May 15, 2018 / 12:53 PM / 10 days ago

Struggling to agree on government pact, Italy's League turns on EU

ROME (Reuters) - Italy’s far-right League, struggling to stitch together a coalition deal with the anti-establishment 5-Star Movement, said on Tuesday it was ready to wage war on European Union budget rules and put Italians first.

FILE PHOTO: League party leader Matteo Salvini speaks to the media during the second day of consultations with Italian President Sergio Mattarella at the Quirinal Palace in Rome, Italy, April 5, 2018. REUTERS/Alessandro Bianchi/File Photo

The two parties held a sixth day of negotiations aimed at creating a government and ending 10 weeks of political stalemate following an inconclusive election on March 4.

They had been widely expected to unveil a deal at a meeting with President Sergio Mattarella on Monday, but in the event had to ask for more time after differences emerged over policies and over who should head any new administration.

With frustration growing, League leaders turned their fire on Europe Union financial restrictions which, if followed to the letter, would make it impossible for the anti-immigrant party to enact its big-spending electoral promises.

“We need to be able to speak with a single voice, to say to the EU, to which we pay many billions of euros every year, that for us Italians come first,” the League’s economics chief Claudio Borghi said, echoing U.S. President Donald Trump’s rallying cry “America First”.

“First must come the things that need doing, and only afterwards (we need worry about) absurd rules written many years ago when the world was totally different,” he said.

Borghi called on 5-Star to recognize the need to take on Brussels, and got a response from its leader Luigi Di Maio.

“European (budget) constraints need to be reviewed, together with our partners, but they need to be reviewed,” Di Maio said on Facebook.

Once fiercely eurosceptic, the 5-Star has mellowed in recent months, looking to reassure financial investors that it is fiscally responsible. It has hesitated about signing up to a full-frontal confrontation with Europe over public accounts.

The League has promised to introduce a flat tax rate of 15 percent, which would tax revenues by some 80 billion euros ($95 billion) per year, while 5-Star has pledged new welfare payments for the poor costed at around 17 billion euros.

They have both vowed to scrap an unpopular pension reform — a move that would punch a 15-billion-euro hole in state coffers.

Di Maio said the joint program the two groups are drawing up is “almost completed,” and called on the League not to pull out at the last moment.

“This is the time to have the courage to go all the way,” he said, promising measures including tougher penalties for tax evaders and cuts to the so-called “golden pensions” enjoyed by wealthy former politicians and business executives.

“FAR APART”

League leader Matteo Salvini told reporters on the way to a meeting with Di Maio on Tuesday evening that there were still areas, including the approach to the EU, where the parties diverged. “We cannot go to Brussels with positions that are far apart,” he said.

With tensions high, Valdis Dombrovskis, the vice president of the European Commission, warned that Italy should maintain its commitment to gradually reduce the public deficit and debt.

“It’s very clear that in current times of economic growth Italy needs to put its debt on a downwards trajectory,” he said.

Another commissioner, Dimitris Avramopoulos, was also quoted on Tuesday as weighing in on Italian politics, saying he hoped the new government maintained current immigration policies.

The League has promised a tougher line on migrants arriving from Africa and denounced Avramopoulos’s comments. “We are seeing the latest, unacceptable interference from an unelected official in Europe,” said Salvini.

Di Maio backed his potential coalition partner, saying the nascent government was “receiving constant attacks, even today by some eurocrats who weren’t elected by anyone.”

5-Star has adopted a softer line on migration and Salvini said on Monday this was another area of discord between the two sides. However, three 5-Star sources said the main stumbling point remained who should head the administration.

Salvini and Di Maio have both agreed to drop their own ambitions to be prime minister and are looking for a candidate from outside their parties to enact their program.

In a meeting with Mattarella on Monday, 5-Star proposed little-known law professor Giuseppe Conte, but the League has not yet given its go-ahead, a source in the president’s office said. Mattarella has given them until next week to find an accord. If they fail to do so, fresh elections look inevitable.

($1 = 0.8457 euros)

Additional reporting by Giuseppe Fonte, Steve Scherer and Massimiliano Di Giorgio; Editing by Catherine Evans

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