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Italy's coalition solves tax row, seeks 'dialogue' with Europe

MILAN (Reuters) - Italy’s ruling coalition patched up a row over a tax amnesty on Saturday and struck a more conciliatory tone toward EU institutions, saying it wanted to discuss its budget plans with Brussels.

Italy's Minister of Labor and Industry Luigi Di Maio, Prime Minister Giuseppe Conte and Interior Minister Matteo Salvini attend a news conference after a cabinet meeting at Chigi Palace in Rome, Italy, October 20 2018. REUTERS/Remo Casilli

The coalition included the tax amnesty in measures to fund costly electoral promises that are set to sharply lift the budget deficit to 2.4 percent of domestic output next year, flouting European Union rules that require steady progress toward a balanced budget.

Earlier this week, Italy brushed off criticism from Brussels after the Commission stepped up pressure over a draft budget it labeled an “unprecedented” breach of EU rules.

But speaking after a cabinet meeting that settled the amnesty dispute, Italian Prime Minister Giuseppe Conte said Italy had “a comfortable place” in Europe.

“We acknowledge European institutions as our counterparties (over budget matters) ... we’ll sit down around a table for a constructive and peaceful dialogue,” Conte told a news conference.

He said he would visit EU Commission President Jean-Claude Juncker in the near future to discuss the issue.

Deputy Prime Ministers Luigi Di Maio and Matteo Salvini, head of the anti-establishment 5-Star Movement and far-right League respectively, both reiterated Italy’s commitment to the single currency.

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“We’re well in Europe. There isn’t and there won’t be any plan to leave the euro or the European Union,” Salvini said.

Salvini had rebuffed criticism over the budget earlier this week, saying the Commission was “a bunker under siege whose days are counted,” in reference to next spring’s European elections.

The government’s free-spending plans prompted a credit downgrade by Moody’s on Friday, which cut Italy’s sovereign debt rating to one notch above junk status.

Data released the same day showed foreign investors have reduced their holdings of Italian government bonds by 67 billion euros since May when markets first got wind of the coalition’s program.


The League and the 5-Star Movement, the two parties in the coalition, had been at odds over widening the proposed tax amnesty to shield financial criminals, including money launderers.

Di Maio had accused the League of tricking its coalition partner by surreptitiously broadening the scope of the amnesty in the final draft of the 2019 budget. He said on television he was ready to go to the magistrates over the incident.

But Salvini offered to drop the measure and a compromise was hammered out at a coalition meeting on Saturday, followed by a cabinet meeting that approved the law decree.

“Three surreal days are coming to an end ... it’s been a bit tiring but all’s well that ends well,” Salvini said.

The 5-Star has opposed tax amnesties in the past but they are popular with the League’s voter base, which traditionally comprises self-employed businessmen.

Italy, which suffers from high rates of tax evasion, has often resorted to tax amnesties to raise money.

Reporting by Valentina Za; Editing by Adrian Croft and Helen Popper