MNI SOURCES: Italy Set To Sink EU Tax Plan, Auguring Trouble

By Silvia Marchetti

     ROME(MNI) - The internal tussles of Italy's governing coalition ahead of

this year's regional elections may prompt the country's parliament to scuttle a

European Union bid to overhaul the bloc's voting on tax regulation in the next

few days, in a sign that the country's fractious politics augur increasing

trouble for efforts to overhaul EU governance.

     A vote is imminent in the Italian parliament on a

European-Commission-backed initiative to drop a requirement for unanimity on tax

policy moves in the European Council, which represents member states, and to

allow so-called qualified majority voting. The proposal has already run into

opposition from low-tax jurisdictions like Luxembourg and Ireland, and Brussels

officials fear an Italian "no" will kill it.

     Its fate may have been sealed by its rejection by the populist 5-Star

Movement, which is seeking to differentiate itself from the centre-left

Democrats with which it shares the governing coalition ahead of a series of

regional elections beginning at the end of the month, senior government sources

told MNI.

     "The ruling parties are already in electoral mode and will exploit their

differences over EU policies in an attempt to locally boost consensus," said one

government source.

     --5-STAR TENSIONS

     At the end of January two Italian regions will vote to renew local

councils, and another six regions will follow suit in May and June. With nearly

half of the country voting over six months of campaigning and the eurosceptic

League apparently heading for victory in erstwhile left-wing strongholds ,

5-Stars in particular may be tempted to play up its differences with the

Democrats over relations with Brussels.

     Italian opposition has already led to what looks to be at least a

significant delay in approval of a revamp of the European Stability Mechanism, a

key piece in the bloc's financial architecture.

     Five-Star members recently defied their leader Luigi di Maio to vote

against a potential alliance with the Democrats at a local level, as the

populist movement suffers from defections and internal dissent. Several 5-Star

members of parliament have left the party in recent weeks.

     "This qualified majority voting proposal has landed in parliament and

discussion on it is expected to start in coming days, but it's really bad

timing," said a source from former premier Matteo Renzi's Italia Viva party, who

is in charge of presenting the EC initiative to legislators. There is little

chance of any serious debate on qualified majority voting until after the

summer, if agreement on the matter can ever be achieved at all, the source said.

     A senior government official noted that 5-Star parliamentarians had on some

recent occasions voted in line with pro-European parties, such as when they

backed the appointment of new European Commission President Ursula von der

Leyen.

     "Hopefully at the end of the day they'll come round to seeing the benefits

of such a tax voting scheme, in the cause of EU integration," the official said.

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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