Italian coalition breaks as fiscal deal collapses

THE GOVERNING coalition in Italy collapsed over the weekend, with ex-Prime Minister Silvio Berlusconi’s party withdrawing support for the five-month old administration.

Five ministers of the People for Freedom party stood down over the weekend, attacking a planned increase in Italy’s sales tax, which was due to rise from 21 to 22 per cent.

Labour minister Enrico Giovannini commented: “On Monday our borrowing costs are going to rise by many points.”

Italy’s President, Giorgio Napolitano suggested yesterday that he would attempt to form another governing coalition without further elections. The last Italian election occurred less than a year ago.

Earlier this month International Monetary Fund (IMF) stressed the need for continued economic reforms, raising the prospect that the country will not meet the government’s target to reduce the budget deficit below three per cent.

With a deficit of over three per cent, the country runs the risk of re-entering the European Commission’s excessive deficit procedure, raising the prospect that Italy will have to make further painful fiscal corrections.

The previous government, which was led by Mario Monti, held office for eighteen months, with a cabinet made up entirely of unelected experts.