April 24, 2019 / 6:08 AM / a month ago

Italian cabinet infighting overshadows growth plan

ROME (Reuters) - Italy’s government approved an economic growth plan in the early hours of Wednesday after a bad-tempered cabinet meeting that exposed divisions in the ruling coalition and fuelled speculation about a government collapse.

FILE PHOTO: Matteo Salvini, Italy's Deputy Prime Minister and leader of the far-right League Party, speaks as he launches campaigning for the European elections, in Milan, Italy April 8, 2019. REUTERS/Alessandro Garofalo/File Photo

The infighting overshadowed media coverage of the “growth decree” which called for tax breaks and investment incentives and for simplified procedures for public tenders.

The ruling parties, the right-wing League and anti-establishment 5-Star Movement, are feuding as they compete for votes ahead of European Parliament elections on May 26, stoking investor fears that the government could fall.

The government had presented the decree as a landmark in its efforts to kickstart Italian growth, which has lagged euro zone peers for two decades, but it instead served to underline an intensifying feud between the coalition partners’ leaders.

5-Star chief Luigi Di Maio showed up for the meeting more than an hour late, after using a TV appearance to call for a junior League minister to resign over a corruption scandal. League leader Matteo Salvini has refused to sack the minister.

“It’s official - there are two governments,” read the front-page headline in national daily newspaper La Repubblica.

Di Maio and Salvini repeatedly say they want the alliance to continue even as they attack each other on a range of issues, and they have shown no willingness to compromise over the future of the League official at the centre of the scandal.

Armando Siri, a transport ministry undersecretary and economic adviser to Salvini, has been put under investigation for allegedly accepting bribes to promote the interests of renewable energy firms. Siri denies any wrongdoing.

“I plan to govern for a full mandate and I have no intention of sending Italians to (early) elections,” Salvini told reporters on Wednesday.

He added that he would not push for a cabinet reshuffle to have more weight in government after the EU elections, where the League is likely to be the largest party, opinion polls suggest.

He said Prime Minister Giuseppe Conte - an academic who is from neither ruling party but is close to 5-Star - had not asked for Siri’s resignation. Shortly afterwards Conte said he would speak to Siri, without giving further details.

DEBT RELIEF CHANGE

The growth decree contained few surprises, though the dispute was reflected in a change to one of the decree’s major measures - debt relief for the municipality of Rome, which is run by 5-Star.

The decree was less generous than an original draft of the plan after criticism from the League.

Cabinet also broadened the scope of its plan to compensate savers hit by the country’s recent banking crisis, making the money available to those with an annual income of up to 35,000 euros ($39,000) or with assets of up 200,000 euros.

The asset test was raised from 100,000 euros in the original draft, but it later emerged the amended scheme with the higher threshold would be conditional on EU approval.

The decree also gave the green light for the government to potentially take an equity stake in any vehicle set up to rescue loss-making airline Alitalia. The government is desperate to save the carrier and avoid mass layoffs.

Slideshow (2 Images)

Italy last year unveiled a big-spending budget for 2019, rattling the euro and other financial markets, but it has so far had little impact on growth. The economy slipped into technical recession at the end of 2018 and is now barely expanding.

Italy, the euro zone’s second-most indebted nation after Greece, had public debts equalling 132.2 percent of GDP in 2018, up from 131.4 percent in 2017.

($1 = 0.8923 euros)

Editing by Giselda Vagnoni, Mark Bendeich and Alison Williams

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