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Allies turn the heat on Berlusconi

Beleaguered premier Silvio Berlusconi has come under pressure on two fronts: his crucial coalition ally demanded tax cuts or early elections, and Italy's credit rating appeared in danger due to high public debt and a laggard economy.

The Northern League, Mr Berlusconi's main partner in the three-year-old government, wants more say on key policies as the premier's popularity slips.

Mr Berlusconi's main candidates in mayoral elections were defeated last month and voters later rejected some of his pet projects, including reviving nuclear power.

The credit ratings agency Moody's, meanwhile, warned late on Friday it might reduce Italy's credit rating because of concerns about the country's ability to spur growth and reduce its debt, one of the highest in Europe.

Standard and Poor's has already cut its rating outlook for Italy's debt from stable to negative and eurozone chief Jean-Claude Juncker warned yesterday that contagion from Greece's debt crisis could spread to other European countries, including Italy.

Mr Berlusconi's finance minister, Giulio Tremonti, has been resisting tax breaks since Italy already slashed spending and cannot afford to lose revenue.

But a Northern League official in Mr Berlusconi's Cabinet, Roberto Calderoli, pressed for tax changes now. Mr Tremonti is to present plans later this month to reportedly balance Italy's budget in three years.

League leader Umberto Bossi is expected to step up the pressure today at his party's annual rally, possibly even laying out conditions for his continued support of Mr Berlusconi.

On Saturday he said the League would ask for several ministries to be transferred from Rome to his political strongholds in the north.

The anti-immigrant League also bitterly opposes Italy's involvement in Nato's Libya operation, fearing it will drive more refugees to Italy.

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