Italian political instability undermines investment-EU's Rehn

ROME, Sept 17 | Tue Sep 17, 2013 6:25am EDT

ROME, Sept 17 (Reuters) - Continuous threats to bring down Italian Prime Minister Enrico Letta's fragile coalition government are holding back investments, European Commissioner for Economic and Monetary Affairs Olli Rehn said on Tuesday.

"Particulary in Italy, where the economy is weak, political uncertainty is a brake on investments," Rehn said in testimony to Italy's parliament.

Centre-right leader Silvio Berlusconi and his allies have repeatedly threatened to withdraw from the right-left government if Letta's Democratic Party votes to expel Berlusconi from parliament after a tax fraud conviction last month.

A parliamentary vote over Berlusconi is scheduled for late Wednesday.

Rehn also said Italy's scrapping of an unpopular housing tax at the end of last month was cause for concern for the country's management of its public accounts, and that Italy needed a long period of structural reforms to improve its growth potential.

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