Italian housing tax fresh threat to coalition

Italy’s fractious ruling coalition struggled to bridge differences over a housing tax that threatens to create a new crisis for a government already severely strained by the legal turmoil surrounding Silvio Berlusconi.

With twitchy financial markets nervous about the prospect of fresh political instability in Italy, the Milan stock market fell for a second day and government borrowing costs rose ahead of a closely anticipated bond auction tomorrow.

Ministers are due to meet today to decide what to do about the tax on main residences, which Berlusconi’s centre-right party insists must be scrapped if it is to continue supporting centre-left premier Enrico Letta.