Berlusconi disowned on tax pledge, blamed for Italy market jitters

Rome (dpa) - Silvio Berlusconi‘s main ally disowned on Tuesday the former Italian prime minister‘s proposal to introduce a tax amnesty if he wins this month‘s general elections, while his successor Mario Monti blamed him for renewed market tensions over Italy.

The scandal-prone politician has always focused his campaigns on offers of tax cuts. Until last month he was the clear underdog in the race for the February 24-25 vote, but some polls indicate he has reduced the gap with centre-left rivals to around five points.

"I do not like amnesties, I do not like general pardons. On this point, I cannot express my support," Northern League leader Roberto Maroni said on RAI state radio.

The League, a right-wing movement that used to advocate the secession of northern regions, is key to Berlusconi‘s electoral efforts because of its strength in Lombardy - the region dubbed "Italy‘s Ohio," after the main battleground state in US presidential elections.

Maroni, who is also running for the Lombardy presidency in a vote taking place alongside the national elections, said he could support Berlusconi‘s other tax proposal - the reimbursement of property taxes paid by Italians in 2012.

Berlusconi is trying to tap into deep popular resentment at the state of the economy. Italy is deep in a recession and taxes have gone up over the last year to tackle a financial crisis that had forced the conservative politician out of office in November 2011.

With such promises, he "is essentially trying to buy the vote of Italians with their own money," said outgoing premier Monti, whose centrist coalition is battling for third position in the polls after Berlusconi and the frontrunning centre-left.

The fourth major election contender is the protest Five Star Movement by comedian Beppe Grillo, which has roughly the same level of support as Monti‘s camp.

"What seems to be a nice promise is a poisoned pill, because there would be financial consequences which are those that are already producing today some signals of turbulence in the markets," Monti said of Berlusconi‘s tax pledges.

On Monday, the Milan stock exchange lost 4.5 per cent, the worst performance in Europe, while the spread between German and Italian 10-year bonds - a key risk indicator in the eurozone - rose to 286 points. It was below 250 last week.

Analysts suggested that investors were unsettled by the derivatives scandal at Monte dei Paschi di Siena, Italy‘s third-largest bank, and fears that Berlusconi‘s poll surge may produce a stalemate after the elections.

"Berlusconi effect, markets collapse," the centre-left La Repubblica summed up on its front page.

But market anxieties eased on Tuesday. The Milan stock exchange was up by over 1 per cent in mid-morning trading, while the Italy-Germany spread was down to 277, after peaking at 294. dpa alv mga Author: Alvise Armellini