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Berlusconi's spat with finmin resolved-spokesman

(Agencies)
Updated: 2009-10-28 13:21

ROME: Tensions within Italy's government over its economic policy have been resolved, the prime minister's spokesman said on Tuesday, after a meeting between Silvio Berlusconi and the economy minister.

Italy's Prime Minister Silvio Berlusconi and Economy Minister Giulio Tremonti (L) attend a news conference in Rome in an October 8, 2008 file photo. Italian newspapers said on October 23, 2009 that Tremonti was considering resigning over Berlusconi's surprise announcement of tax cuts, but a source close to Tremonti said he would not quit. Il Giornale, owned by Berlusconi's family, and best-selling Corriere della Sera ran front-page stories saying Tremonti, the leading advocate of budget discipline in the cabinet, was taken unaware by Thursday's decision to scrap a regional business tax. [Agencies]

"All misunderstandings have been cleared," spokesman Paolo Bonaiuti said after Berlusconi held talks with Economy Minister Giulio Tremonti in his Milan residence.

A source close to Tremonti said that during the meeting "confidence was expressed in the minister's economic policy, which he and the prime minister will work on together."

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Italian media reported on Friday that Tremonti was considering resigning after Berlusconi announced plans to cut a regional business tax without consulting him.

The reports were followed by five days of hectic negotiations behind closed doors, with neither Berlusconi -- who according to political sources is suffering from a mild bout of scarlet fever -- nor Tremonti making any clarifying statement.

The row had threatened to weaken the government, whose approval ratings have been falling steadily in recent months although it still has 44 percent support. A sex scandal surrounding Berlusconi has also weighed.

With Italy labouring under the euro zone's largest debt, Tremonti has strongly advocated fiscal restraint: eschewing tax cuts and foregoing the large stimulus measures adopted by other Western governments during the global financial crisis.

Even so, Italy expects its budget deficit to reach 5.3 percent of GDP this year, well above the European Union's 3 percent ceiling, and its debt to rise to 115 percent of GDP.

Key Berlusconi allies are divided on whether Tremonti should be given more or less powers, and his policies have put him at loggerheads with some cabinet colleagues.

A group of parliamentarians signed a petition calling for looser fiscal policies to spur economic growth and newspapers report concern in the coalition before regional polls next year.

Political sources told Reuters on Tuesday that Tremonti had been told to coordinate more with his government colleagues and also with Berlusconi's People of Freedom party.

"The government's policy has always been based on two pillars: fiscal discipline and economic growth. It's clear that now we have to insist on growth," said a source close to Berlusconi.