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BREAKING NEWS

Italian cabinet infighting overshadows growth plan

Italian cabinet infighting overshadows growth plan
FILE PHOTO: Interior Minister Matteo Salvini talks with Italy's Minister of Labor and Industry Luigi Di Maio at the Quirinal palace in Rome, Italy, June 1, 2018. REUTERS/Tony Gentile/File Photo -
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Tony Gentile(Reuters)
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By Giuseppe Fonte and Gavin Jones

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 of a government collapse.

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 have said they want the alliance to continue, but 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 League chief Matteo Salvini, has been put under investigation for allegedly accepting bribes to promote the interests of renewable energy firms.

Siri denies any wrongdoing.

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.

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.

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.

(Editing by Giselda Vagnoni, Mark Bendeich and Andrew Heavens)

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