ROME (AP) — Italy's government agreed Wednesday to repeal an unpopular property tax that ex-premier Silvio Berlusconi has long campaigned to abolish, a crucial deal for the survival of Premier Enrico Letta's unusual left-right coalition.
The Cabinet, which is made up of both Letta's Democrats and Berlusconi's center-right ministers, decided to cancel the payments through the end of the year and institute instead a local "service tax" starting in 2014, Letta told reporters.
Hawks in Berlusconi's party had warned that if the tax weren't abolished, the party would withdraw its support for Letta's government. As a result, Wednesday's decision to repeal the tax gives Letta's government some breathing room as it presses ahead with measures to revive Italy's moribund economy.
"This is good news," said Angelino Alfano, Berlusconi's political heir and the vice premier in the hybrid government. "For us it has the value of 'Mission Accomplished.'"
Details of the decree were still being worked out late Wednesday, and it wasn't immediately clear what the substitute "service tax" would mean in real terms for Italians struggling to make ends meet amid Italy's two-year recession and 12.1 percent unemployment rate.
Abolishing the property tax creates a 4 billion euro ($5.3 billion) annual shortfall. Officials declined immediately to give specific details of how that money would be recovered, though Letta stressed that the new "service tax" wasn't a property tax in disguise and that Italy would maintain its international commitments to keep its public debt in check.
Berlusconi had made abolishing the unpopular tax a cornerstone of his campaign before February's inconclusive elections, and the issue gained importance as his own political future was thrown into doubt following his definitive tax fraud conviction earlier this month.
Italy's high court on Aug. 1 upheld Berlusconi's conviction, four-year prison term and a ban from public office.
A Senate committee on Sept. 9 begins deliberating how to implement the public office ban given Berlusconi's current Senate seat. Some of Berlusconi's more hawkish allies have warned that a vote to strip him of his Senate seat would spark a government crisis.