Italy escapes rebuke over budget deficit

Italy escaped without a rebuke for its big budget deficit yesterday, after the country's Prime Minister, Silvio Berlusconi, promised to implement a multibillion-euro package of spending cuts and tax rises which has provoked a domestic political crisis.

Italy escaped without a rebuke for its big budget deficit yesterday, after the country's Prime Minister, Silvio Berlusconi, promised to implement a multibillion-euro package of spending cuts and tax rises which has provoked a domestic political crisis.

Mr Berlusconi, who has temporarily added the role of finance minister to his wide web of interests, hailed the deal as "a good result as I had predicted", after a meeting in Brussels.

So controversial is the €7.5bn (£5bn) package of measures that the man who constructed it, Giulio Tremonti, was forced to quit as Finance Minister over the weekend. His exit was the price demanded by Mr Berlusconi's fractious coalition partners for avoiding the prospect of early elections. It looked last night as if Mr Berlusconi will hang on to the post of Finance Minister for some time after suggestions that the job would go to Mario Monti, the European commissioner for competition, fell by the wayside.

In addition to being Prime Minister, Mr Berlusconi served as Foreign Minister for 11 months after the resignation of Renato Ruggiero in 2002. But his new position raises more questions of conflict of interest for Italy's richest man.

As Finance Minister he will act as the main shareholder in the state broadcaster RAI, the utility and energy giants ENEL and ENI, the national flag carrier Alitalia, the national post and the state railways.

However EU finance ministers in Brussels welcomed his statement. The measures are designed to keep Italy in line with the eurozone ceiling of a budget deficit of 3 per cent of GNP.

The finance ministers - several of whom have also breached EU deficit guidelines - took the pledge at face value, arguing that Italy has "responded to the concerns" expressed and that "the procedure is closed".

The EU finance ministers agreed to press ahead with plans to appoint a new public face of the euro to help coordinate policies in the 12- nation eurozone and communicate with the European Central Bank. Luxembourg's Prime Minister, Jean-Claude Juncker, is the front-runner for the post, due to be created anyway under the new EU constitution.

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