Italy PM to call confidence vote

During a television interview on Sunday, the Italian prime minister said he would seek a confidence vote from both houses of parliament on Wednesday. Enrico Letta's grand coalition goverment has come close to collapse in recent days, with junior partners the People of Freedom (PDL) party threatening to withdraw from the always-uneasy alliance.

"We face a dramatic moment and a turning point," Prime Minister Enrico Letta (pictured) told Italian broadcaster RAI. "I will ask for the confidence of both the Senate and the Chamber of Deputies…If I do not get it, I will draw my conclusions."

The grand coalition government between Italy's two main - and ideologically opposed - political groups took two months to even assemble after general elections; it may ultimately collapse within six months.

Berlusconi ban, or sales tax spat?

Berlusconi's PDL party has threatened to withdraw from the government if the senate votes to strip Berlusconi of his seat in the upper house. The former prime minister faces possible expulsion over a tax fraud conviction and allegations of abuse of power and of soliciting sex from a minor. The senate is due to vote on Berlusconi's fate as senator in October.

Letta responded to the PDL threats to dissolve the coalition by freezing all new legislation until the situation was resolved, arguing that the 5-month-old government could not commit "to measures worth billions of euros without a guarantee on the government's continuity."

The PDL had been pushing to delay the planned rise in sales tax, from 21 to 22 percent, but in order to do so Italy would need to find around 3 billion euros ($4.05 billion) to make up the difference and bring the country's deficit inside the EU ceiling.

On Saturday, all five of the cabinet members belonging to Berlusconi's PDL party resigned from their posts in protest of Letta's decision to halt new legislation, which Berlusconi called "inadmissible and unacceptable."

Europe watches, again

Italy is currently working toward recovery from its worst post-war recession. Instability in the government could harm investor confidence.

The International Monetary Fund (IMF) deemed coalition tensions in Rome a "key risk" for the Italian economy in a recent report.

Italy's coalition government also includes a small centrist party led by former Prime Minister Mario Monti, but Letta's government would fall well short of a senate majority without the PDL's seats in the upper house.

kms/msh (AP, AFP, Reuters, dpa)