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. Last Updated: 07/27/2016

Italy Budget Aims To Calm Investors

MILAN -- Prime Minister Lamberto Dini's nonpartisan government has promised to unveil its key mini-budget later this week, a package seen as vital to restoring confidence in Italy's beleaguered markets.

Dini's office moved swiftly over the weekend to try to allay investor alarm after the lira's recent hemorrhage against the mighty German mark, saying the budget had been completed and the government was committed to reforming the state's finances.

The new measures are expected to bring in up to 20 trillion lire ($12.5 billion) as the Treasury struggles to meet its 1995 deficit targets, with the emphasis placed firmly on a series of potentially unpopular tax hikes.

Some parties in Italy's fractious parliament have already said they might oppose the budget, predicted to include higher levies on gasoline, but Dini has warned of dire consequences if anyone tries to stop the bill.

"It would be criminal to block it. I don't say this for my sake or for the sake of my government, but for the Italian economy, the currency and the country," Dini said Saturday in an interview with La Repubblica newspaper.

"Anyone blocking it would assume a dramatic responsibility and I can't believe anyone would dare do it," he added.

Dini's rebuke came after former prime minister Silvio Berlusconi was widely quoted as saying his center-right Freedom Alliance would only accept the budget if it received guarantees of early general elections in June.

But businessman-turned-politician Berlusconi on Sunday denied he had ever made such a connection and bitterly rejected any charges that he was acting irresponsibly.

"We regard the mini-budget with a sense of responsibility. We want to see it and possibly make some improvements to it. We realize that the country must find a way out of its economic crisis," he said.

Last week the Bank of Italy was forced to intervene two days running in the currency market to try and restore calm as the lira tumbled on the exchanges, crashing to a record low of 1,086.75 against the German mark on Friday. At the back of the market's problems is the country's huge 2,000 trillion lire debt mountain -- the largest public deficit in Europe.

Dini said in a statement Saturday the forthcoming budget would stabilize the ratio between the country's debt and its gross domestic product -- a year ahead of schedule.

Newspapers have forecast that the package would look to raise some 15 trillion lire from increases in direct and indirect taxation, while up to five trillion lire would come from spending cuts.

Former central banker Dini, who was treasury minister in Berlusconi's government which collapsed at the end of last year, also pledged to outline measures aimed at speeding through the country's privatization program.

But, although Berlusconi looked set to back the budget, he warned it would not resolve all the country's problems.

"The real problem is that Italy needs certainties and these can only come from a solid government," he said.