Italy government could fall over reforms: minister

Reuters News
Posted: Oct 25, 2011 5:10 PM
Italy government could fall over reforms: minister

ROME (Reuters) - Italian Prime Minister Silvio Berlusconi faced growing pressure on Tuesday over European Union demands for swift economic reforms with a member of his cabinet warning that the government could fall over the issue.

EU leaders, led by German Chancellor Angela Merkel and French President Nicolas Sarkozy, have demanded that Berlusconi present firm plans for growth and reducing Italy's massive debt in time for a summit meeting in Brussels on Wednesday.

However an emergency cabinet meeting late on Monday ended without agreement after Berlusconi's coalition allies in the Northern League party refused to budge on their opposition to raising the pension age to 67 years.

On Tuesday, as leaders from the coalition parties held a series of meetings in Rome, Infrastructure Minister Altero Matteoli said there was a risk that the government could fall because of its disagreements over the issue.

"I think there is this hypothesis, yes but certainly there is a margin for maneuver and we are talking," Infrastructure Minister Altero Matteoli said, in remarks confirmed by his spokesman.

Berlusconi, mired in scandal and facing sliding approval ratings, has survived a series of confidence votes this year with the help of the League but speculation has grown that the government will fall before the end of its term in 2013.

Italy is now at the center of the euro zone crisis with concerns mounting over its ability to stop its 1.8 trillion euro debt mountain sliding out of control and threatening the entire bloc.

Yields on Italian 10-year bonds are just under 6 percent, not far short of levels they reached in August when the European Central Bank stepped in to cap Rome's borrowing costs by buying Italian bonds on the market.

Berlusconi reacted angrily to the pressure from Germany and France, widely seen as a humiliation for Italy. He issued a statement on Monday declaring that no EU country was in a position to give lessons to its partners.

Economy Minister Giulio Tremonti has promised a package of reforms that would open up closed professions, cut red tape and raise revenue though steps such as privatizations and a new wealth tax, measures all aimed at boosting growth and righting the state's finances.

The package, intended to revive Italy's chronically stagnant economy, has been repeatedly delayed by deep differences between ministers, including Berlusconi and Tremonti.

(Reporting By Giselda Vagnoni, writing by James Mackenzie, editing by Barry Moody)