Italian Prime Minister Enrico Letta defended budget rigour yesterday, sending a clear message of caution to an ally in his fractious coalition who wants a hated property tax eliminated by the end of next month.

One of Letta’s main supporters, the centre-right People of Freedom (PDL) party, has said the government’s survival depends on abolishing a tax on primary residences, which brings in about €4 billion in revenue per year.

Number crunchers for the ruling bloc failed earlier this week to agree an alternative to the tax, known as IMU, but said they would still try to seek a solution by the end of August, two weeks before annual payments of the tax come due. Italy was taken off special EU budget surveillance earlier this year after exceeding the deficit ceiling in 2009, and that should give the country more spending flexibility next year, Letta said.

“It’s necessary to continue with the policy of budget rigour. The public accounts must remain in order,” Letta told the Senate during question time yesterday.