Italy's Leader Resigns Amid Budget Dispute, Economic Worries

Times Staff Writer

Unable to prevent the defection of a junior partner from his ruling coalition, Italian Prime Minister Giovanni Goria submitted his resignation Saturday, thereby becoming the first Western leader to fall victim to the current international economic crisis.

President Francesco Cossiga will likely decide Monday whether to accept the resignation. He could ask Goria to attempt to govern with the four remaining coalition allies, which together hold a slim parliamentary majority. Pending formation of Italy's 48th post-World War II government by him or someone else, Goria will govern as caretaker prime minister.

The collapse of Italy's government--the second this year--was neither expected nor sought by any of the country's major political movements, but it reflected Italy's economic preoccupation in the wake of world stock market crashes and the fall of the dollar.

The 44-year-old Goria, a Christian Democrat, threw in the towel after prolonged talks Friday failed to persuade the tiny Liberal Party to remain within the coalition he has led for the past 15 weeks.

The misnamed Liberals, who are really conservatives, won only 2.2% of the vote in elections last June and held just one Cabinet seat.

The Liberals bolted over an oft-amended 1988 government budget proposal amid criticism that Goria is not dealing rigorously enough with threats of inflation and recession.

On Oct. 31, the Senate rejected an initial Goria budget calling for a $93-billion deficit next year, saying it contemplated too much government spending in the face of international economic uncertainty.

A revised budget hurriedly put together for submission to Parliament last week reduced the projected deficit to about $88 billion. To help achieve the deficit reduction, Goria proposed recovering tax credits promised to Italian industries and deferring promised personal income tax cuts until 1989.

That brought an angry response from major Italian unions, which threatened a general strike for later this month, and the Liberals, who argued that the decision violated accords on which the Goria coalition was built.

Liberal Cabinet representative Valerio Zanone charged that the budget ignored "unproductive, superfluous and excessive" government spending, which he called the principal cause of the deficit.

In announcing his party's departure despite a day of talks with Goria and the leaders of the other parties, Liberal leader Renato Altissimo on Friday night called the budget weak in confronting structural economic problems. "An extra effort should be made toward greater reduction of the deficit and public spending," he said.

Leaders of the Italian private sector have been equally critical of the Goria budget, arguing that deficit reductions are too small and that tax credits are necessary to keep Italian industry internationally competitive.

A former treasury secretary, Goria has insisted that the Italian economy is what he calls "essentially healthy." On Friday, though, the naysayers had their day.

On Saturday morning, Goria went to the Quirinale Palace to submit his resignation, leaving Italy without a new budget or the immediate prospect of the political consensus necessary to write one.

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