MNI EXCLUSIVE: Italy Centre-Right Clashes Over SGP 3% GDP Rule

--Coalition Allies Diverge On Stability Pack Rules

By Silvia Marchetti

     ROME (MNI) - Growing differences between Silvio Berlusconi and Matteo

Salvini over how Italy will deal with the European Monetary Union's 3%

deficit-to-GDP rule risks putting a centre-right coalition at stake should they

win the March general election, MNI has learned.

     Former premier Berlusconi, head Forza Italia, has reassured Brussels that

the EMU fiscal rules will be fully respected if he returns to power. However,

Salvini, leader of the populist Lega party, wants freedom to breach the rules to

support growth, if needed.

     "We aim to revise all European treaties, including the Stability and Growth

Pact, but the 3% deficit rule is sacrosanct. We would never infringe it," 

Maurizio Gasparri, Forza Italia's Senate president told MNI.

     Salvini and Berlusconi are both aiming to become prime minister, despite

their centre-right election alliance, with both enjoying around 15% to 17%

support in the polls. The one who wins the most votes at the upcoming elections

becomes the major coalition stakeholder and, if they win, will appoint the next

government.

     Opposing positions on EMU fiscal rules are upping tensions between Lega and

Forza Italia leaderships, even if both parties attempt to play down differences

in order to safeguard the coalition.

     --HISTORICAL DEFICIT BREACHES

     Gasparri argued that Europe's strict fiscal rules have more than once been

subject to "exemptions and to large degrees of tolerance" for several countries

that were close to breaching the deficit threshold, he said, including both

France and Germany.

     "The 3% rule must be respected, but Europe needs to be reformed and Forza

Italia wants to contribute to this change. Brexit and Spain's Catalonian crisis

have shown that the union is vulnerable and lies at a crossroads," he added.

     The centre-right government program is intentionally vague on European

matters to help avoid a split between Forza Italia and Lega ahead of the Mar 4

vote. It simply calls for less bureaucracy, "no austerity", greater sovereignty

and a "revision of treaties".

     --SCRAP SGP 3%

     But according to Claudio Borghi, Lega's economic coordinator and a hard

core eurosceptic, revising existing treaties is far too mild an approach.

Scrapping public spending caps would be the best option, he said.

     "The 3% deficit-to-GDP rule shouldn't even exist anymore, it has been

replaced by the Sixpack and Fiscal Compact treaties. That 3% is a sort of

scarecrow that Brussels and the Eurogroup like to use against Italy to penalise

our economy and buy our firms at low costs. We've become Europe's scapegoat,"

said Borghi.

     In his view, the deficit rules are "pure nonsense", and a barrier that acts

again the normal goals of anti-cyclical policies.

     If the Lega wins power, Borghi pledged that they will "take all the freedom

to fund whatever public expenditures are needed to support consumption levels

and investment, no matter the fiscal limits".

     He argued that that this was the only way to boost growth and, by

extension, curb public debt.

     According to Borghi, Italy's growth gap and high public debt have been

caused by Europe's austerity demands.

     "In 2008, all countries were hit by the sub-prime crisis but then in 2011,

when Italy's first austerity measures were adopted, the growth gap widened just

in Italy," he noted.

     Forza Italia's Gasparri downplayed diverging views with Lega on the 3%

rule, saying that "our tones might be different but the substance is the same:

Europe needs to reform".

     Several analysts however believe the Forza Italia-Lega alliance is likely

to have a short lifespan, aimed at only getting through the electoral campaign

and winning the election.

     The centre-right coalition is currently ahead in the polls, with roughly

37% of the vote, and Berlusconi just ahead in the leadership stakes

     "Berlusconi and Salvini are both running for the premiership, but once the

ballot boxes deliver no clear result, Berlusconi might reconsider alliances and

join the Democrats who have a softer, more realistic European stance," said

Giovanni Orsina, School of Government director at Rome's LUISS University.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

[TOPICS: M$E$$$,M$I$$$,M$X$$$,MC$$$$,MI$$$$,MX$$$$,MGX$$$]