Italy’s rival parties on verge of striking government deal
DRAFT UNDERSCORES DIFFICULTIES IN FINDING RESOURCES NEEDED TO PAY FOR PROMISES
Italy’s two anti-system parties yesterday appeared on the verge of clinching a deal to form a coalition government after 2-1/2 months of stalemate, rattling markets with radical ideas to free up billions of euros for tax cuts and welfare.
The far-right League and the 5-Star Movement have been discussing a common policy agenda for a week after a March 4 election ended in a hung parliament.
“It would be crazy to give up at the moment of truth,” League leader Matteo Salvini said in a live video stream on Facebook, adding that he would not be intimidated by negative reaction from financial markets or attacks from the media.
“The more they insult us, the more they threaten us, the more they blackmail us, the more desire I have to embark on this challenge,” he said.
Thorny issue of PM
A definitive programme should be completed by the end of the day, Salvini said, adding that the two parties would update Italian President Sergio Mattarella on their attempt to build a government by Monday.
There was still no word on the thorny issue of who would be prime minister.
Neither Salvini nor 5-Star leader Luigi Di Maio want the other to get the job, but they have yet to propose a mutually acceptable alternative figure.
Late on Tuesday, a draft coalition programme leaked. In it, the parties said they planned to ask the European Central Bank to forgive €250 billion (Dh100 billion) of Italian debt purchased under the Eurozone central bank’s quantitative easing (QE) programme.
The ideas in the draft programme underscore the great difficulties in finding the resources needed to pay for promises the two rival parties made to their voters.
The League has pledged to introduce a flat tax rate of 15 per cent, which would lower tax revenues by some €80 billion ($95 billion) per year, according to some estimates, while 5-Star has pledged new welfare payments for the poor costed at €17 billion.
Widening gap
They have both vowed to scrap an unpopular pension reform — a move that would punch a €15-billion hole in state coffers.
Italy already has an enormous debt worth more than 130 per cent of annual output, second only to Greece in the EU. The bloc’s budget rules require it to cut the debt pile aggressively under the “fiscal compact”, which both parties want scrapped.
Salvini dismissed concerns about the widening gap, or spread, between Italy’s bonds and safer German ones as a sign the two potential partners were on the right track.