Sept. 2 - Italy is coming under renewed pressure to face up to austerity measures and make difficult cuts, as worries grow about the country's ability to deal with its debt. Kirsty Basset reports.
Italy's Silvio Berlusconi is under increasing pressure on both economic, and personal fronts. He's under pressure to ease market fears about the health of Italy's economy and cut a mountain of public debt. Instead, his government has backflipped on a number of austerity proposals in the face of protests, from abandoning a proposal to tax high income earners, to changing pension rules, leaving markets uncertain. As the government struggles to come up with a coherent plan, Italy's Economy Minister Guilio Tremonti says recent amendments will not impact on total savings. (SOUNDBITE) (Italian) ECONOMY MINISTER GIULIO TREMONTI SAYING: "Instead of receiving the solidarity tax we will be getting money from tax evasion." But the changes have left a funding shortfall believed to be between 4 and 6 billion euros. Italy's main business association has slammed the austerity package as "weak and inadequate." ECB President Jean-Claude Trichet has also stepped up the pressure - telling Berlusconi's government it must deliver on its promised 45.5 billion euro austerity package, announced a month ago. The ECB last month decided to start buying Italian bonds to bring the interest rate down - but some believe this was a mistake. The head of Germany's Ifo economics research unit says it's reduced pressure on Italy to make difficult cuts. Meantime Berlusconi - already facing a string of scandals - has angrily rebuffed the latest one, sparked by the arrest of a businessman accused of extorting hundreds of thousands of euros from the premier over a prostitution affair. In Paris, he defended himself. (SOUNDBITE) (Italian) ITALIAN PRIME MINISTER SILVIO BERLUSCONI SAYING: "I confirm that what the investigating magistrates are saying is pure fantasy. Pure fantasy. I gave a hand to a family with children which was in the deepest poverty. I did with this family as I do with a myriad of people who come to me. When I see that there are genuine reasons to help out, I do it because I can afford to." Nonetheless, it's added to doubts the government has the necessary focus and discipline to deal with Italy's mounting problems. Kirsty Basset, Reuters.