Coalition ally accuses central bank of trying to destabilise Italian government by demanding tough conditions for support.
Silvio Berlusconi is facing growing resistance to the implementation of new austerity measures demanded by the European Central Bank.
In perhaps the most strident protest yet by a European politician at the ECB's growing power, the Italian prime minister's coalition partner, Umberto Bossi, on Thursday accused the bank of trying to oust the government. And in an equally unusual move, some of Berlusconi's own, normally docile, MPs warned the prime minister he could not count on their support for the approval of the measures.
As Italy's borrowing costs soared and its stock markets plummeted, last week the ECB's president, Jean-Claude Trichet, and his designated successor, the Italian central bank governor Mario Draghi, wrote to Berlusconi listing the demands he would have to meet if the bank were to intervene and buy Italy's embattled bonds. According to one report, the ECB's demands were set out in humiliating detail.
Last Friday, Berlusconi promised a broad range of structural reforms and announced he was bringing forward to 2013 the target date for the elimination of Italy's budget deficit. A new package of measures is due to be endorsed at a cabinet meeting that could be held as early as Friday. Berlusconi's right-wing government has said the package will be enacted by decree, but it would then need to be approved in parliament.
Bossi, the leader of the Northern League, called the ECB's letter "an attempt to overthrow the government". In a reference to Draghi that suggested the central banker harboured political ambitions, Bossi said: "I fear that this letter was done in Rome. He's gone from here into Europe, but he's always in Rome." Draghi has been touted as the possible leader of a non-party, or cross-party, cabinet to lead the country were Berlusconi to fall. Bossi also made it clear he was not happy with suggestions that the ECB wanted pension cuts.
Berlusconi has refused repeated calls from the opposition and the trade unions for the letter to be made public. But his finance minister, Giulio Tremonti, supplied more detail on the government's plans to a parliamentary committee.
In an apparent effort to curry favour with the unions, he said the government would not bow to an ECB demand for a cut in public sector wages. Tremonti said the bank also asked for pension reforms, the privatisation of local authority services and greater labour market flexibility.
He made clear the government had not yet decided how it would eliminate the budget deficit. "The political choice on how to refocus efforts on 2012 and 2013 is a choice we still have to make," he said.
But he indicated that the new measures would include a tax on investment income of up to 20%. To boost growth, the government was considering reducing public holidays, limiting nationwide wage bargaining and cutting old age pensions, he said.