Onset of dreaded VAT rise adds to political ferment
House whips from right and left oppose threatened Letta govt18 September, 16:17
The European Central Bank said last week that Italy risked missing its deficit target for this year and mentioned the elimination of IMU as a factor. The government recently raised its forecast for Italy's deficit-to-GDP ratio for 2013 from 2.9% to 3%, the threshold EU countries are not allowed to go over, following the scrapping of IMU, which is set to be replaced by a new "service tax". The European Commission closed an excessive-deficit procedure against Italy in May after its deficit came in at 3% last year and the government announced the 2.9% forecast for this year.
Rehn warned that the Commission would not hesitate to open a new procedure if Italy's deficit went back above 3%. "Italy's excessive-deficit procedure is closed, but Italy will have to honor its commitments," said Rehn. "(If the threshold is broken) the excessive-deficit procedure will have to be reopened. Italy is fully aware of that". But siding with his center-right counterpart Brunetta, the House whip for the center-left Democratic Party (PD) urged the government to block a VAT hike, arguing more taxes would be more detrimental to the economy than a loss in fiscal revenue. "It would be a tough blow to families and businesses and would further depress consumer buying," Roberto Speranza told ANSA. Opposition to the executive from high-ranking members of the two parties who govern it comes as Premier Letta faces serious threats from the PdL to pull its support and topple the government over Berlusconi's political future. A Senate panel will reconvene later Wednesday to vote on the grounds for ratifying an anti-corruption law and stripping Berlusconi of his seat in the Upper House for a tax-fraud conviction in the supreme court last month, his first-ever binding conviction in nearly 20 years of legal entanglements with magistrates he says are left-wing and biased. Hawkish members of his party have vowed to pull out of the government if PD Senators vote to ratify the ban.