EU's Rehn warns Italy on instability, housing tax

Tue Sep 17, 2013 9:08am EDT
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By Giuseppe Fonte

ROME (Reuters) - The European Union's top economic official told Italy's parliament its fragile economy cannot afford political instability and criticized recent decisions on taxation.

"Particularly in Italy, where the economy is weak, political uncertainty is a brake on investments," EU Economic and Monetary Affairs Commissioner Olli Rehn said in testimony to the joint budget committees of the upper and lower houses on Tuesday.

Rehn's visit comes at a time of acute political tension in Italy and concerns that its public finances are going astray.

Center-right leader Silvio Berlusconi has repeatedly threatened to withdraw from Enrico Letta's coalition government if Letta's Democratic Party votes to expel him from parliament after a tax fraud conviction last month.

A parliamentary vote over Berlusconi is scheduled for late Wednesday.

Rehn said Italy's scrapping of an unpopular housing tax (IMU) at the end of last month raised concerns about the country's management of its public accounts, and that Italy needed a long period of structural reforms to improve its economic growth potential.

"We have recommended switching taxation from production onto property and consumption, so the abolition of the IMU goes in the opposite direction," Rehn said.

Letta abolished IMU on primary residences last month at the insistence of Berlusconi's People of Freedom (PDL) party.   Continued...

Italian Prime Minister Enrico Letta arrives at the construction site of Expo 2015, on the outskirts of Milan, September 13, 2013. REUTERS/ Stefano Rellandini