March 8, 2019 / 7:47 AM / 5 months ago

No light at end of tunnel in Italy rail link dispute

ROME (Reuters) - Italy’s ruling coalition made no progress on Friday in defusing a dispute over a high-speed rail link to France that threatens the government’s future, ahead of a looming deadline when tenders for the infrastructure are due to be launched.

Italian Deputy Prime Minister Luigi di Maio holds a news conference in Rome, Italy, March 8, 2019. REUTERS/Remo Casilli

The TAV project (Treno Alta Velocita) is backed by Matteo Salvini’s League party but strongly opposed by its coalition partner, the 5-Star Movement, which argues Italy’s share of the funding would be better spent upgrading existing roads and bridges.

The TAV is a joint venture between the Italian and French states to link the cities of Turin and Lyon with a 58-km (36-mile) tunnel through the Alps on which work has already begun.

Salvini walked away from the negotiating table on Friday, telling reporters he would not reopen discussion until after the weekend, in a move that seemed designed to allow the tenders, due to be opened on Monday, to go ahead.

“He (Salvini) can’t tell me ‘we’ll see each other on Monday’. This needs to be a weekend of work,” 5-Star leader Luigi Di Maio responded at a news conference, saying he had asked Prime Minister Giuseppe Conte to do his best to block the tenders.

The long-running dispute suddenly escalated late on Thursday and raised the risk of a government collapse, with Di Maio accusing Salvini of acting irresponsibly and betraying the policy “contract” that forms the basis of the coalition.

That contract, drawn up by the anti-establishment 5-Star and the right-wing League following inconclusive 2018 elections, calls for the TAV to be “totally re-discussed” but not necessarily scrapped.

Salvini reiterated in a breakfast-time radio interview on Friday that the League would “never” vote in parliament to block the project, as 5-Star wants.

Some League politicians proposed that the tenders could be launched on schedule but with a clause that they could be revoked depending on the outcome of the coalition dispute. Di Maio rejected this, saying it made no sense to commit money to a project and then discuss whether to go ahead with it.

“Putting the government at risk over the TAV is absurd,” he said, appealing to Salvini to work with him for a deal.

EU FUNDING

The European Union has pledged to fund up to 40 percent of the costs of the TAV, Italy up to 35 percent and France up to 25 percent.

Conte said on Thursday he had strong doubts about the validity of the venture and he would take responsibility for a final decision based on a cost-benefit analysis already carried out by the government.

That analysis, commissioned by Transport Minister Danilo Toninelli, a 5-Star politician, found last month that the TAV was a waste of public money, estimating the economic return would be a negative balance of at least 7 billion euros ($7.9 billion).

Conte, who is not a member of either ruling party but is close to 5-Star, said he would speak to France and the EU “to share our doubts and perplexities.”

His words were applauded by Di Maio but Salvini responded he would “go all the way” in backing the TAV, which the League says will help the economy and reduce road haulage pollution.

French Transport Minister Elisabeth Borne said on Friday the European Commission had let it be known it was willing to increase its share to 50 percent, leaving France and Italy to finance 25 percent each.

Italian Deputy Prime Minister and League leader Matteo Salvini arrives for a news conference at the Senate upper house parliament building in Rome, Italy March 8, 2019. REUTERS/Yara Nardi

“Of course we must respond to the Italian government’s questions,” she told Reuters, but added that Paris remains committed to the project.

Markets have shrugged off the mounting coalition tensions.

Italian 10-year bond yields were heading on Friday for the biggest weekly drop since September, and the spread over German Bunds hovered around 245 basis points, compared with a recent high of 280 on Feb 22.

Additional reporting by Stefano Bernabei in Rome and Danielle Rouquie in Paris; Writing by Gavin Jones; Editing by Susan Fenton, Andrew Cawthorne, William Maclean and Frances Kerry

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