Friday 24 March 2017

Budget could topple Berlusconi

€43bn austerity plan may cause collapse, coalition ally warns

Giuseppe Fonte in Rome

EMBATTLED Italian Prime Minister Silvio Berlusconi's main coalition ally last night warned the government could collapse over an unpopular austerity plan.

The €43bn plan, seen by economists as vital to avoid contagion from Greece's debt crisis, is Mr Berlusconi's biggest test since suffering two major political defeats and has raised tensions within the ruling coalition.

The Northern League, the pro-devolution government member led by Umberto Bossi, opposes budget plans to cut funding to local governments and pension spending, putting it at odds with economy minister Giulio Tremonti.

Mr Tremonti yesterday denied newspaper reports that he had threatened to resign if his austerity plan was changed. He is widely credited with protecting Italy from the global economic crisis by insisting on prudent fiscal policies.

Mr Berlusconi met coalition leaders yesterday at his private residence in Rome to thrash out agreement on the plan.

Asked by reporters ahead of the meeting if the government risked falling over the budget, Mr Bossi replied: "Yes."

Markets and ratings agencies are watching closely for any signs of backsliding on the package, which is aimed at eliminating the budget deficit in 2014.

However, ratings agencies Moody's and Standard & Poor's have warned that they may consider cutting Italy's credit rating.

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