Italy PM Letta seeks to calm cabinet tensions at Tuscan retreat

By Silvia Ognibene

SARTEANO, Italy (Reuters) - Italian Prime Minister Enrico Letta took his ministers to a conference center in a former abbey in Tuscany for a retreat on Sunday to thrash out differences that have already threatened the stability of his fragile coalition.

The two-day bonding session near the town of Sarteano was billed by Letta's office as a chance to discuss some of the thorniest policy issues facing the coalition between the main traditional rivals on the left and right of Italian politics.

As well discussing major reforms to the dysfunctional electoral and parliamentary system, the cabinet must also find a way to reconcile differences over billions of euros worth of tax cuts promised by the center-right but resisted by the left.

The encounter will also give Letta an opportunity to try to calm the mounting tensions that have appeared in his new government, formed last month after weeks of wrangling in the wake of February's deadlocked election.

Only two weeks after the government was formed, senior members of Letta's center-left Democratic Party (PD) took aim at their partners in Silvio Berlusconi's People of Freedom party (PDL) following a fierce attack on magistrates by the 76-year-old media tycoon at a rally on Saturday.

"It's quite clear that this demonstration complicates the relationship and not just between the PD and PDL but between all the parties," PD deputy Economy Minister Stefano Fassina told the daily La Stampa.

It was noted that Interior Minister Angelino Alfano, the PDL party secretary, attended the demonstration against magistrates who rejected an appeal by Berlusconi against a four year tax fraud sentence last week.

However the remarks were brushed off by PDL politicians including Agriculture Minister Nunzia de Girolamo, who said the rally was no different from a meeting of PD leaders on Saturday to choose a new party secretary.

"They hold assemblies in rooms inside, we're out in the squares, with the people," she told reporters as she arrived at the meeting.

TENSIONS

The fractious atmosphere has increased the problems facing Letta and raised doubts over the durability of his government, despite assurances from Berlusconi that he does not intend to withdraw support.

Behind the barbs, the coalition faces wide differences over tax policy which must be resolved to win extra budget leeway from the tight constraints imposed on Italy by the European Union's excessive deficit procedure.

Letta has pledged to focus on cutting youth unemployment of nearly 40 percent and restore growth to the sinking economy but he has little room for new spending given the huge burden of public debt, now around 130 percent of Italy's economic output.

EU authorities are due to decide this month whether to take Italy out of the excessive deficit procedure but approval could be endangered by the PDL's insistence on scrapping an unpopular housing tax that brings in 4 billion euros a year.

Letta's PD says it is more important to cancel a 1 percentage point increase in sales tax due to take effect in July and the government has agreed only to suspend payments of the housing tax due in June.

So far, however, there has been no agreement on how to pay for the cuts as well as urgently needed measures to fund special unemployment benefit programmes without pushing the budget deficit past EU limits.

In a bid to calm the tension, Letta's spokesman said on Sunday the coalition partners had agreed that ministers would henceforth not take part in electoral rallies or television talk shows not connected with their portfolios.

However Berlusconi's legal woes are likely to continue to overshadow the government, with a hearing in his trial on charges of paying for sex with a minor set for Monday.

Opinion polls continue to show the center-right holds a lead, with a survey by the ISPO institute in the Corriere della Sera showing Berlusconi's alliance on 35.6 percent ahead of the combined center-left on 29.6 percent and the anti-establishment 5-Star Movement on 24.1 percent.

(Writing by James Mackenzie; Editing by Giles Elgood)

Source: http://news.yahoo.com/italy-pm-letta-seeks-calm-cabinet-tensions-tuscan-184115339.html

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