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Rome - Italian President Giorgio Napolitano on Friday refused to sign a key government decree to increase the taxation powers of local authorities, dealing a blow to embattled Prime Minister Silvio Berlusconi.
The cabinet approved the decree at an emergency meeting on Thursday even though the tax measures had been rejected by a special parliamentary panel, sparking fury from the opposition which accused Berlusconi of riding roughshod over parliament.
Napolitano, whose signature on government decrees is required for them to become law, said in a statement the government had not followed the correct procedures in drawing up the decree.
Berlusconi's decision to try to force the package through on Thursday underscored the growing strength of the Northern League, his main coalition partner, which had threatened to withdraw its support if the measures were blocked.
Northern League leader Umberto Bossi said the government would quickly re-present the decree after making the corrections required by Napolitano, while centre-left lawmakers applauded the president and some called for early elections.
"For the good of the country now we must let the people decide at the polls," said Antonio Di Pietro, leader of the Italy of Values party.
It remains to be seen whether, and how quickly, the government will be able to respond to Napolitano's objections and whether the Northern League will continue to support Berlusconi if the measures appear to be permanently blocked.
Local autonomy
Bossi, who has the power to bring down the government, had promised his supporters a deal on the package aimed at increasing local autonomy and cutting subsidies from the prosperous north to the poorer south.
Thursday's vote of the Committee on Federalism, made up of lawmakers from both houses of parliament, was not formally binding, but it was widely expected that the government would have to take into account its verdict.
However, after a hastily convened evening cabinet meeting, Bossi announced in a brief statement that the tax measures had been "definitively passed".
"The League keeps its promises and brings home a concrete result in the interests of the people," he said.
Since Berlusconi's former ally Gianfranco Fini split from the ruling PDL party in July, the League has held the fate of the government in its hands and its importance has only grown as a sex scandal has engulfed the 74-year-old premier.
Berlusconi has resisted calls to resign over the scandal that has made a household name of "Ruby", the teenage nightclub dancer he is alleged to have paid for sex when she was under 18, the earliest legal age for prostitution in Italy.
