Govt still split as IMU showdown looms
But Alfano says talks with Saccomanni 'constructive'27 August, 18:52
(ANSA) - Rome, August 27 - Italy's uneasy ruling partners on left and right were still split Tuesday on scrapping a property tax called IMU whose fate has been entwined with that of the unprecedented coalition since it was formed four months ago.
The squabbling over the unpopular tax, which the centre-left Democratic Party (PD) wants to reform in the face of insistent demands from Silvio Berlusconi's People of Freedom (PdL) party to scrap it entirely, showed little sign of abating on the eve of a crunch cabinet meeting Wednesday, exactly four months since PD Premier Enrico Letta took office.
Profound divisions on revising or eliminating the tax, a pledge credited with driving Berlusconi's storming run to a close second in February's inconclusive general election, were again apparent Tuesday. The PD made it plain, once more, that getting rid of IMU altogether was impossible given Italy's fiscal straitjacket in the eurozone.
Letta's party went on to list several policies it believes take priority over IMU.
Funding struggling schools and social programmes while stoking economic growth are more important than retooling the tax, the PD said.
"For the PD, the priorities concern funding schools, and social programs, including assistance for older unemployed workers, while avoiding increases to the value-added tax or other measures that might hurt consumption," the party said after talks between PD leader Guglielmo Epifani and several ministers.
Continuing to provide funds for temporarily unemployed workers is also a high concern, the PD said.
Italy is struggling with its longest and deepest recession in more than 20 years, PD members noted.
During the meeting, it became clear that the government must "make every effort to support (economic) recovery, to address acute social problems," including education funding and boosting investment.
The PD has warned that Italy cannot afford to forgo the billions of euros in revenues generated by IMU, but instead should ease it while losing as little badly needed cash as possible. Epifani went on to rebuff the PdL's ultimatum to get rid of IMU or see the government fall. "We don't accept ultimatums," he said ahead of a meeting with Letta.
Epifani said it was "also in our interest to reform IMU" but there were "plenty of other measures" that needed funding, including help for people left without pensions and the prevention of a planned VAT hike.
The PD has proposed various IMU reforms to exempt low-earners and keep a renamed 'service tax' on large portfolios but the PdL kept insisting Tuesday IMU must be scrapped entirely to meet Berlusconi's key electoral pledge.
One of the leading PdL hawks, former civil service minister and House Whip Renato Brunetta, reiterated that abolishing IMU "is a key plank in our platform.
"The fact that the government has still not presented an organic proposal (to abolish it) leaves many doubts; going on like this isn't serious," said Brunetta, one of Berlusconi's top economic advisors.
"After four months (in government) we still don't have a bill, and Italians are fed up," Brunetta claimed. IMU is only one, and perhaps the lesser one, of the two major threats hanging over Letta's unnatural marriage of long-time foes, whose possible end has spooked financial markets this week. The government's future is also jeopardised by ex-premier Berlusconi's ejection from the Senate because of an August 1 tax-fraud conviction, his first definitive sentence in 20 years of fighting magistrates he says are left-wing.
The PD is turning a deaf ear to PdL pleas not to ratify a ban that would strip the centre-right leader of his seat, in a vote scheduled for September 9.
The PdL says it will pull the plug if Berlusconi loses his upper-house seat, leaving the IMU plans moot and Italy heading for an election which polls say Italians in general, and especially the business community, deeply do not want.
On Tuesday the political uncertainty widened the spread between the benchmark Italian bond and its German counterpart to 260 basis points, almost matching the 262-basis-point spread between German and Spanish bonds. The spread between lending rates in the two countries is a gauge of investor faith in the Italian economy and in the ability of the government to avert a resurgence of eurozone-meltdown fears. Letta has, however, continued to insist that the government will not be brought down by IMU or the Berlusconi ban.
His optimism was echoed Tuesday by Justice Minister Anna Maria Canciellieri, who said "I don't think the government is near collapse".
The Italian mayors' association said going into a meeting with Economy Minister Fabrizio Saccomanni it believed an IMU deal would be thrashed out Wednesday and appealed to the government not to "make municipalities pay" for a partial or full abolition that would hit their revenues and force them to hike local taxes to ensure services.
PdL Secretary Angelino Alfano tweeted that talks he and Brunetta had with Saccomanni had been "constructive".