by La Repubblica to be planning a mini-budget that would include deficit reduction measures totalling €40m (£35m). But Bossi told his supporters: “Tremonti says that we risk ending up like Greece. But, whatever, something has to be done to bring down taxes.” He stopped well short of threatening to bring down the government in a confidence vote on Wednesday because that would force a general election “at a moment favourable to the left”. But he said Berlusconi’s leadership of the Italian right would be at stake after the next general election in 2013 “if he does not do certain things”. Largely thanks to Tremonti’s insistence on fiscal rigour, Italy has remained comparatively unscathed by the financial hurricane blowing through southern Europe. Italy’s budget deficit this year is expected to be a modest 4% and investors demand a return of less than 5% for 10-year loans to the Italian treasury; in Greece, the rate is above 17%. But Italy’s public debt is expected to top 120% of GDP by the end of the year, so any increase in the cost of borrowing could swiftly make it impossible for the Rome government to contain its budget deficit, especially as Italy’s low economic growth is holding down tax revenues. Tremonti has tried to square the circle by rooting out tax evasion, but the clampdown is among the chief grouses of Bossi’s mainly lower middle-class following of small business owners and self-employed workers. A poll on Saturday indicated 55% of the league’s voters disapproved of the government’s performance. Many would like to see Bossi withdraw from the coalition and some would like him to lead the north out of Italy. Seven times during his speech, he was interrupted by chants of “Secession. Secession.” Bossi told them Tremonti had done “shameful things” and repeated a demand for some government ministries to be moved to the north. “The industry ministry shouldn’t be in Rome. It ought to be in the north, where the factories are,” he said, adding that he and another Northern League minister had signed decrees for the transfer of their departments to Monza “but then Berlusconi shat on it”. The League’s plan could yet cause the government serious problems. The regional governor of Campania in the south promptly demanded the transfer of an equivalent number of ministries to Naples. His counterpart in Lazio, the region around Rome, announced a petition to keep the government in the capital. And the mayor of Rome, Gianni Alemanno, warned of a “hard, serious” tussle. Italy Europe European debt crisis Europe Euro Silvio Berlusconi European Union Euro Currencies John Hooper guardian.co.uk

Posted by on June 19, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.